Steel industry representatives have renewed calls for government support in order to avoid a crisis which could hurt the construction as well as manufacturing sectors. Considering that steel is used to make countless consumer goods as well as blades and tools, any major problem involving steel production would naturally impact a wide variety of other spaces as well. Industry leaders voiced dismay at their lack of support from MPs, which caused trade unionists to write to the Prime Minister to look for further support.
One union document claimed that the Prime Minister’s office is making a serious mistake that could have overarching consequences for the industry, which currently employs around 32,000 people throughout the UK. That being said, it’s unlikely that these problems are related to regulations or trade restrictions.
Rather, financial analysts are pointing to soaring energy costs as the primary driving reason for the steel industry’s woes.
Debating Whether to Intervene in the Industry
Treasury representatives are rather reluctant when it comes to offering a bailout, especially if this would help to continue the sudden rise in energy costs. Gas prices are currently high, which has hurt glass, paper and chemical manufacturers as well, but giving them raw funds could simply push these prices even higher. At the same time, steel beams are in huge demand as the construction sector recovers, which has increased calls for such bailout payments to be made.
Loans are another option that some are considering, though union representatives have preferred a £50 million injection of cash. They say that this will help to protect upwards of 1,000 jobs during the current crisis. Irrespective of whether it does, however, it remains to be seen whether these jobs could ever hope to stick around in the face of a digital economy.
The Role of a Growing Digital Economy in the Steel Industry
Others are suggesting that regardless of any changes in the price of energy, the advent of an increasingly integrated digital economy is going to have far-reaching impacts on the steel industry. Most providers in this space have to offer manufacturing services to an overwhelming client base, which means that digital security costs can start to spiral out of control. The average cost of financial fraud protection has gone up considerably, and that’s impacted heavy industry every bit as much as it has retailers.
One breach could cost steel firms more than they could ever hope to pay back, which could force them into bankruptcy. If this were to happen, then it’s likely that calls for a steel industry bailout would be right back on the table. In such a situation, however, individual taxpayers would be less likely to support it as they might see the steel industry itself at fault for the breach and therefore feel that they shouldn’t have to pay to clean up what is perceived as someone else’s mess.
According to data specialists from Aura, simply investing in a digital security program could help to dramatically reduce the chances of this occurring. However, the steel industry has historically been slow to adapt to certain new ideas and this makes it less likely that they’d be willing to jump straight into an investment that could have a high upfront cost.
Managing Costs in an Inflationary Period
Price inflation is going to impact the industry even if governmental regulators are able to slash energy costs. Some manufacturing industry representatives are positioning steel as a cheap and strong building material, which could help to increase sales. Those who are in favor of this idea have suggested that it is indeed truthful and follows the maxim that companies shouldn’t cut their promotion even when times get particularly tough.
Financial commentators have pointed to government moves from 2016, which helped to stave things off until now. Trying a similar policy could simply cause the industry to repeat past mistakes. That’s why some specialists are starting to suggest that the industry as a whole releases additional shares of stock in order to keep their companies afloat without relying on help from outside groups.
Since this could potentially have the side effect of diluting ownership, few people are considering it as a serious option. That being said, something will have to be done in the near future, so there is a good chance that at least some British steel manufacturers will start to look abroad for more assistance in the form of purchased securities. That could create an interesting investment opportunity.
