Trade and Industry Press Notice 77

Session 2002-03        26 June 2003


Press Notice 77

UK STEEL 2003

Publication of Report

The Trade and Industry Committee today published its Ninth Report of Session 2002-03, on the problems facing the UK steel industry.

Since the Committee last took evidence on the competitiveness of the steel sector in 2001, the industry in general, and Corus in particular, have continued to experience increased competition for markets at home and abroad, while demand for steel in the UK has declined. Against this background, the Committee decided to undertake a further inquiry into the problems faced by the sector in the current economic climate, and its prospects for the future.  The inquiry focussed on five key issues:

• The underlying reasons for the sector’s current performance;

• The competitiveness of the UK steel sector;

• Current and future demand for UK steel, at home and abroad;

• Developments in world markets for steel products; and

• The role of the Government in the development of a competitive steel industry.

The Committee concluded that to survive, the UK steel industry needs to maintain its grip on its domestic market. In order to counter the decline of the UK manufacturing sector, this will require the steel industry to increase its market share. It also needs to improve its share of a largely stagnant EU market. This will undoubtedly be difficult, although UK competitiveness on EU markets should be improved by recent trends in exchange rates. World markets are suffering from overcapacity and demand is rising significantly only in developing markets such as Asia, where UK and EU industries generally cannot compete.

The Committee took note of the continuing difficulties being faced by the steel industry throughout the developed world. UK companies are under extra pressure because of the decline in the manufacturing base and, until recently, the strength of Sterling. While there are signs that exchange rate problems are easing, there needs to be a period of stability to bring much of the UK steel sector back into profitability and allow it to make the capital investment it needs to ensure its future competitiveness.

Given the key strategic role of the steel industry in underpinning the UK manufacturing sector, the Committee recommended that the Government should establish an industry forum to assess the address the problems currently facing the industry and to formulate solutions to be acted upon by Government, regional and local agencies and the industry itself.

Commenting on the Report, Martin O’Neill MP, Chairman of the Committee, said:

“The UK steel industry has been in decline for many years in the face of increasing competition on domestic and international markets where production capacity exceeds demand. That competition often has the advantage of lower production costs and proximity to those markets where demand is growing, such as Asia. The UK industry’s problems have been exacerbated by declining demand from its main domestic customer - the manufacturing sector - which has also experienced falling output and demand, and has struggled to be competitive on international markets.

“One of the major factors which has hindered the competitiveness of the sector has been the strength of sterling against the euro and its predecessors over several years, although we note that the decline in the steel industry’s fortunes pre-date this period. The recent weakening of sterling has provided some respite, and we would expect the sector to improve its performance at home and in the EU. However, sustained improvement will be possible only if a period of exchange rate stability and the process of rationalization of the industry brings the sector back to profitability and enables it to make the capital investment it needs to compete on its core markets.”

Copies of the Ninth Report can be downloaded from our website: (www.parliament.uk/commons/selcom/t&ihome.htm)