UK: Steel's big chill. (2 of 3)

UK: Steel's big chill. (2 of 3) - Seen this way, British Steel seemed to be the embodiment of the purifying power of market forces: the triumph of streamlined private efficiency over public waste.

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Last Updated: 31 Aug 2010

Seen this way, British Steel seemed to be the embodiment of the purifying power of market forces: the triumph of streamlined private efficiency over public waste.

But appearances can be deceptive. Many of the reforms that reaped rewards for the company were set in train as early as 1973. Although based on rapidly rising demand (which never materialised), the plan still recognised the need for dramatic cuts in manning and sites. Progress had been hampered by union objections and political considerations, but when the plans materialised they proved far from painless.

Ironically, the inability of the unions to block the axe was proved by the 1980 strike. After an agonising three months on the picket lines, the steelworkers returned to work only to find that British industry could survive without them. Small private firms and foreign competitors simply grabbed British Steel's share of the market. "After that there were no more objections," remarks a British Steel insider wryly.

The closures and cuts in manpower did not come in one fell swoop. MacGregor accompanied each successive announcement of closures with the assurance that this was the smallest cut that could make the industry viable, based on the most optimistic judgements that he could make. As prices fell and markets contracted, these assessments were revised - followed by further cuts. In so doing the impact of each was minimised (and the pill sugared by generous pay-offs), but the trend was ever downwards. These "salami" tactics are precedents that worry today's workforce as another recession looms.

But even after the pain of the past decade, the future is far from rosy. As a raw material producer for what remains of British manufacturing industry, the company is vulnerable. Steel output in 1990 was down 4.8% on 1989, but, more alarmingly, total UK production in December 1990 (the last month for which figures are available) was down 15.1% on the previous Christmas. While British Steel did not suffer quite as much as the average, John Graham, engineering analyst at Warburg Securities, is pessimistic. "The market has only been depressed for two or three months," he points out. "It's bound to get worse - with demand down 13% and prices having fallen by 6%, the future looks pretty dire."

The motor industry is not Port Talbot's main customer, but it is an important one. As the slump in the car industry has begun to affect production, so steel sales to Europe's car producers have dropped. Port Talbot's Madden stresses that demand from the motor trade represents little more than a quarter of the plant's output and points too to the amount of steel that is exported to markets that are less vulnerable (30% of production at Port Talbot is exported and 35% of the company's as a whole). But recession is clearly a worry.

Madden prefers not to discuss falling demand, but his use of phrases like "the necessity for austerity" and "the search for cost cutting on all routes" is revealing. So too are his pursed lips and sighs. "I can't say when it will end," he protests, before adding: "After all, it was only a couple of months ago that we were expecting things to turn around mid-year."

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