Government and industry must work with trade unions to unlock much-needed investment to create a world-leading, net zero steel sector, argues Common Wealth’s Miriam Brett and Community’s Alisdair McDiarmid
Port Talbot has been home to the steel industry since the early 1900s, playing an integral role in delivering local jobs and generating local investment. The identity, history and culture of the area is steeped in and shaped by steel. Today, despite waves of wider deindustrialisation, Port Talbot is the UK’s largest steelworks, directly employing 4,000 workers. Its future, however, is now thrown into jeopardy as its owner, Tata Group, threatening to close operations unless the government agrees to £1.5bn in subsidies to reduce its carbon emissions.
Absent action from government and industry through a strategic to transition the sector, the livelihood partnerships of steelworkers and communities and the longevity of the UK steel industry are uncertain. The end of steelmaking would be devastating in any circumstance, but with the necessary levels of investment and a level playing field, UK steel has the potential to become a low-carbon sunrise industry.
Prior to Tata Group’s announcement, the sector has been battling the long-term impact of high energy costs, with UK steel manufacturers paying 25 per cent more for electricity than European competitors over the past five years. This combined with widespread trade turbulence and steel dumping, and global overcapacity in steel production, means the steel sector is navigating a difficult and uncertain landscape. Moreover, the UK’s uncompetitive energy prices are a major barrier to delivering green steel, as all the low-carbon steelmaking technologies required increased use of electricity.
Despite this, steel plays a vital role in today’s labor market. Over 33,000 people are directly employed by the steel industry in industrial heartlands, and a further 40,000 jobs are supported in the supply chain. Average wages in the steel sector are 28 per cent higher than the national average, and up to 46 per cent higher when compared to regional averages in Wales and Yorkshire and Humberside where steel jobs are concentrated.
While the industry has undergone a rapid reduction in employment – which dropped by around 55 per cent since 1990 – today’s jobs remain critical to the sustainability of communities, with steel accounting for nearly 13 per cent of all employment in Aberavon, the home of the Port Talbot steelworks. The economic benefits speak for themselves: the industry generates over £2bn in direct contribution to the UK economy, and £1.7bn in direct contribution to the UK’s balance of trade.
The climate crisis, however, necessitates a fundamental rewiring of the economy, and the operation of the steel industry is no exception. Steel is currently one of the biggest UK industrial carbon emitters, producing 7 million tons of steel each year, giving rise to around 11.6 million tCO2. The UK’s main primary steel production facilities – Port Talbot and Scunthorpe – currently produce around 15 per cent of the UK’s industrial greenhouse gas emissions. However, if well managed, greening the industry can be a significant opportunity.
Securing a thriving and green future for the sector can rapidly reduce emissions, stimulate investment in industrial hearts, secure good green unionised jobs, and improve the UK’s trade imbalance. From electric buses to wind turbines, the infrastructures of a low carbon future will depend on a thriving, decarbonised domestic steel sector. This in turn will require an ambitious green industrial strategy to deliver, with steelworkers, trade unions and steel communities at its heart; a win for workers, industrial communities, the climate, and economy.
Appetite in other states for hydrogen-based steel production is rapidly growing, with tens of projects either planned or underway across Europe. The UK is well placed to create a world-class green steel industry, and cannot reach its net zero targets without transforming the way steel is produced. Yet while neighbors European countries forge ahead with the private and government support necessary to transition the industry and align industry emissions with Paris Agreement commitments, the UK is lagging.
Progress is urgently needed to secure a future for UK steel, most urgently by tackling excessively high energy costs for the industry, but with an overarching goal of providing the investment and policies required to transition the sector to a green future.
Without intervention, there is a risk that while other states push ahead to green the sector, UK steel could be regarded as a sunset industry, with devastating consequences for the economy and for steel communities whose histories, livelihoods and identities are rooted in the industry. UK steel thus sits at a critical juncture. We can either wait until it is too late or act now to put UK steel on a credible path to net zero. The future of steel is green: the challenge now is to create an ambitious roadmap to transition the industry.
If they are serious about securing a sustainable future, government and industry should work with trade unions and provide the investment needed to enable the sector to be world-leading, delivering on the levelling up agenda, and playing an integral role in meeting its net zero targets.
Miriam Brett is director of research and advocacy at Common Wealth and Alisdair McDiarmid is operations director at the Community trade union