ALEX BRUMMER: Steel is a vital UK industry

The apparent indifference of Kemi Badenoch to the fate of the British steel industry needs to be challenged. 

The Business Secretary’s assertion that ‘nothing is ever a given’ when it comes to preserving steelmaking in the UK shows a worrying naivety.

As we approach the anniversary of Russia’s brutal war in Ukraine, Britain’s defence and aerospace industries are vital to the national interest.

Domestic production of the highest quality steel, also of great importance to new nuclear, is vital.

The steel cycle is notoriously volatile and there will be periods when domestic production becomes uneconomic. That is among the reasons why tariffs go up and down with the regularity of an elevator.

No sovereign nation can afford to scrap the security of domestic production on short-term economic grounds.

And if the Tories are to have a chance of preserving ‘Red Wall’ seats they cannot allow the Chinese owners of one of Britain’s last coking plants in Scunthorpe to close it.

Electric arc furnaces may be the greener option. But the highest grade steel needed for defence equipment, nuclear industry and HS2 needs blast furnaces and they require coking coal.

The idea that the UK’s command over steel is in the hands of India’s Tata and China’s Jingye Group shows shameful neglect by successive governments.

In 1999, British Steel merged with Hoogovens creating the sixth largest steelmaker on earth with annual revenues of £12billion.

In 2007 the group, renamed Corus, was sold to Tata for £10billion. It has been downhill ever since as interest in remaining a steelmaking nation has been surrendered to overseas owners, who made promises to invest but effectively are managing decline.

Amazing to think that after this sordid record the steel industry is still responsible for 35,000 jobs and high-quality production. 

Rishi Sunak’s government has no choice. It needs to invest to rebuild a vital industry, not preside over further decline.

Badenoch’s announcement today of the British Industry Supercharger, with measures to help strategic energy-intensive industries including steel be more competitive, is welcome but it is too little, too late.

Exploiting savers

The high street bank results season, brought to an end by Lloyds, has been dominated by net interest rate margins.

That, in plain English, is the difference between what banks charge for their loans and what they pay for savings, current account and other cash deposits.

On this metric alone Lloyds, headed by Charles Nunn, had a good year with the margin at 3.22 =. 

The bank is also raising its margin outlook for 2023. As we know from the financial crisis, when Lloyds was bailed out after rescuing HBOS, building a strong capital base is a good thing.

Yet it is hard not to have deep reservations about the stock market obsession with interest rate margins. In a world of inflation and rising interest rates, such gains are at the expense of savers. 

Any bank which prioritised improving savings returns and customer service, rather than axing branches, could reap competitive advantage. As owner of the Halifax brand, Lloyds has a good view of the mortgage market.

In the year of the Truss bond market shock, volumes of mortgage lending per day shrank to £1.1billion from £1.5billion. Lloyds is predicting a 7 per cent decline in house prices this year as home loan costs rise.

The bank thinks the economy could shrink by 1.2 per cent this year. That looks too gloomy. As inflation tumbles and interest rate rises moderate in 2023, there is no reason to think house prices will dive.

The task for Nunn is to find new streams of income without relying on starving savers of returns. Wealth management looked a good way to go. If there is a loss of goodwill among consumers they will look elsewhere.

Citi U-turn

Great excitement last August when US behemoth Citigroup forecast UK inflation would soar to 18 per cent in 2023, the highest since the sterling crisis of 1976 when Britain was bailed out by the IMF.

Goldman Sachs joined the declinist UK arms race, claiming the cost of living could hit 22 per cent. Citi has now done an incredible reverse ferret, claiming UK prices will fall to just 2 per cent by the year’s end. 

Damage done to public confidence and good decision-making by bonkers forecasting is unforgivable.