Government has allowed steel plant at Redcar to fail

Government has allowed steel plant at Redcar to fail. Credit: PA

The government has decided to allow the steel plant at Redcar to fail. A tough decision to make and obviously an unpopular one, not least on Teesside.

Tata Steel tried and failed to make the business work. The Thai company SSI took it on in 2011.

SSI UK's accounts for last year are overdue but it's never made money and until now has been loss-making to the tune of roughly £200 million a year.

It's also deep in debt and the three Thai banks that are owed money have decided they've had enough.

The government will not invest taxpayers money propping up a steelworks that it clearly believes doesn't have a future. The problem is the other big steel-producers in Britain are also loss-making, together they employ 30,000 people.

In the short-term there's no obvious prospect of the steel price recovering, the pound remains strong, China's factories continue to turn quantities of steel the world no longer needs at a price Britain can't match.

Unless something changes more bad news looks inevitable.

UK Steel, which is part of the manufacturing trade body EEF, believes the government needs to do much more than the £80 million that was committed today to help people on Teesside find alternative employment.

It wants the government to buy British for major infrastructure projects, relax rules on emissions targets (steel works are energy intensive), trim business rates and urgently reform energy policy that has had the effect of increasing energy bills. British steelmakers pay just over £9 for a unit of electricity, rivals in France pay just over £4.

The British steel industry was once owned by the state, it's looking to the government for support again.