Post Brexit Steel Industry to Strengthen, Saving Jobs
Brexit Steel Industry – On 29th of March 2016, Tata Steel announced that it would pull out of all its UK operations. This included Port Talbot. The announced triggered anxiety allover as more than 15,000 jobs were put at risk.
One of the factors that motivated the decision was a £1m loss per day.
Why Britain’s Steel Industry Fell Into Crisis
A number of powerful forces have sent the steelworks into jeopardy. Since the 2008 financial crisis, the demand for the metal has remained at its lowest. Tata Steel argues that China is a major contributor to the problem. The said country dumps its steel in Europe.
Most of the Chinese steelmakers are owned by the state. They have been making losses from 2015 due to declining domestic demand. To curb this, they resorted to increasing their steel export. In fact, steel exports to Europe from China have doubled since 2013. And this helped bring down the value of the metal to half of its 2011 levels.
Can Europe do Something? Brexit Steel Industry
The answer is a simple yes. It can come up with tariffs. Other countries such as the US have slapped Chinese steel with a 236% tariff. India is also not silent on the matter. It is estimated that steel prices will grow by 15% in the country. That motivates China to turn to Europe as the dumping site. At the same time, Tata is pressurized to pull out of the UK and concentrate on the growing domestic market (India).
Brexit Steel Industry – Why isn’t Europe responding?
The members of the EU find it hard to agree on the course of action. During the previous meeting, the members opposed the proposed 9% tariff on Chinese steel.
That basically tells you one thing; the EU is to blame for the steel industry crisis.
Brexit Steel Industry – How is the EU the Problem?
When the members fail to agree on a higher tariff, it is a perfect example of European bureaucracy. This is the kind that leads to no or slow response in tackling the matter.
The EU also has procurement rules that inhibited the UK government from bailing out Tata Steel. The rules make it impossible for the government to just hand every state infrastructure project to Tata. The same are a block to possibilities of giving cash to prop up Port Talbot. For instance, the EU is investigating the support Italy gave Ilva. It has also asked Belgium to take back the €211m of state aid to Duferco Group. They argue such support is illegal. Why? The steel maker can locate a market investor to offer the loans given by the authorities. As much as the EU purports to nurture competition, the manufacturers, like Tata Steel need support in dealing with manufacturing difficulties.
A New Dawn – A Post Brexit Steel Industry
7 countries have placed their bids to purchase Tata. These include Endless and Liberty House Group. But what is its UK business was retained? The UK government is currently negotiating on the possibilities of giving Tata Steel support. Considering that Brexit has happened, EU rules will no longer be binding in the matter.
Reports are already out that the UK government will convince Tata to keep its Port Talbot plant open with a multi-million-pound loan. Tata was to make the critical sale decision the same day the referendum was conducted.
Indian analysts argue that due to the Leave team winning, the need for a swift sale will reduce. That gives room for the government to bail out the company and save jobs.
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