Will Brexit Really Destroy Britain's Steel Industry?

01/08/2016 12:28 | Updated 01 August 2016

While Britain's political landscape is still in turmoil, Brexit is inevitable. Article 50 is yet to be triggered, but new Prime Minister Theresa May, has made it very clear that it will eventually happen. Remainers should feel free to continue expressing themselves. Leavers must understand that, while they won the battle, freedom of speech is our democratic right as British citizens. Admitting defeat and simply "getting over it" is far easier said than done.

Fundamentally, there is still room for error. If negotiations don't go smoothly, people could lose their jobs, homes, and ultimately, their livelihood, especially those working in sensitive industries, such as British steel. Now is the time to stop taking sides and pull together, not only for the sake of damage control, but to grab the bull by the horns and take advantage of the new opportunities that are on offer.

In the buildup to the referendum, the British steel industry was a hot topic. Community (the trade union for steel workers), David Cameron, and the Business Secretary all stated that the economic uncertainty could crumble the industry, while senior leave campaigner, Michael Gove, claimed that Brexit would save the industry. It was hard to know what to believe. While the true damage/opportunities have yet to present themselves, the topic of British steel (post-referendum) seems to have taken the back-seat, overshadowed by May's baffling decision to make Europe's most hated man, Boris Johnson, Foreign Secretary. But was anybody right?

In short, it's really too early to accurately determine how and when the industry will be affected. We can make sensational claims all we like, but in truth, there are no experts. A seasoned economist will be the first person to tell you that even THEY don't understand the economy, so the odds are, the average Tom, Dick or Harry won't have a clue. So let's take a step back and look at the facts...

Since the 1970s Britain's steel production has been on the decline, moving from roughly 23 million tonnes per year to around seven. When looking at these stats it's easy to understand both sides of the argument: "Why take a chance with what little we have?" Versus "The industry is in decline anyway, so why not try to salvage it?" -- there really is no right or wrong; it's simply a matter of risk.

That said, Port Talbot in South Wales, is already suffering from the side effects. While 57 percent of the residents voted leave, many are now regretting their decision. The town is known for housing Britain's longest surviving steel plant -- Port Talbot Works -- which also happens to be the town's largest employer. The plant's owner, Tata Steel, who bought the business in 2007, was planning to sell off the plant before the referendum. The government even offered loans of up to £1 billion (for a 25 percent stake in the business) to support the £700 million pension deficit. The sale has now come to a stalemate, leaving the 4,000 employees in a state of limbo. Tata have since held talks with Germany's Thyssen Krupp about the possibility of a joint venture; however, many economists believe that consolidation could run the industry into the ground. The reality of losing the plant is starting to sink in as residents come to the realisation that it would be a major blow to the local economy.

While Port Talbot is just one of many companies operating in the steel sector that has been affected, the short-term results don't seem too encouraging. While it's easy to point the blame at Brexit for the steel industry's problems, it's important that we (as a European society) don't ignore the bigger picture. According to steel manufacturing business, Custom Fittings Ltd, "For years the flood of cheap Chinese steel exports has been making is harder and harder for businesses to make money. Brexit isn't necessarily the biggest issue." How Europe as a whole can combat China's rapid growth and undervalued currency is the real underlying problem.

That said, for now Britain must think short term to have any chance of salvation. Business Minister, Anna Soubry, has stated on numerous occasions that tariff-free access to the single market is a must in order to entice European companies to continue buying British steel. With over half of the UK's steel being exported to EU member states, it is crucial. While this won't save the dying industry, it will keep it afloat for a little longer -- hopefully long enough for major, positive changes to occur.