Closure of Port Talbot blast furnace exposes limits of state power

Jonathan Edwards

Future historians will benchmark this week’s sad closure of the last remaining blast furnace at Tata Steel Port Talbot as a turning point in the UKs industrial history.

With the British Steel plant at Scunthorpe also due to turn off its own blast furnace, the UK as the birthplace of the industrial revolution will be left without the ability to produce its own steel.

This is a seismic moment therefore in our economic history: from here on in the UK will be reliant upon virgin steel imports.

Strategically this leaves the British state in an exposed position on all sorts of fronts.

Tragedy

This week’s development is of course primarily a tragedy for the 2,800 workers who will directly lose their jobs and those businesses further down the supply chain.

The jobs at Port Talbot were well paid in comparison to other available employment and therefore the local economy, even if workers were to find alternative jobs, will take a hit in terms of direct consumer expenditure.

The south Wales Valleys are already regrettably amongst the poorest regions of Europe.

The decision by Tata of course indicates the folly of privatising your primary industries in the first place. Once those industries are sold then governments lose control.

Decision makers

Port Talbot was originally bought by Corus before being ultimately bought by Tata in 2007, meaning that the fate of Welsh steel making was in the hands of decision makers in faraway Mumbai.

Understandably, directors and board members make decisions in what they perceive to be the best interests of their company.

Port Talbot is one asset of many that Tata holds across the world and in the group’s future business plan there is no longer a requirement for primary steel making capability in Port Talbot.

Did Brexit play a role in Tata’s thinking? The UK is no longer a part of the world’s largest economic union. If Tata wants to produce primary steel for the European market, why do it in Wales which is outside?

According to Tata, the blast furnaces were losing the company £1m a day. The restructuring involves £1.25bn investment by the company to build an electric arc furnace, which essentially recycles steel, with construction set to begin next summer. The UK Government will contribute £500m.

Savaged

In opposition the Labour Party absolutely savaged the blueprint, yet the final plans seem to have changed little now that they are in government at a UK level.

We were told in advance of the election that only a change of government could save the jobs. Prior to the election, Jo Stevens MP, the then Shadow Secretary of State for Wales, said in the Commons: “This government has forked out £500m taxpayers’ cash for the loss of 3,000 jobs and this is their deal, and they own it.”

Earlier this month, the new Business and Trade Secretary of State, Jonathan Reynolds, said the Labour version of the same deal gives “hope for the future of steel making in south Wales”.

From what I can see it’s the same number of jobs lost for the same amount of money invested by the UK Government. Furthermore, the unions’ alternative proposals have not been adopted.

I am not entirely convinced the tactic of the UK Government to gloss the agreement is credible.

Perhaps they genuinely thought that their proposals would change the position of the company; if so they have been given a very rude awakening on the limit of the powers of the nation state when up against a giant company like Tata.

Plaid Cymru’s ultimate call for the Welsh Government to compulsorily purchase the site also has its weaknesses.

The Welsh Government’s entire economic development budget for both revenue and capital is only £527m. At a £1m a day loss, compulsorily purchasing Port Talbot would wipe out 70% of the total budget without even considering the cost required to buy the plant.

Alternative for Deutschland

I was listening to a very interesting podcast by Irish economist David McWilliams recently where he discussed the rise of the far right AfD (Alternative for Deutschland) in Germany.

One of the main reasons for its recent electoral successes has been the decision of Volkswagen, a company that has provided well-remunerated employment for the best part of a century, to start closing production capacity in Germany.

The podcast argued that the demise of the old certainties has created a climate of fear that is being exploited.

We are no strangers to industrial decline in Wales; however the closure of the last steel making blast furnace in Wales underscores that we are facing a very uncertain economic future.

Faced with global forces they cannot control, the traditional political mainstream does not have a convincing narrative of where we are heading. Talk of a green industrial revolution sounds great in a pamphlet, but what exactly does it mean for working people in terms of employment and remuneration?

Looking at the overall strategic political position, I fear that Project Miserable by the UK Government could well backfire and play into the hands of the far right. Welsh nationalism also must move beyond its default grievance narrative. In the absence of hope for our people, malign forces will surely pounce.

Jonathan Edwards was the MP for Carmarthen East & Dinefwr from 2010 to 2024.