Government supports steel workers hit by Corus restructuring

In May 2001, the Anglo-Dutch steel-making company, Corus, confirmed to the UK government that it would proceed with the plant closures and 6,050 redundancies first announced in February. The same day, the government and Welsh Assembly announced an aid package for redundant workers. This feature examines the context and details of the government's offer, responses to the package, and some implications it raises for industrial relations.

Corus was formed in June 1999 through a merger of British Steel and the Dutch steelmaker Hoogovens (UK9908125F). Financial losses (a GBP 1.3 billion pre-tax loss for the 15 months to December 2000) led to the announcement on 1 February 2001 of plans to cut 6,050 jobs across the UK, following 4,500 job losses already made since the merger (UK0102113F). The latest cuts amount to more than one-fifth of Corus's workforce, and include 3,500 job losses in Wales.

Corus has blamed the government for many of the problems facing the company, citing high energy and transport costs, and increased regulation. According to Corus, this adverse situation has been exacerbated by the UK's absence from the euro and the strength of sterling, which has favoured imports and hit export performance. In addition, the company argues, overcapacity in the industry has driven down steel prices and more than offset the productivity improvement measures achieved by Corus's UK workforce.

However, politicians, trade union officials and workers have condemned Corus's response to the economic difficulties facing the company. A report by the House of Commons Trade and Industry Select Committee in mid-March 2001 echoed union criticism of the company's business strategy. The committee said that Corus had failed to make the decisions that would have delivered the efficiencies promised by the merger. MP s argued that the weak euro presented only a "short-term" problem for Corus and that "a large, well-managed company could have been expected to weather" the fluctuations. The pound had been as strong and stronger against the main European currencies for most of the 1980s and 1990s. Further, steel prices look likely to rise later in 2001, and may have helped Corus to safeguard capacity at its plants.

Union proposals

Following the announcement, the company said that it would listen to fresh ideas from unions during the statutory 90-day consultation period required in respect of the redundancies. Management had already previously rejected the bid by the Iron and Steel Trades Confederation (ISTC) to buy the Llanwern steel plant in Wales (leading union branches to request a strike ballot on industrial action), and the Amalgamated Engineering and Electrical Union (AEEU) proposal to "mothball" the plant (UK0102113F). The company's subsequent rejection of the ISTC's proposed rescue of 1,300 jobs through reduced production at Llanwern echoed its response to similar union proposals for the Shotton, Ebbw Vale, Bryngwyn and Teesside plants. A Corus director, Tony Pedder, said that the bids were "not a viable alternative because of long-term change in the UK marketplace". The government urged Corus to "rethink" its plans and backed the union-led schemes, including an AEEU proposal to retrain 4,000 ex-steel workers as technicians in the EXi telecoms company in South Wales. (The subsequent downturn in the telecoms market, however, has meant that the company has not won the necessary contracts on which the jobs depended.)

In late March, another union initiative, led by the ISTC, proposed funding for retraining 6,000 displaced workers through the European Commission. The main plan, costed at GBP 90 million, was to cut hours at threatened plants, with training packages when workers were off-shift jointly funded by the government, Corus and the unions. The aim was to ensure that the company rethought its plans while waiting to see if demand rose. Corus chief executive Sir Brian Moffat derided the proposal as a "blatant piece of electioneering", though at a meeting both sides agreed a joint statement accepting some capacity reductions and committing themselves to creating a tripartite working party to pilot an in-work training package. Unions were jubilant, talking of a "turning point".

However, the next day newspapers carried reports that Corus's position had not changed. A Corus spokesperson commented: "It was always going to be the case that there would be different nuances in the way the agreement was presented." Corus said that the restructuring package had not been renegotiated at the meeting with the unions and that attention had focused on keeping people on the Corus payroll after plant closures while retraining them. Tensions deepened when Corus's annual accounts disclosed that the company had paid bonuses in the region of GBP 2 million to former executives.

On 3 May 2001, following three months of talks, Corus management confirmed that it would complete the 6,000 job cuts over the next few months, and that alternative proposals had been rejected. The then trade and industry secretary, Stephen Byers, joined in widespread condemnation of Corus for "rejecting [union proposals] out of hand . . . I think when the management of Corus reflect on their actions in this whole saga, they will realise the unions were right".

