Britain - facing the steel closures

Spring 2016

Over the past seven months, most of what remains of the British steel industry has been in crisis, as the 3 largest steel companies operating in Britain chose to pull out altogether.

First, last September, the British subsidiary of Thailand-based Sahaviriya Steel Industries (SSI-UK) went bust and mothballed its Redcar steel mill, in Teeside. Then, in October, Caparo Steel filed for bankruptcy. Both alleged unsustainable debts. Then, later that month Tata Steel announced plans to dump some of its small facilities and mothball its Scunthorpe mill, in Yorkshire. Finally, this March, Tata Steel revealed its decision to drop its entire British operation, on the grounds that it was just piling up losses.

In total, these plant closures (both potential and completed) would affect 2,200 workers for SSI, 1,700 for Caparo and 18,000 for Tata - a total of 22,000 directly employed workers (around 80% of all steelworkers), plus 35,000 or so other workers employed by companies providing supplies and services to the industry. Of course, for the areas around these plants, which have seen wave after wave of factory closures and are now unemployment black spots, this was devastating news.

In the meantime, however, the campaign for the EU referendum had been hotting up. This forced the government to abandon its initial "hands-off" attitude towards the plant closures, for fear of a backlash which was certain to favour the "Leave" camp. As a result, today, after much to-ing and fro-ing in official circles, "bailout plans" are supposed to have been cobbled together for some of these plants. Secretary of state for business Sajid Javid is now trumpeting to all and sundry that, thanks to his efforts, many of the jobs which were under threat have been "saved". But whether they are really safe and at what cost, is quite another question.

China red-herring and capitalist chaos

Today, more or less all commentators blame the British steel companies' dumping of their workers, on what they call China's "illegal dumping" of cheap steel.

Because, of course, in this capitalist society, which is organised exclusively around the needs of capitalist profiteering, there can be nothing "illegal" in the fact that companies choose to deprive tens of thousands of workers of their livelihoods! But the fact that China is able to sell its steel at a price which is unacceptable for British steel bosses because it does not allow them to make their "normal" profit - that, in their view, can only be "illegal"!

Not only is this hypocritical, but it is also ironical. Aren't large numbers of British companies quite keen to use Chinese subcontractors, precisely due to their capacity to produce at low prices? Would British fashion retail chains or mobile network companies - among many other cases - be anywhere as profitable as they are today, if it were not for the fact that they can get their clothes and mobile phones manufactured at China's at rock-bottom prices?

But, who cares? The myth of China's "illegal dumping" of steel is there to stay, as the only explanation on offer for the crisis of British steel.

And never mind that China's steel exports mostly go to Asia, not to Europe, or that, at around 100m tonnes a year, they represent but a small fraction of the world's excess production capacity of 600m tonnes a year! Never mind too, that steelworkers' jobs are just as much threatened in China as they are in Britain. Hasn't the Chinese government announced plans to cut up to 800,000 steel jobs over the coming 2 years and possibly up to 2 million, according to some estimates - and this, on top of the 550,000 which have already been cut since 2013?

The truth is that if these threats against jobs should be blamed on anything - whether in Britain, China or anywhere else, for that matter (because the steel industry is facing the axe more or less everywhere) - it is on the chronic chaos of this profit-based, capitalist system.

Indeed, for a long time already, there has been a worldwide overproduction of steel, partly due to massive (and very profitable) speculation and partly due to the economic slow-down caused by the banking crisis (see our article "China's slowdown and commodity market turmoil" in this issue of our journal).

This overproduction has caused a fall in the world price of steel and generated cut-throat competition between the steel giants. In order to protect their profits, they cut investment to the strict minimum while cutting the wage bill to the bare bone. And when, despite this, a plant does not produce enough profits to their liking, they just close it down. In Britain, China and elsewhere, steelworkers are just being caught in the crossfire of their on-going rivalries!

This situation is yet another consequence of the permanent state of crisis in which this decrepit capitalist system survives. Being based on on-going competition between rival capitalists, it is incapable of planning its production according to need - which is already, in and of itself, a cause of chaos. But the fact that, in addition, the capitalists are able to make huge profits by speculating on everything that can be bought and sold - thanks to the sophisticated tools made available by financial markets - and that they can plough enormous amounts of spare cash into this speculation, results in an exacerbation of this chaos on a colossal scale.

Lining up in defence of the bosses

Both politicians and union leaders have been unanimous in shedding tears over this sorry tale in which the Chinese are the bad guys and the steel bosses are the good guys who have to be defended at all costs against the bad guys' "illegal dumping" of steel. And they all rushed to request from Cameron a rescue package - not for the workers, however, but for.... the steel bosses.

