Brexit: A new ‘manifest crisis’ for UK steel?

This steel reporter owes his entire career to the European Union, and specifically British membership of it. I was recruited by what was then the world’s premier metal trade magazine in 1975 shortly after the UK joined the EU, when it was becoming clear that the European Coal & Steel Community (ECSC – a forerunner of the EU) was about to loom large in the consciousness of British steel companies.

I knew little about steel at that time. I was a fresh university graduate who had studied French and lived in France. French was the ECSC’s principal working language, and the magazine’s editor hired me “because you can speak to these ECSC chaps in their own lingo”.

In the years that followed, I spent many days and weeks in Brussels chronicling the European Commission’s role in regulating the steel industry and tackling its problems. By 1980, with steel companies facing collapse, it declared a “manifest crisis” and took powers to control output, steel prices and trade in steel. The anti-crisis plan devised in Brussels was credited with saving the European steel industry, but it required a degree of intervention which would not be possible now, since the ECSC’s Treaty of Paris expired in 2002.

Today the EC’s role in steel is confined mainly to investigating unfair trade cases and regulating competition. But, 41 years on — and into a fifth decade — I’m still covering it, and the UK’s vote to resign its membership of the EU has mightily shocked me.

It’s a cliché to say that steel is an increasingly global business. And — with large parts of the UK steel industry controlled by foreign interests — it should be obvious that “going it alone” is simply not an option. Many steel-using industries in the UK are dependent on serving the EU market, and their future prospects have had a blanket of uncertainty cast over them.

The British steel industry remains a substantial exporter: in 2015, 71% of its flat product exports and 65% of its long product exports went to other EU member states. As EU steel federation Eurofer warned in advance of the vote, the UK steel industry’s “close integration into Europe’s value chains” will be imperiled by the Brexit vote.

The country also has a large and vigorous community of independent traders who are active in steel, scrap and other markets globally. A British retreat into narrow nationalism threatens to undermine their dynamism, and set up tensions with other steel-trading countries.

Despite the EU’s faults — overweening bureaucracy, lack of democratic accountability, opaque decision-making processes — many believe the order of the day should be more integration, not less.

As ratings agencies, including S&P Global Platts sister company S&P Ratings,  cut the UK’s credit rating because of uncertainties caused by the Brexit vote, it became abundantly clear that the politicians leading the ‘Out’ campaign have only vague plans about what they want to do now. The big issue for steel and other industries is the EU’s single market. The Brexiters say they want to retain British access to the EU market tariff-free, but to halt free movement of EU citizens into the UK. That currently looks unattainable: Angela Merkel cautioned on June 28 that those who choose to leave the club cannot expect to keep all the benefits while shouldering none of the responsibilities.

“Tough” scarcely begins to describe the tone of the negotiation that I fear lies ahead. After four decades wed to European steel, divorce hurts.