Forth Road Bridge leads to China
Should we set a vision for manufacturing to produce 20% of GDP by 2020? There was huge controversy when it emerged that steel contracts for the new £1.6billion Forth Road Bridge went to China, Portugal and Spain – though Tata Steel’s Dalzell steelworks in Motherwell stepped in to make some of the steel when a Spanish firm dropped out. More to the point – are any of the UK’s 1,000 offshore wind turbines made in the UK? Each turbine is made of a thousand tonnes of steel, combining six different types of steel product.
We have been reminded this week that production was replaced by banking as UK manufacturing began its hollowing out in the 1980s. Manufacturing’s share of GDP fell from 20% of GDP to half of that today. So the Business Secretary has taken a welcome lead in recreating industrial strategy through new sector councils. And equally, DECC’s energy strategy can propel a job creation agenda, driven by £110bn of new energy investment up to 2020, and the potential of the Green Deal to deliver a major jobs and skills premium. Yet the procurement process – or lack of it – is the key to driving UK jobs, growth and innovation and building our manufacturing capacity for the long term.
Getting strategy right for steel could prove decisive for all ten sectors than make up our energy intensive industries (EIIs). Together they form the core of the UK’s manufacturing and provide the basic inputs for our future low carbon economy. Steel, chemicals, cement, ceramics, glass, brick and the rest make up a fifth of manufacturing output, consume half of its energy needs and emit 55% of industry’s CO2.
BIS is working on 10 sector strategies this year, with Aerospace, the UKs nuclear future and a strategy for Oil & Gas appearing around Easter. Offshore Wind and Automotive are due shortly.
It’s vital that the sector strategies engage with the “enablers” like steel. Sector council strategies are highly dependent on steel and other basic products available in the UK, yet the government hasn’t yet done enough to build the enabling sector’s into the strategies. Importing is chancy, as the Forth Bridge case shows. But a huge amount of economic value and jobs are lost in the process.
The Offshore Wind market will be worth £115bn by 2020, possibly half of that is steel content. But theUK hasn’t captured the turbine market for three reasons:
- Weakened manufacturing capacity.
- International energy companies are winning offshore contracts and bringing their own supply chains.
- Sometimes we cant compete on cost – not least because of the cumulative impact of UK energy and climate change policies not experienced by competitors.
Steel is a sustainable material of choice – 85% is recycled. An offshore wind turbine uses 1,000 tonnes of steel, has 1,000 parts. But the word “steel” isn’t mentioned in the Oil & Gas strategy. It admits that “the majority of recent major fabrication projects have been awarded overseas to yards that are more cost competitive than those in the UK.” But adds mildly, “There is a case for refocused Government attention on UK content.”
The nuclear strategy is more forthright. A key Action Points wants “clear direction and co-ordination across public procurement, R&D, and skills development.”
The Offshore Wind strategy is under development, but we understand that this may confine ambition to an aspirational “50% UK content”. Would such a low ambition satisfy our French or German competitors?
As work progresses at BIS on sector strategies, a few essentials lie ahead:
- To complete an industrial strategy for the energy intensive industries (EIIs), based on the work now underway led by Energy Intensives Users Group, the TUC and industrial unions Unite, Community, GMB and Unity, in cooperation with BIS.
- Bring the energy intensives, as enabling sectors, into the heart of the sector strategies.
- See procurement as a vital strategic tool. Not using soft language like “a case for refocusing” but to provide “a clear direction and coordination,”, including targets and reporting.
Above all, industry and trade unions need to develop a strategic relationship with government – a dialogue about how we move to a low carbon future, supporting innovation, creating and retaining skills, supply chain alignment, a resource efficiency roadmap, and a strategy for carbon capture through CCS technology for energy and industry. Then we might be ready to set a vision for UK manufacturing to produce 20% of GDP by 2020.