No deal Brexit fears for UK Steel

With a ‘no-deal’  Brexit looking increasingly likely, the future isn’t looking good for the UK steel industry.

 

According to Gareth Stace, director-general of UK Steel, the trade body representing UK steelmakers, there are many problems queuing up to make life difficult for UK steel  operations.

First, UK steel exports would almost certainly be restricted by the European Union’s new steel safeguards, and with US steel tariffs now in full swing and responsive safeguard actions elsewhere, things aren’t looking too good. Add a loss of access to EU Free Trade Agreements and it’s beginning to look like a recipe for disaster.

According to Stace, loss of access to FTAs would mean trade restrictions in virtually all of the UK steel industry’s key export markets, which account for  97% of export trade.

He said that the export of some 2.6Mt of UK-produced steel to the EU each year would be severely disrupted by additional administration, costs and border delays. UK Steel estimates that  4-5% would be added to the cost of a tonne of steel – estimated at £70 million/year for the sector. Delays and complications would also encourage many EU customers to seek alternative steel providers.

No deal means that the EU would introduce a range of tariffs on imports of steel-containing products (such as 10% on cars) from the UK, reducing export and production of these products and ultimately demand for steel in the UK.

Loss of access to a range of EU free trade agreements (FTAs) would also result in the imposition of tariffs to other important markets for steel, most significantly Turkey (15% average tariff impact). The exports 300kt/yr of steel to Turkey.

At present, claims UK Steel, no detail exists on how the UK will replicate the EU’s recently introduced steel safeguards, introduced in response to US Section 232 tariffs. Here the devil is in the detail as poorly implemented measures could be as ineffective as no measures at all, leaving the UK open to trade diversion and import surges.

Furthermore, there remains concern about the UK’s immediate readiness to investigate and introduce new trade remedies measures in a timely manner, particularly those already in train in the EU. This could leave the UK further at risk to trade diversion and dumping.

Leaving without a deal means that UK steel would no longer count as of EU origin for the purposes of rules of origin within the EU FTAs – and this will mean that EU demand for UK steel could weaken as a result, claims UK Steel.

UK Government policy, says UK Steel, is to ensure that EU steel qualifies as UK origin for the purposes of replicating our existing FTAs – eliminating any possibility of any strengthening UK manufacturing supply chains after Brexit.

It is estimated that UK Steel companies would lose access to the €1.6 billion Research Fund for Coal and Steel, which is essential to the sector’s ability to collaborate across the EU on vital innovation projects.

“Let us be clear, there are no benefits to be had from Brexit for the steel industry. This merely an exercise in damage limitation with the various different shades of Brexit, from soft through to hard representing various degrees of harm. 

“Leaving the EU without a deal represents the most extreme and negative end of that spectrum, causing such harm to the steel sector that any nascent signs of recovery we have seen over the last two years would be completely dashed, sending the sector back into crisis mode. It is not an exaggeration to say that the long term future of steel production in the UK is on the line here.

“This is not a re-run of project fear or an attempt to enter into the debate over Brexit. This is simply a statement of facts and an appeal to MPs of all stripes to put party allegiances aside and avert disaster. We know there exists a sensible and pragmatic majority in parliament that can steer the ship through, delivering an agreement and an orderly exit. But as Brexit looms ever closer, we watch aghast as that majority, paralysed by party allegiances, is ceding control of the tiller to a fringe minority intent on guiding us onto the rocks.  

“This cannot be allowed to happen. MPs must wake up, come together and deliver a deal.”