The news that Tata is planning to sell off its UK steel plants, which are reportedly losing £1m a day, raises questions over the industry. Can or should it be saved? Should the government look at nationalisation? The Financial Times’ commentators debate whether steel production has a future in Britain

Jonathan Guthrie

Tata is pulling out of British steelmaking much in the way that BMW pulled out of British volume car making in 2000. I remember that vividly: I lived near the Rover Cars plant in Birmingham back then. It was billed as the end of the British car industry. It wasn’t. Companies such as Toyota, Nissan and even BMW continued making vehicles in the UK. Jaguar Land Rover was eventually rescued by Tata itself.

What will end now is volume steelmaking at uncompetitive plants. The government should spend heftily on retraining and relocating workers. It should spend nothing on propping up factories that can’t make money. Buyers will emerge for specialised parts of Tata Steel UK that are financially viable.

Peggy Hollinger

The real problem with the British steel industry is that we could have seen this coming years ago and begun the difficult transition to higher grade steel, with government encouragement in research and training. There is no steel catapult for example. If we thought this was such an important industry, why did we not encourage cutting edge applications in specialty steel where the value and money is? The transition from blast furnace primary steel production might be easier now, had we nurtured a high grade steel expertise.

The fact is that others do liquid steel production more efficiently than the UK. This will be even more the case if ThyssenKrupp merges its steel operations with Tata’s European business — as is suggested by Wall Street Journal today. The companies I have spoken to say they do not care whether their steel is UK or European. Most steel is purchased through wholesalers, so customers have no idea where their steel comes from.

What counts is whether we have a strong primary steel industry in Europe. But industrial customers do care about the higher grade steels that make their products competitive. Apparently, UK producers did not even bid on the certain types of specialty steel needed for our nuclear subs, so BAE Systems had to go to France instead. Remember this when you hear over the next few days that Britain must keep its furnaces going for the sake of Trident.

Giles Wilkes

It’s easy to argue against industrial intervention: just roll your eyes, mutter something about the 1970s, Tony Benn and British Leyland, and your case is half made. Although people forget that the same decade saw a rescue of Rolls-Royce, which over the past 40 years has proved an astonishing success.

But steelmaking is not car manufacturing, let alone the ultra-high tech business of making jet turbines. The case for it as a “strategic” or systemic industry is difficult, as the stuff is easily traded, and Europe has plenty of high-quality product. The notion that our defence capability might be weakened by the lack of local product is absurd and anachronistic.

No. This is about regional policy. We do not know what regional assistance programmes work, but we have seen many that fail. Parts of the UK are still not recovered from the savage deindustrialisation of the early 1980s. These places still cost money — countless ad hoc subsidy schemes, the drag of long-term sickness benefits, the drain of weakened tax revenues.

Somewhere in the Treasury, some bright spark with a spreadsheet may work out that the drain of supporting Port Talbot through this patch may work out better value. Hard-headed policymaking would find some way of keeping this plant running.

Martin Sandbu

Nationalisation is a term that seems to mean a lot of different things. One is long-term public ownership, another is a partially state-owned public corporation, such as Statoil or many other European industrial companies, that operates more or less commercially. A third is temporary control to handle the fallout and restructuring necessary when a private owner throws in the towel.

Surely an appealing model is what President Barack Obama did with General Motors. They were allowed to go into bankruptcy but the government then funded the restructuring through debtor-in-possession financing. Is that “nationalisation”? I think the catch-all term is misleading — that particular model involves a high degree of effective government control but the government was never the formal owner.

Port Talbot is different in that the steelworks is a subsidiary of a going concern, but one option would be for the government to lean on Tata to spin the works off as a standalone company which would then go into bankruptcy and something along the line of the GM restructuring could take place. Now, I don’t know if this would make commercial sense, but if we think a fire sale or a shutdown are inefficient in the long term, this would be a way to avoid it.

