A tale of two steelworks

Why Brexit critics are half-right

Two countries. Two steelworks.

In the UK last week, Tata Steel announced that it would close its Port Talbot blast furnaces by the end of this year. Almost 3000 jobs will be lost and the UK will lose the ability to make steel from scratch. The UK government had previously committed £500m to support steel-making at Port Talbot but this will only pay off in the long-term, with the money going into setting up new, less polluting electric arc furnaces.

Meanwhile, in France this same week, senior ministers went to Dunkirk to meet with the operators of the ArcelorMittal steel plant. Here too, the company is looking to decarbonise its processes and move away from blast furnaces. However, as part of the newly signed deal only one of the two blast furnaces will be replaced with electric arc furnaces for now. A new direct reduced iron facility will also be set up, maintaining a greater part of the steel production process than if there were only electric arc furnaces. To fund this transition, the government has committed over €800m, with ArcelorMittal putting in €1bn on top.

Much of the debate in Britain has pivoted around whether Brexit or net zero is truly to blame for the British steel plants closing.

It’s not hard to see why. During the referendum campaign, Brexiteers made a point of saying that only by voting Brexit could steel production be saved. Nigel Farage said that voting to Remain would be the ‘end of the steel industry in this country’. Michael Gove noted that being outside of EU state aid rules could allow us to provide more funding to subsidise UK steel. Boris Johnson made a similar argument.

Those arguments now appear absurd in their disconnect from the reality of Brexit. So naturally Brexiteers themselves have been quick to say that everything would have been fine were it not for the UK’s net zero policies and the push to stop climate change.

On some level, they’re not completely wrong. Steel is a highly polluting sector and there is a major need to decarbonise. Shutting down the old blast furnaces will be an inevitable part of that. Indeed, the two sites at Port Talbot and Dunkirk are respectively each country’s most CO2-intensive industrial areas.

Yet the French case does demonstrate that the unfolding debacle at Port Talbot is no inevitability. France after all is just as committed to net zero as Britain.

Rather, this is the result of deliberate policy choices. It’s remarkable in fact how similar the actual French plan is to the proposal that had been put forward by the UK trade unions: keeping one of the blast furnaces online, with the option in the future to replace it with a direct reduced iron facility. The problem is likely that this would be more expensive than what Tata Steel have announced and neither they nor the UK government seem willing to invest the necessary money to make this happen.

So if blaming net zero is off the mark, what about Brexit? Much as the increased trade barriers between the UK and the EU have had a negative impact on major British industries, they are probably not primarily responsible for the blast furnace closures. These would likely have happened anyway.

Instead, the case against Brexit is more indirect.

An underappreciated part of EU membership was that it required British governments to develop more medium- and long-term policies in various areas. Plans that they would then need to stick to in order to fulfil EU obligations and access relevant funding.

In 2021, the EU established the Just Transition Fund. The JTF is a pot of money that gets allocated to national governments to invest in particular regions of their country. Specifically, it’s there to help regions that are poorer and more exposed to the climate transition get new investments and new jobs to replace the old ones. The funding would be deployed between 2021 and 2027, running the length of the EU budget cycle. To access that money, governments had to produce ‘just transition plans’, showing how they would use the funds and help guide affected regions.

France has developed plans for all of its key regions, supplemented by additional national funds, identifying many businesses in each of those areas that will need support as the economy decarbonises. The Dunkirk facility falls within one of those regions. The government has also gone further, singling out the 50 most polluting sites and negotiating ‘ecological transition contracts’ with each of them.

The balance between the EU and its members provides helpful counterbalances; a clash of methods and priorities that deliver a more refined end product. Much like the great fires needed to forge steel, it is not pre-existing harmony that allows the EU to bring advantages to its members, but a (controlled) competition to prove that your ways are the best. It is a world where everyone has something to bring to the table and everyone has something to learn.

This is where the cost of Brexit can really be seen. France hardly needs encouragement when it comes to planning but Britain does. The Port Talbot fiasco has again exposed the lack of planning and strategy that runs through large parts of the British state. After all, what else can you say about a government that approved a new coal mine to supply steel furnaces that are set to close? Inside the EU, there were structures to push us to work against this foible. Outside, the chaotic, disconnected instincts of the British state are allowed to run rampant.

The blast furnaces would have likely closed sooner or later but the management of that transition has been a failure, at least in the short-term. Maybe the future investments and facilities will eventually deliver a recovery for the people living there, but only after a great deal of hardship. With a more joined-up strategy and a government that was forced to plan the follow-through of its net zero ambitions in detail, many of the job losses announced this week could have been prevented. If you don’t believe me, just ask the French.