It is a sad state of affairs when Britain announces the closure of yet another keystone manufacturing business. Steel is part of our everyday lives but, from now on, we will need to buy most of it in from abroad.
It’s such a change from the mid-Sixties when the UK was the fourth biggest steel producer in the world. Now we are 22nd. Sure, China and India have risen up the ranks as they industrialise, but countries like Germany and Japan have managed to hold their production steady due to domestic demand. The UK steel industry has declined because energy costs here are too high. If costs are too high in manufacturing, a business does not generate enough cash to invest in expansion or modernisation and nor does it reward its shareholders.
They had high energy costs. Steel towns like Pittsburgh were on their knees. Towns like this were referred to as the rust belt. Decaying industry bereft of investment because energy costs were simply too high.
In 2008, the USA experienced a breakthrough in shale production. They had found a way to unlock the oil and gas from the layers of shale many kilometres below the surface of Texas, Oklahoma and Pennsylvania.
In the following few years the cost of energy plummeted, hundreds of thousands of jobs were created and billions of dollars invested in revitalised manufacturing.
The USA became the world’s largest oil and gas producer in 2012 (even bigger than Russia and Saudi Arabia) and self-sufficient for the first time in many years. It has been riding a resurgent economy for the past decade.
They now have some of the lowest energy costs in the world. All on the back of shale.
They have drilled well over a million wells, safely and with good environmental standards. Cheap energy has created a virtuous circle.
It has led to increased manufacturing which has generated more steel production. Only last month US Steel announced an investment of over a billion dollars to increase steel production near Pittsburgh for the auto, appliance and construction industries.
The UK, rather like the USA, has long sat on hydrocarbons. Coal, oil and gas have been abundant in the British Isles, but sadly have long since peaked.
We now have some of the highest energy prices in the world and manufacturing has declined catastrophically.
Whereas 30 years ago our manufacturing was as strong as Germany at 25 per cent of GDP, today it is a paltry 8 per cent. Almost extinct.
Manufacturing is culturally and economically a key part of Britain. The industrial revolution began here. The North emerged from subsistence farming to become a world leader in manufacturing. Today much of it is rust belt.
Yet pushing industry out of Britain doesn’t save the planet, it just means those same products are made with a higher environmental cost and less regulation elsewhere.
No one can guarantee that our shale deposits will transform our economy the way shale has done in the USA. But it might.
Britain is a sophisticated country. We should look to the science as we have always done, and not allow foolish politicians driven by their obsessions with their own image to set the agenda based on the blathering of a few ignorant activists.
Many of shale’s detractors exhibit little more than a destructive Luddite attitude to the new approaches and technologies needed to address the big issues. INEOS own shale kit has even been attacked and damaged.
But at least the Luddites only damaged textile equipment they felt threatened their traditional employment. The current Luddite menace is not protecting existing employment but destroying future opportunities. The fact is, if the UK had a shale industry, we could be investing in steel not closing it.