Martin Wolf

Is the British steel industry “strategic”? If so, why? Some people are prone to consider any and every industry strategic. Whenever I hear people making this argument, I assume they do so in bad faith, as a barefaced excuse for protectionism. Historically, certainly, steel would have been regarded as strategic, militarily and so industrially. But those days are in the past. It is reasonable perhaps to argue for the survival of a European steel industry, for strategic reasons. But it is quite hard to imagine the circumstances in which it would be strategically vital for the UK to have a steel industry. Are we going to fight a war with France or Germany?

Second, are the problems of steel production in Port Talbot plausibly temporary? If they are, what might the best temporary policies be? China pursues a policy of sustaining demand by expanding capacity, almost regardless of the economics. It might seem reasonable for other countries to protect themselves against the consequences, particularly if such a policy is unlikely to continue forever. (If the Chinese are prepared to sell steel cheaply forever, it surely makes sense to take advantage of their generosity.)

If the problems are really due to temporary dumping, then the first-best policy would be a temporary subsidy to production, the second-best policy might be some form of nationalisation and the third-best might be anti-dumping duties. The last is third-best because tariffs impose costs on steel consumers. The costs to the latter are likely to outweigh the benefits to the steelworkers. In general, tariffs on intermediate products, such as steel, are particularly damaging, because the costs are pushed downstream where more workers are employed (in the car industry, for example). Moreover, it is important to remember that temporary assistance can easily become permanent. So one must start by asking oneself whether the problem really is temporary or a permanent problem masquerading as a temporary one.

Finally, if the problems are not plausibly temporary, what is the right policy? The destruction of a community is indeed damaging. Yet government resources should not go into permanent subsidies for unviable production, but rather into the creation and support of more viable activities. If the steel production is never going to be economic again, then the policy should be to wind it up, not provide fruitless support. The UK has no future as an industrial museum.

Philip Stephens

The first rule of policymaking in such circumstances is don’t listen to the Treasury’s market fundamentalists. Its present leadership is still reliving the 1970s with a concomitantly slavish commitment to so-called market solutions.

This was the out-of-date mindset that gave us light-touch regulation in the City, was delighted to see solid building society mutuals swallowed up by overleveraged banks and ignored the warning signs before the 2008 crash. Markets work when well regulated and, ask the US or German governments, sometimes need support.

The second task is to take a long hard look at the finances of Tata’s operations in the UK before rushing to judgment. Would Port Talbot be in such a dire state if, for example, it paid the same business rates and energy costs as the German competition. Is the problem cyclical or structural — a product of a temporary downturn in global demand or the result of decades or under-investment in new technologies? The answer is probably a combination of both but the balance is important.

The third rule says take an equally hard look at the costs of closure — not just on direct and indirect employment but on supply chains across the rest of industry. There is no happy outcome to this crisis but the best would be the emergence of a modernised steel industry. If that takes some government, and taxpayer, help, so be it.

Jonathan Ford

“Temporary nationalisation” has a vaguely comforting ring to it, and the social harms from closing the Port Talbot steelworks would certainly be harsh and long lasting if Britain’s past experience of deindustrialisation is anything to go by.

But the key question has to be whether there is a viable business at Port Talbot that can be turned round in a reasonable space of time. Not all past nationalisations have been failures by any means. But successes like Rolls-Royce worked out because they had valuable technologies within them that just needed the sort of patient support to flourish that sometimes only governments can provide. And even then, “temporary” for Rolls meant 16 years.

The worst outcome now would be the sort of cynical patch-up job that handed the business over to asset strippers and subsidy seekers, using taxpayers’ cash to stave off collapse until such time as the story was safely out of the headlines.

If the government believes that there’s a realistic chance of retrieving a valuable business at Port Talbot, it should commit properly and buy the plant sufficient time to find a solution. But there must be a proper business case for that assistance. Steelmaking in Britain cannot simply become a branch of the National Trust.

Do you think the British steel industry can or should be saved? Let us know what you think in the comments below.