The Green Transition: Who killed industrial Britain?
Weekly analysis of the shift towards a new economy.
Dear Reader,
Welcome to this week’s edition of the Green Transition from the Spotlight on Policy team.
Over the weekend, parliament made the momentous decision to hand control of British Steel back to the government. Jonathan Reynolds, the business secretary, now has powers over what happens at the company’s site in Scunthorpe, where last week fears abounded that the UK’s final two blast furnaces might be switched off. The Steel Industry (Special Measures) Bill made its way speedily through both the Commons and the Lords in an extraordinary daylong sitting on Saturday. The bill gives Reynolds power to order that the blast furnaces be kept running and any attempts at obstruction from the plant’s owners (the Chinese company, Jingye) could result in criminal charges.
The government has staved off crisis in the UK’s steel industry (for now!) but a question mark remains over a long-term plan for the sector. Having stopped short of nationalising the entire industry, the government is now locked in renewed negotiations over Scunthorpe’s future and things may become clearer in the next few weeks.
How did we get to this point? Spotlight’s associate editor, Jonny Ball has gone some way to answering that question in a brilliant piece which you can find below.
So, let’s get to it!
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Who killed industrial Britain?
By Jonny Ball
When he was Prime Minister, Boris Johnson caused a minor stir (no pun intended) by suggesting that Margaret Thatcher should be commended for having given Britain a head start on net zero by closing down the coal mines.
It was a characteristically flippant, tongue-in-cheek remark from a PM that had recently scored a historic victory by taking chunks out of Labour’s Red Wall, not least in former coalfield constituencies. But it presaged a debate that has only accelerated since, and one that has now reached fever pitch with the government’s effective nationalisation of the Scunthorpe steelworks to rescue the UK’s virgin steelmaking capabilities: who, or what, killed industrial Britain?
There are, roughly speaking, three schools of thought that have emerged. First, a net zero-sceptic crowd, which now includes Kemi Badenoch, places blame squarely on climate policy, and even on one individual in particular as its lead evangelist: Ed Miliband. That analysis seems a little unfair given that industrial manufacturing’s share of total UK economic output and employment has been in decline since roughly the 1970s, when young Ed was merely a nipper.
But the agenda is being pushed relatively successfully in the right-wing press and broadcast media. It says that climate policies and renewable subsidies are adding costs to energy bills, making the UK uncompetitive for energy-intensive industries like steel, glass, ceramics, chemicals, cement, and much else besides.
Countering this tendency, we have a second school that responds with the following: UK manufacturing and energy-intensive industries are indeed being hampered by sky-high energy costs, this much is true, and agreed by all parties. But, they say, these high costs are a result of Britain’s over-reliance on fossil fuels, specifically gas. Bringing down prices requires a rapid transition to low-carbon, cheaper, home-grown forms of energy production, namely renewables. This is the government’s position.
And gas prices have certainly risen dramatically, particularly since sanctions against Moscow cut off supplies from the world’s biggest natural gas exporter. It is only since Putin’s invasion that UK and European prices have begun to diverge significantly. Yet while this gas price spike has had an adverse impact, the anti-net zero grouping does have a point, in that a significant proportion of customer bills are made up of renewable subsidies, carbon taxes, and grid balancing and transmission costs.
Even net zero advocates admit this much. Shaun Spiers, executive director at the Green Alliance, says “there are policy costs added to bills – the green levy and so on… but it’s important to say in terms of industry costs that the policy cost of industry’s energy bills is lower than it is in, say, Germany”.
Re-wiring Britain’s electricity grid will cost money. We have an over-centralised system set up to accommodate a small number of large, coal-fired power stations. A renewable grid requires a new, more decentralised network, with countless new connections. That won’t come cheaply and is currently being delivered through a combination of public and private investment (which, yes, is linked to your bills).
“There is definitely an initial outlay”, says Spiers. “There is obviously a cost in infrastructure.” But he hastens to add, “there are lots of jobs and growth opportunities one can leverage from that as well”. And that’s the promise of the so-called green industrial revolution: a regional jobs and growth boom with climate policy as the catalyst, as turbines, solar panels, pylons and cables are produced and laid in every corner of the country. Once that grid is in place, bills will start to come down.
So, is net zero destroying British industry? Not really, even though there’s a kernel of truth to claims that climate policy is adding to costs, and that a total re-jig of the UK’s electricity grid will require significant amounts of capital investment.
But what about the other side of the debate? Is our reliance on costly gas imports killing industry? Well, again, not really. This is only part of the story. As mentioned, British heavy industry has been in decline for a long time.
The more complex, nuanced reality goes back to Boris Johnson’s Thatcher jibe. For it was Mrs T who turbocharged the decline of manufacturing Britain, and not, as Johnson jokily claimed, because she was an enthusiastic eco-warrior. It was because she was integral to the formation of a political consensus that her Conservative Party heartily promoted. That consensus basically stated: it doesn’t matter where goods are produced, we should buy them as cheaply as possible; it doesn’t matter who makes things, the market and the prices mechanism should dictate our decisions; it doesn’t matter that we’re losing manufacturing jobs, the high-value added future is in services and the “knowledge economy”, and so why should we subsidise British production when we can import commodities from elsewhere?
And that’s the third school of thought, which the Green Transition is bravely getting behind. It’s not net zero, or even the post-Ukraine gas price spike, that’s killing industrial Britain. It’s an economic philosophy that’s now coming apart at the seams, one that says globalisation is an unalloyed good, that it doesn’t matter if the Chinese own our steel plants or that we rely on the kindness of strangers to keep the lights on. And that’s the philosophy that needs to change.
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why is it always the governments fault, why not the awful management in both unions, business and utilities, what happened in Harland & Wolff and Clydeside once the greatest shipyards in the world, aircraft manufacturing, railway systems, and car manufacturing, on and on it reads, the quality of Management and politicians all sliding into the abyss, cheered on by The Media!
Since the UK now only owns 40% of its infra structure and essential services with shareholding owned by international corporations we do not retain the taxable profit. That is the primary cause of our extremely week ecomomy with little interest for UK investors in our industry.. Why do you think that Trump wants industry to return to the USA out-sourcing production has the same affect as out sourcing investment.