Government aid package

On the same day, Mr Byers announced a recovery package worth a total of GBP 135 million for workers affected by the latest and previous job cuts dating back to January 2000. This included GBP 66 million of aid announced by Rhodri Morgan, the first minister of the Welsh Assembly, to help steel workers in Wales, with GBP 50 million from the Welsh Assembly topped up by GBP 16 million from central government. The package is a modernised version of an earlier steel readaptation benefits scheme, terminated in 1994, to provide training for redundant workers and regional regeneration measures. David Blunkett, the then education and employment secretary, commented: "A redundancy of this scale can devastate a community ... we will respond as quickly and as effectively as possible in order to help people through this difficulty. Above all, we need to be working to ease the transition into new industries ... we are already talking to Nissan in the north east and to EXi nationally about how we can help them meet their recruitment needs."

Key elements of the package are:

  • a lump sum payment of GBP 2,500 each to redundant workers, benefiting up to 12,000 steel workers;
  • training opportunities and support for individuals from the Employment Service;
  • a package of regeneration measures worth GBP 48 million in England and a similar package for Wales; and
  • a joint government-union bid for GBP 2.5 million of European Union funding to offer support, advice, skills analysis and retraining prior to workers leaving Corus, with the company also contributing to the programme.

Union leaders welcomed the government's package as a boost to local economies, if only a partial compensation for the job losses. They remain critical of Corus for the way it has treated its workforce and for not actively considering a union-devised redevelopment programme. Michael Leahy, general secretary of the ISTC, welcomed the government's review of employee consultation requirements, announced in (UK0101110F) as a way of getting troubled firms to take workers' ideas more seriously: "New legislation cannot be introduced too early if UK workers are to be treated with the same dignity and respect as their European counterparts." For its part, Corus also supported the government scheme. A spokesperson said: "[The company] will work with all relevant agencies to facilitate the regeneration and redevelopment of its sites". It will provide the Department of Trade and Industry with employee names, and relevant information on its supplier networks.

Commentary

The long-term decline of the UK steel industry is symptomatic of the country's accelerating shift away from manufacturing. Since the creation of British Steel at the end of the 1960s, nine of out 10 steel jobs have gone. Britain is now Europe's fifth largest producer, overtaken for the first time by Spain in 2000. While many of the steel jobs lost have been due to global factors, not local conditions, it is notable that British plants often suffer the resulting fall-out more acutely than continental European sites. Britain's comparatively lightly regulated labour market might be good for creating jobs in buoyant economic times but the downside of labour market flexibility is shown when times are tough.

The Trade and Industry Select Committee's report on the steel crisis concluded that little could have been done by the government to prevent thousands of job losses, though others have cited possible options to reduce the impact of Corus's restructuring measures. Whilst the government is barred by EU competition rules from subsidising companies directly, these options could include altering company ownership structures, takeover rules and corporate governance rules that together emphasise high short-term returns. The "hands off" exchange rate policy has not helped competitiveness, particularly without a firmer commitment to entry to the euro. However, such measures have not been considered politically acceptable and/or were rejected as "anti-business". The government has instead largely relied on "supply-side" interventions such as the New Deal (UK9710175N) to "pick up the pieces".

The Corus crisis has also highlighted the obstacles facing union efforts to become true "stakeholders" and to appeal to companies to develop a social conscience. Highly significant, then, is the political agreement reached at the EU Employment and Social Policy Council on 11 June 2001 on a common position of the draft Directive establishing a general framework for informing and consulting employees (EU0106219F). The Directive will give employees a right to be informed about the company's economic situation, and to be informed and consulted about employment prospects and - with a view to reaching agreement - about decisions likely to lead to substantial changes in work organisation or contractual relations, including redundancies.

Government endorsement of union rescue plans, and its own aid programme for Corus workers, have highlighted an active support role for "new Labour" in helping a traditional cause - saving steel jobs and retraining workers, albeit now in the context of a privatised industry. Although welcomed by unions and workers, government involvement has been seen by some as trying to keep an ailing industry alive at considerable cost to taxpayers, or merely as an electioneering ploy. Others have criticised the government package as an inadequate "band-aid" approach to the steel crisis which still threatens thousands more jobs among suppliers and businesses connected with the affected plants.

Moreover, turbulent times remain likely in the steel industry. Further consolidation and rationalisation of capacity in Europe (BE0104344F), a slowing US economy and the spectre of US protectionism mean that steel multinationals are likely to seek further cuts in their workforces in the future. (J Parker, IRRU)

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