Not only did they ask for public funds to help the steel companies to overcome possible liquidity problems, but they also requested subsidies, both to reduce their energy bills and to make up for the high pound. And, above all, they requested that tariff barriers should be set in order to protect "British steel" against Chinese steel imports! The steel industry's lobby group, UK Steel, couldn't have argued the steel bosses' case better than they did!

Some union officials even went as far as to argue that since the banks had been bailed out in 2008, so should the steel industry. One can only wonder whether they have already forgotten that it is the working class which has been made to pay - and is still paying - for the banking bailout. Do they want Osborne to come up with new austerity measures tomorrow and tell workers that this is the price they have to pay for the steel bailout?

As to Jeremy Corbyn, he was hardly more daring. Earlier in the crisis, he had already stated in the Commons that if he was in Cameron's shoes he would personally go to Beijing in order to get a better deal for the British steel industry. Then he called on the government to "renationalise" British steel - but only until a new buyer could be found and without saying a word about the issue of compensation.

Indeed, why should there be any question of compensating these steel companies or their shareholders, when they are running away with the profits they made over the years? But, predictably, Corbyn was careful to avoid this issue: just as in the case of his "re-nationalisation" programme of the railways, Corbyn does not seem to want to take the risk of antagonising shareholders!

In any case, neither Corbyn nor the union leaders saw the point of mentioning the real issue - the fact that these 3 steel companies are in fact quite wealthy and could be made to foot the bill for the damage they are causing.

Indeed, Caparo has an empire - albeit a relatively small one - of very profitable businesses based outside Britain. SSI is South-East Asia's largest sheet steel producer and despite the falling price of steel, its assets are still estimated to be worth ?560m. As to the much larger Tata Steel company, it controls ?17bn worth of assets and its parent company, Tata Group, which employs 600,000 workers worldwide, made ?4.5bn profits last year. What's more, unlike Caparo and SSI, Tata has very significant assets non-steel assets in Britain - in particular the very profitable Jaguar-Land-Rover automotive group which it owns!

And these rich companies would need some kind of bailout? On the contrary, what they would need is to be read the riot act! But this was never on the agenda for Corbyn and the steelworkers' union leaders.

"White knights" and asset strippers

It did not take long to see what the results of the government's intervention to "save the industry" really were. There was plenty of talk about "white knights" coming to steelworkers' rescue, or "part-nationalisation" of the industry. But, predictably, all that turned out to be just a con designed to pull the wool over the steelworkers' eyes.

The first "white knight" to appear on the scene was an unknown company called Liberty House whose only activity in Britain, so far, had been in shipping and commodity trade, but not in steel. According to an investigation published by the Financial Times on 7 April, the parent group (owned by the Indian Gupta family) "has operations in Dubai, Singapore and Hong Kong". Its British arm, Liberty House UK, is "owned through a company registered in the Isle of Man" and run by Sanjeev Gupta, who is based in London but has non-dom status, allowing him to reduce his tax bill. More bizarrely, this British company's filing at Companies House indicated less than ?40m in revenue in 2014, thereby showing a rather limited activity.

Nevertheless it was this rather shady, smallish company which bought part of the Midlands facilities of Caparo UK, last year, together with a small steel mill in Newport. Finally, on 24 March, it bought two small Scottish steel mills from Tata, Clydebridge and Dalzell, in a bid brokered by the Scottish government. However, all these facilities were closed and mothballed when they were bought. And, as far as jobs are concerned, anything can happen in the process of re-opening them - assuming they are reopened at all - since the buyer has made no commitment concerning the number of jobs that will be retained. So the British and Scottish government may well boast of having "saved" jobs - but they haven't yet.

The second "white knight", a company called Greybull Capital, bought Tata's Scunthorpe plant, in Yorkshire, for a symbolic ?1. Greybull was set up by an ex-Lehman Brothers banker, after this bank's collapse triggered the banking crisis. It is supposed to be specialised in "turning around" troubled businesses. But, in fact, it seems to be more in the business of "sweating" their assets and their workers.

For instance, in 2011, Greybull bought, with another partner, the troubled electronics retailer chain Comet for ?2. But, exactly one year later, Comet went bust, throwing 7,000 workers on the dole!

In another case, Greybull bought the ailing Monarch low-cost airline for a few pounds, in October 2014. This marked the beginning of a restructuring exercise in which 700 jobs were cut and workers were blackmailed into taking a 30% wage cut. Having "turned around" the company on workers' backs, Greybull is now looking to sell it on, at a huge profit!

It is clear, therefore, that Scunthorpe workers can expect nothing from Greybull. It is already blackmailing them into agreeing to a 3% pay cut and to undisclosed "changes" in their pensions. And given Greybull's record, they've got no guarantee whatsoever concerning their jobs, nor even the future of the plant!

