The cost to the UK economy of allowing British Steel to collapse would be far greater than the 4,500 jobs directly lost and the many thousands more at risk in the supply chain, according to research by IPPR.
It could lead to £2.8 billion in lost wages over a 10-year period, cost the government £1.1 billion in lost revenue and extra benefit payments and reduce household spending by £1.2 billion over the same period, the think tank has found.
The analysis comes as Britain’s second-largest steelmaker awaits a response from the government to its plea for up to £75 million in emergency support, needed because of what the company says are “Brexit-related issues”.
IPPR calculated that in addition to the 4,500 steelmaking jobs at risk at plants in Scunthorpe and Teesside, a further 7,000 jobs in the supply chain would be in jeopardy, many also in the North East. In total 12,000 jobs could be lost.
Looking at the impacts of the potential job losses, researchers calculated the cost to the UK government in the first year (2019/20) as £170m, accumulating to £1.1 billion over a full decade while former steelworkers gradually find new jobs. Households would spend £190 million less in the first year, accumulating to £1.2 billion over 10 years.
The upheaval faced by British Steel, owned by Greybull Capital, is just the latest example of British industry struggling with growing uncertainty and adverse conditions in the global economy.
A report published by IPPR’s Centre of Economic Justice last month, The UK in the Global Economy, warned that the UK is dangerously ill-prepared for the growing risk of a global economic downturn. It said that while policymakers have concentrated on planning for the UK’s departure from the EU, other hazards increasingly threaten global instability and recession – with the UK particularly exposed because of unresolved structural flaws within its economy.
Carys Roberts, IPPR chief economist and head of its new Centre for Economic Justice, said:
“Brexit uncertainty and problems in the global economy like the US-China trade war are presenting an uncertain and challenging environment for industries like steel.
“Our steel sector is important not just for the jobs of workers in the plants, but also for jobs in the local economy around the plants – as well as the success of exporting industries which rely on those inputs.
“We need a UK-wide industrial strategy that supports strong supply chains, including the foundation industries such as steelmaking that manufacture core materials for use in other industries. This must go alongside a plan to decarbonise by finding ways to produce materials like steel more efficiently, and to reduce our use of carbon-intensive materials, creating good jobs in the process.”