British Coal Minefield for Sale: Does Britain Still Need Its Large Coal-Mining Industry, or Not?

By Skeel, Shirley | Management Today, May 1991 | Go to article overview

British Coal Minefield for Sale: Does Britain Still Need Its Large Coal-Mining Industry, or Not?


Skeel, Shirley, Management Today


BRITISH COAL MINEFIELD

It has been a great winter for cabarets. But none so entertaining as the Great British Energy Show, featuring: energy secretary John Wakeham as compere; the two-headed electricity monster as the star who seeks the love of millions; and Old King Coal as the spurned suitor.

The story so far has been enlightening. Act One: energy secretary without energy plan blindly conducts privatisation of the electricity industry. Act Two: generators National Power and PowerGen tell old flame British Coal it can go jump because coal imports and gas look more attractive as fuel sources. Act Three: energy secretary ponders how to dress up the despairing British Coal to sell it off too.

Act Four is yet to come, opening this summer when National Power and PowerGen will sit down with British Coal to negotiate the next coal contract, starting 1 April 1993.

It is no overstatement to say that British Coal's future rests on the outcome of this new contract. The coal group sells 80% of its production to the two power generators - a total of 70 million tonnes last year and this year, declining to 65 million in 1992-93. It is also fair to say that if the cost-conscious generators knocked, say, some one-third off those volumes (and used cheaper gas and coal imports instead), some one-third of the 60,000 mining jobs at British Coal would go.

The upshot - John Wakeham has a smaller and possibly much harder industry to sell, this depending on the length and volume of the next contract. Wakeham is now doing work on the privatisation, but will not announce its form until the next election. At stake is not only jobs, but at least five marginal seats in the mining district of Nottinghamshire - a sore point that could limit the shrinkage of British Coal.

Of course, should Labour win the general election, British Coal would face quite a different future. Labour has said it will not re-nationalise the power industry. However, it would put a legal armlock on the generators to ensure a long-term British Coal contract at a break-even price, and impose quotas on coal imports from outside the EC. Some kind of worker buy-out of British Coal could even be considered.

That possibility aside, there is no doubt that the generators will cut back substantially on local coal. It follows that British Coal - which has already shrunk to 68 deep-mined pits and 60,000 miners from 170 pits and 171,000 miners in 1985 - will be an even smaller group. But just how small is the most beautiful is a matter of violent debate.

At this point the industry's future is impossible to predict. Which leaves one with no great envy for British Coal's cigar-smoking new chairman, Neil Clarke. Clarke, a reserved and carefully spoken ex-head of mining house Charter Consolidated, was the dark horse candidate for the chair vacated by Lord Haslam. Since January, working overtime, Clarke has had to grapple with quite an array of hole-filled scenarios that could be British Coal's future.

At one ear Clarke has the chief executive of National Power, John Baker, trumpeting that 50% of his group's coal will be cheap imports in future. At the other is his outspoken lieutenant, commercial director Malcolm Edwards (the kind donor of the nickname |two-headed monster' to the generators). Edwards claims British Coal needs only a five-year breathing space to make the industry viable at 35 [pounds] a tonne - a price that he believes will by then be competitive with gas and coal imports. Over Clarke's shoulder peers not only the Government, with its demand that British Coal be made bright, beautiful and saleable, but the EC, shaking a signed agreement that the UK will cut sulphur emissions by 60% by 2003. (Coal-burning is one culprit.)

Some of what is being said on all sides is bluff: even John Wakeham commented privately that he expected the newly privatised electricity industry's |macho feelings to give way to more sober judgement of commercial realities'. …

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