In the case of Tata's biggest plant, Port Talbot, several potential "white knights" have been bargaining for government aid in order to take over Port Talbot. The latest news at the time of writing is that a team formed by some of the plant managers would take it over with the financial backing of a number of wealthy individuals and an aid package provided by the government, which could include not just guarantees and loans, but also direct participation in the new company's capital. The workers themselves have been offered the chance to buy shares in this new company, provided they can spare a minimum ?10,000 out of their savings - which, if they could, which is unlikely, would be another means to pressurise them into agreeing to cuts in their conditions.

But, so far, there is no indication of what the new company may have in store for its workforce. Nevertheless, since it will be run as a capitalist concern whose purpose is to make a profit, Port-Talbot workers cannot expect anything which is favourable to them, either.

As to the rest of the Tata workforce, its fate remains suspended in mid-air. But by looking at what has already happened with the "saved" plants, they now know what to expect if their own plants escape closure.

A logic workers can't afford

The logic of the union leadership's approach was illustrated by a statement released in March by Roy Rickhuss, leader of the main steelworkers' union - Community - in which he said that the "independent consultancy" Syndex had been appointed to advise the union on "constructive proposals" to reshape "our steel industry". This was followed by the outline of a strategy supposedly designed to restore the industry's "viability", while demanding that "the government must invest in our steel industry to give it a future".

The whole statement had the distinct feel of what most union leaders probably consider as the "good old days", back in the 1960s, when they were brushing shoulders with the directors of the then still nationalised industries, during board meetings.

As if it was in the steelworkers' interest to make this industry "viable" - i.e. profitable for the capitalists! As if profits didn't only exist because exploitation does! As if offering to make the industry "viable" (from a capitalist point of view) wasn't another way of saying, by implication, that workers' exploitation should be stepped up! Is it the role of a trade union worth this name to make such an offer? Of course, it shouldn't be!

But, in fact, this is exactly what happened with the takeover of Scunthorpe by Greybull Capital. Despite the shadiness of this company and despite its record, Community leader Roy Rickhuss stated that "Community's independent experts... have assessed that the transformation plan for the business is robust and Greybull has the necessary capabilities to build a sustainable business". And then, in the ballot that was subsequently held at the plant, all the steelworkers' unions recommended the 3% wage cut and reduced pensions. And when the vote gave a majority in favour, Rickhuss hailed the result as "a significant contribution by the workforce towards turning the business around and giving it the best possible chance of success under new ownership."

But Roy Rickhuss still did not bother to explain fully what Greybull's "transformation plan" might involve or how this asset-stripper could offer a sustainable future to the workforce. Nor did he bother to explain why it should be steelworkers who should "contribute", when neither the steel bosses nor the shareholders do!

However this is the logic which is concealed behind slogans like the "save our steel" which has been used to front the steelworkers' unions very muted campaign in response to the steel closures. As if, in this capitalist society, any part of the economy could belong in any way to the working class! Steel, like the rest of the economy, belongs to the capitalist class - and it still would even if it was really nationalised, as some suggest. Otherwise, for instance, if it was "our steel", working in a steel mill would have long ceased to be one of the hardest and most dangerous jobs and there would have been no job cuts!

As to the idea that the steel industry must be "saved", because Britain "must" have a steel industry, it is forgetting that Britain is not an isolated island. This world would be much better able to meet the needs of all, if it was operating on the basis of an international division of labour, whereby certain regions would be specialised in certain productions for the benefit of the whole planet. Only such a division of labour would allow the pooling together of all resources available across the world and a rational organisation of production according to needs.

True, there is a major obstacle to this - the capitalists' domination of society and their private ownership of the means of production. But this means that, ultimately, the so-called "solutions" that the bosses or the government may provide to the problems faced by the working class, can only be dead ends. Only by challenging the control of the bosses over the means of production and enforcing its own control over them, will the working class find real solutions to its problems, especially at a time when, like today, it is confronted with systematic attacks from the capitalist class.

Of course, for the steelworkers who lose their jobs, it is a disaster and a devastating blow for their communities. But does this mean that the only prospect they can be offered is to hang on at all costs to their dangerous jobs, including by agreeing to worse conditions, in order to "save" an industry which is only there to make profits for the bosses?

Certainly not. Instead of expecting the government to bail out the steel companies or to provide funding to aspiring asset-strippers, as the union leaders do, why shouldn't the likes of Tata pay their debt to the workers who made their profits, even if this means paying them their full wages for as long as it takes for them to find another job or retire on generous pensions! And if there are steel companies which are really bankrupt and cannot pay up, why shouldn't the capitalists class as a whole be made to pay collectively for the damage generated by the crisis which they have collectively caused? It would take a fight? Yes, and a big one. But that is the only real option the working class has!