manufacturing sparks

A painful revolution: the rebirth of British made steel

01/10/2024
manufacturing sparks
The taxpayer-backed investment in Port Talbot steelworks of £500 million, one of the biggest in the government’s history, to build low-emissions Electric Arc Furnaces (EAF) is an important moment in securing the future of steel production and the associated supply chains that will ensure high-quality jobs and skills stay in the UK. This has never been more important as uncertainty continues to grow over the viability of Scunthorpe and other UK steelworks.

Port Talbot is now part of a global trend of investing in EAF. Nearly half (49%) of world’s steelmaking capacity under development is EAF, up from just 43% in 2023 and a third (33%) just two years ago. This trend will continue growing because 7 in every 10 of existing coal-fired blast furnaces will require major refurbishment by the end of 2030, meaning steelmakers across the world are left with little choice but to refit and upgrade their facilities, especially in the face of global decarbonization agreements.

Commentating on the current situation in Port Talbot, Alasdair McDiarmid, assistant general secretary of the Community steel union, notably said “it is a big test of Labour’s industrial policy”. Indeed, this is true now and for the long-term future of UK steelmaking.

Steelmaking capacity for a country the size of the UK is limited and expensive, primarily due to the high cost of energy but it has the capacity - 5.6 Mt tonnes of produced steel is outstripped by 7.6 million Mt tonnes of domestic demand - to support UK-based manufacturing. The biggest challenge facing domestic producers however is cheaper imported products from places such as China, the world’s largest producer, which is undermining the UK’s competitiveness.

This is especially challenging when Chinese oversupply continues to undercut global prices as it places excess steel onto the open market because of its current weakened domestic demand. According to ArcelorMittal, this has made the international market for the metal ‘unsustainable’.

Innovation in EAF could give Port Talbot the competitive edge it needs and make the transition to greener and more sustainable steelmaking smoother for steelworkers, manufacturers and the economy. Crucially managing the raw material mix is key to making electric arc made steel significantly cheaper, and is of high enough quality to replace virgin steel that supplies important industries - with well-paying and highly skilled jobs - such as the aerospace, car manufacturing and sectors critical to helping the UK decarbonise.

According to TATA Steel, there is an abundance of scrap steel in the UK as more than 10 million tonnes is collected each year. As laid out in our Manifesto for Manufacturing, this is good news for the UK government and British jobs as this will encourage businesses to reshore and create secure, robust, secure and short supply chains. This is an important factor for SMEs who are critical to all stages of UK manufacturing, including their responsiveness to just in time manufacturing – any undue events could have a knock-on impact across the entire supply chain to end product.

The real attraction for Jaguar Land Rover, Nissan, JCB, Kipling, David Neiper and other global manufacturers to keep making in the UK, is the availability of a highly-skilled workforce. An important part of securing the future of Port Talbot over the coming months, which will see 2,500 of over 5,000 people working at the steelworks face redundancy, is retaining this skilled workforce with a Tata-run training programme that is supported by the UK government. And for those in power, it must find new opportunities to ensure generations of these highly-skilled people, and the communities around the steel works, do not become ghosts to the past.

Successive Crowe Manufacturing Outlook Surveys (MOS) have repeatedly revealed the shortcomings in education and learning, including the current apprenticeship system being not fit for purpose. This year’s survey also identified 27% of manufacturers saw lack of skills as a barrier to growth, an increase on last year’s figure of 5%.

As laid out in our blueprint for securing the industry’s future, there must be alignment between regional and national governments to ensure the appropriate educational pathways are flexible, accessible and even funded to help people continue developing their skills – not just in Wales, but where the other steels works are located in Midlands, South Yorkshire and the North East of the UK.

This means incentivising learning by introducing a potential tax credit-based system for apprentices (as well as widespread reform) and supporting graduate level study fees for science, technology, engineering, and mathematics (STEM) subjects. This could also mean introducing schemes which encourage original equipment manufacturing to invest in training and education.

The UK government has promised to publish a new steel sector strategy in spring 2025 that will investigate modern technology to produce primary steel. It must think holistically across the entire manufacturing industry given the fundamental importance of steel to the economy and protect a total of 75,000 jobs involved directly and indirectly with steel making. The next budget of the new labour government is slated for October 30 and it must help the industry prepare and invest in new technology, including the role of artificial intelligence as well as new machinery, to ensure manufacturers are part of the next industrial revolution.

The demise of an industry which dominated the landscape has been rapid over the last few decades. Where once revolutionising our way of life and allowing the UK to spread its influence far and wide across the world, domestic steel output fell to its lowest level last year since the Great Depression. It now faces a precarious crossroad – revolutionise or we cease being a nation of makers.

The investment in EAF is necessary for the future of steel making but painful for the community of Port Talbot as it witnesses an industry reborn. As our economy decarbonises there is an opportunity for the industry to emerge on the front foot with high-quality jobs staying in the UK, supply chains secure and predictable, and the next generation possessing the right skills to stimulate innovation and embrace the future. If the story of this government is stimulating growth - when British manufacturing is strong, so is the country.

Contact us

Johnathan Dudley
Johnathan Dudley
Partner, Head of Manufacturing
Midlands