Government failure to make the UK business environment more competitive for its steelmakers could lead to the continual slow erosion of investment in the sector, industry association UK Steel's director-general, Gareth Stace, told Argus on the sidelines of the World Steel Association general assembly in Monterrey, Mexico.
UK mills face a number of disadvantages, even without the uncertainty regarding the UK's future trading relationship with Europe. Electricity costs for UK producers are 62pc higher than for their competitors in Germany, and 80pc more than in France.
UK Steel has continually highlighted this issue to the UK government for a number of years, but no action has been taken. This means that when the market is undergoing a slowdown — as it is at present — UK producers face more downside than their global competitors.
And when there is an uptrend, the UK industry lags behind. So producers in the UK, most of which have production operations elsewhere, have little incentive to invest in their domestic plants when they can secure higher returns in other jurisdictions.
UK Steel is against the UK leaving the EU without a deal because of the threat that this poses to exports — more than 95pc of which could face tariffs and restrictions, up from 4pc at present — as well as to domestic demand. But the association acknowledged that there could be some upside in this event in the form of a government economic stimulus package.
UK finance minister Sajid Javid has committed to a significant increase in borrowing to invest in new infrastructure and upgrading of the existing stock, Stace said. But the government is so distracted by Brexit at present that it has forgotten about a number of issues that would help UK mills. The government's industrial strategy was launched and promptly forgotten about, and it focused on sectors perceived as exciting rather than those that would deliver real growth, Stace said.
