Magazine article Management Today

Steeled for Closure Fight

Magazine article Management Today

Steeled for Closure Fight

Article excerpt

British Steel's decision to close its hot strip rolling mill at Ravenscraig in Scotland will be a test case of how far relations between industry and politics changed in the 1980s.

At first sight the logic of the decision is straightforward. The hot strip rolling mill was opened in 1959 as part of an ill-fated attempt to broaden the base of the Scottish economy by bringing its car industry back to life. In the wake of the decision to split a new hot strip rolling mill between Llanwern in South Wales and Ravenscraig, the then Conservative government insisted that the motor manufacturers Roots and the British Motor Corporation would only receive industrial development certificates if they located in Scotland. Thus were born Linwood and Bathgate.

From the time the Macmillan government decided to split the hot strip mill between Scotland and South Wales, the steel industry complained that the division was uneconomic. The Linwood and Bathgate plants both closed in the 1980s. Only a small proportion of Ravenscraig's output goes to Scotland. It is ill-placed to serve the car industry investments of the 1990s. The Nissan plant in Sunderland will be served by British Steel's Redcar plant, the Toyota plant in Derby by the Scunthorpe plant and the South Wales plants at Llanwern and Port Talbot will be well placed to service Honda at Swindon. As British Steel expands its sales to continental Europe, Ravenscraig will soon find itself 500 miles from its main markets.

The investment in Ravenscraig was made mainly for political reasons. It is now being reversed by a privatised British Steel. Sir Robert Scholey says its main obligations are to its shareholders, rather than to political constituencies. That was after all the reasons it was privatised. With competition in the European market intensifying, the company needs to cut further into its UK costs base to maintain its position as Europe's lowest cost producer.

But it is not quite that simple. Privatisation has generally removed one very direct form of political control over industry: ownership of nationalised industries. But it has not entirely removed politics from industry. The managers of privatised monopolies are partly responsible for the continuing political involvement in their industries.

Most managers of privatised companies have successfully opposed their industries being broken up to allow more competition. The cost of this is that rather than competition exerting discipline over the industries, the Government has appointed regulators to keep the privatised monopolies on their toes. In addition, the Government holds a golden share in most companies to prevent foreign ownership.

Political involvement has been considerably reduced. But it has not been eliminated. British Steel does not have a regulator. But the Government does retain a golden share. Thus the management, in arguing that it has become just another company, is, to a certain extent having its cake and eating it. The government golden share which protects it from takeover is presumably welcome but the political pressure from Scotland to keep Ravenscraig open is not.

Although the company has been privatised, this does not exempt it from politics altogether. The activities of companies, whether privately or publicly owned, are too important for them not to be a matter of public concern, whether it is to do with pollution, job creation or investment. …

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