LDN - Business

Shuttered steelworks becomes crucible for Johnson's 'leveling-up' plan

[March 02, 2020] By David Milliken

MIDDLESBROUGH, England (Reuters) - Looming over the skyline of Teesside in northeast England stands the rusting hulk of what used to be Europe's largest blast furnace, which shut in 2015 with the loss of more than 2,200 jobs.

Attempts to bring investment and employment back to what was once one of England's industrial heartlands will be a test for Prime Minister Boris Johnson's plan to help 'left-behind' areas.

His government's first budget on March 11 will make increased infrastructure spending in the north of England, and other underperforming regions, a focal point of Britain's post-Brexit economic strategy.

While most workers from the SSI blast furnace have found new jobs, they had to accept big cuts in pay or move away, said Paul Warren, a former steelworker and national organizer for the trade union Community.

"Some people haven't recovered still. It has torn families apart," he said. "You had a job for life, a good pension. Then, that's it, gone."

Johnson swept to victory in December's election with votes in areas such as the Tees Valley that historically backed the Labour Party, but switched to the Conservatives because of his pro-Brexit policy.

The area's mayor, Conservative Ben Houchen, said the party will not hold on to the region unless it improves living standards.

"The Conservatives have been lent the votes of local people, and if we don't get it right - and if Boris Johnson doesn't get it right - I absolutely believe that they'll all go Labour again in five years' time," he said.

The Tees Valley has received 360 million pounds ($470 million) in extra public funds since Houchen became mayor in 2017, mostly to help buy and clean up land around the old steelworks and attract new businesses.

Houchen is asking for another 80 million pounds from Johnson's first budget to revamp nearby Darlington train station. It has a direct high-speed link to London, but can only handle two trains an hour to the rest of the Tees Valley, partly following the route of the world's first steam railway.

After years of austerity, Johnson has already given the green light to a high-speed rail project between London, Birmingham and further north – at more than 100 billion pounds.

There is speculation that in his budget next week Chancellor Rishi Sunak will relax fiscal rules to fund the spending Johnson has promised.

But reducing inequalities between Britain's regions – by some measures the worst in western Europe - is likely to require more than new railways, roads, bus services and broadband as pledged by Johnson.

Bank of England Chief Economist Andy Haldane says regional differences in wages are as wide as they were a century ago, and a major academic report on Thursday said an extra 200 billion pounds in spending over the next 20 years was needed.

REDEVELOPMENT

Middlesbrough's median full-time wage of 26,200 pounds a year is 14% below the national average and in the Tees Valley economic output per person is 25% below the national level.

Unemployment at 6.8% is much higher than the national rate of 3.9%, while Middlesbrough's male life expectancy at 75 years is below the national average of 79.

For an area already in decline, the closure of the SSI steelworks in 2015 was a blow to its core.

Former Conservative prime minister David Cameron refused to save the plant after its Thai owners went bankrupt. It shut so fast that molten steel solidified in the blast furnace instead of being drained out, making the cost of a restart prohibitive.

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Paul Warren is pictured next to a Community trade union sign at his office in Middlesbrough, England February 14, 2020. REUTERS/Scott Heppell

"It was industrial vandalism," says Community's Warren, who had worked in the industry since he was a 16-year-old trainee in 1987.

Steelworkers, who earned around 35,000 pounds a year plus overtime, were lucky to find new work locally that paid 24,000 pounds as employers slashed salaries, he said.

Almost five years on, there are no new jobs on the SSI site, bar a few security guards and safety workers.

Local mayor Houchen hopes this will change soon. Two weeks ago, the South Tees Development Corporation, a public body he chairs, acquired the SSI site from the firm's creditors.

The development corporation now has control of 7 square miles of mostly former industrial land on the south bank of the River Tees, the largest such site in Britain, and it is moving ahead with possible new investments and job creation.

On Friday a group of European oil companies led by BP <BP.L> said they would evaluate the technical and commercial case for a plant on the site to capture and store carbon dioxide emissions from the region's chemical industry and a new gas power station.

This could create or safeguard 5,500 local jobs, and add 450 million pounds a year to the area's economy, by the middle of the decade, subject to government support.

Houchen also wants to bring back steelmaking jobs as part of Teesside's rejuvenation, and is planning to attract a new electric arc furnace, which melts scrap metal.

RISKS

But some fear the days are already numbered for Teesside's steel industry.

British Steel, which has had multiple owners since its heyday as a state firm that made 90% of the country's steel, runs a mill near Middlesbrough that made beams used in London's Shard skyscraper and the new World Trade Center in New York.

Now the company is in liquidation, with its wage bill funded by the government while it tries to secure a buyout from China's Jingye Group <600768.SS>.

Like SSI, its collapse would have a major impact on local businesses such as AV Dawson, which operates a port, rail yard, warehouses and a haulage business in Middlesbrough.

"That is a massive concern for us," says Charlie Nettle, commercial director of AV Dawson.

Broadly, Nettle supports Houchen's efforts to boost the profile of the Tees Valley area and strengthen transport links, including by taking the loss-making local airport into public ownership.

"He's got a lot to live up to, to make sure he delivers," says Nettle.

For others, including Middlesbrough's Labour member of parliament, Andy McDonald, progress has been too slow.

"We've been promised lots of shiny things and massive investment in infrastructure.... But the substance is where are the jobs? Somewhere over the hill."

(Reporting by David Milliken; Editing by Giles Elgood)

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