EurWORK European Observatory of Working Life

UK Steel Enterprise, UK: Business creation and entrepreneurship

About

Country: 
United Kingdom
Organisation Size: 
Small
Sectors: 
Consultancy business services
Category: 
Business creation and entrepreneurship

UK Steel Enterprise, a subsidiary of the Corus Group, provides finance, property, and advice and assistance to a wide range of small and start-up businesses in areas of the UK that are or were dominated by iron and steel industries. The company has been providing these services since 1975, but also intervenes to help address the challenges facing local communities in which Corus has implemented specific restructuring measures.

Organisational background

Corus Group is an Anglo-Dutch steel and metals group with a turnover of about GBP 10 billion (€14.6 billion as at 8 May 2007) and 47,000 employees in over 40 countries. Its main operations are located in the UK and the Netherlands, with 24,000 workers in the UK. The company was formed in 1999 from the merger of British Steel with the Dutch steel company Koninklijke Hoogovens.

British Steel Corporation, a former state-owned company, was privatised in 1988. Although reorganisation and restructuring have continued since privatisation, the company implemented substantial jobs cuts while still a state-owned industry. The biggest cuts began to take effect in the late 1970s and early 1980s, when the oil crisis hit the UK manufacturing sector.

Corus Group is a union-organised company, maintaining social dialogue at national and local level. The main trade union in the company is Community (formerly the Iron and Steel Trades Confederation). The other unions represented include the manufacturing, technical and skilled persons’ union Amicus, the Transport and General Workers’ Union (T&G) and the general union GMB; Amicus and T&G will complete their merger by 2008 under the new title of Unite. Trade union appointees have sat on the board of the Corus Group subsidiary UK Steel Enterprise (UKSE) since that operation was established, providing assistance to businesses and local communities. Community’s General Secretary, Michael Leahy, and his predecessor Lord David Brookman are the two current nominees to the board.

The UK government has undertaken a number of measures aimed at supporting small and start-up businesses. The main way in which government policy links with the UKSE initiative is through its establishment of regional development agencies which have trade union representation and which can provide information and support to companies faced with restructuring.

Description of the initiative

In the second half of the 1970s, the UK government began planning for a major restructuring of the state-owned British Steel Corporation in response to a substantial downturn in the world steel industry following the oil crisis. Both the government and British Steel recognised that the major reorganisation being planned would not just have an impact on thousands of individual employees, but would also pose significant challenges to local communities where the steel industry was often the biggest employer.

Rather than responding through a number of one-off initiatives specific to each region as and when the restructuring took place, British Steel decided to set up a body whose remit would be to take a long-term view and investigate new ways of providing assistance to local communities.

UKSE was established to do this, providing finance, workspace, consultancy services and mentoring to help new businesses to get off the ground and to support small enterprises in their development. Although dependent on financial support from its parent company, UKSE was able to operate with considerable independence and develop new ways of helping companies.

Among its key services are managed workspace and the provision of small amounts of investment funding. During its first few years of operations, UKSE recognised two important challenges faced by new and expanding businesses. The first was the difficulty involved in finding suitable premises without entering into long-term commitments and the second was accessing appropriate investment in relatively small amounts.

The third main strand of UKSE’s business involves initiatives in local communities both to support entrepreneurship and to help other organisations that are trying to regenerate development in areas affected by restructuring in the steel industry. For example, UKSE gets involved with secondary schools through its ‘Going for enterprise’ programme, which encourages young people to be innovative in the widest sense and, more specifically, provides information on starting up and running small businesses. It also ran the STEELSTEP initiative, which brought together undergraduates and small businesses to their mutual benefit.

UKSE now operates in 21 steel industry areas and has four offices, which cover Scotland, Wales, the North of England and Yorkshire, Humberside and the Midlands, plus a head office based in the centrally located city of Sheffield. The company has 30 employees who come from a range of backgrounds including banking and investment as well as the steel industry itself.

The company has become a leading provider of business innovation centres and has now set up four such centres in Sheffield, Hartlepool and Kirkleatham on Teesside in northeast England, and Ebbw Vale in South Wales. It has also established four normal business centres or small industrial units in Cardiff in Wales, and Grovewood and Coatbridge in Scotland.

In addition, UKSE has developed the lending and investment side of its business. It is now a designated lender under the government’s Small Firms Loan Guarantee Scheme and runs its own investment fund management company, UKSEFM, which manages funds for third parties.

In the 1980s, UKSE received around GBP 50 million (€73.3 million) in financial support from the UK government and British Steel. The latter provided further funds of GBP 10 million (€14.6 million) in the 1990s; this was followed by a GBP 10 million contribution by Corus in 2001–02. This marked the last tranche of financial support for the company, which is now wholly self-sufficient, providing support for regeneration projects from its own funds.

UKSE works closely with local authorities and the relevant regional development agencies. It was able to use part of the GBP 10 million from Corus in 2001–02 to further develop its idea of the new, purpose-built innovation centres. The Ebbw Vale centre was the third to be opened and was the result of a cooperation with Ebbw Vale council and the Welsh Development Agency; this initiative constituted UKSE’s response, on behalf of Corus, to the closure of the Ebbw Vale works.

Analysis

UKSE believes that an important element of its success has been the funding made available by the government and British Steel; moreover, it points to the degree of independence which they allowed UKSE to develop its services, often learning by trial and error how best to help small and start-up businesses.

UKSE also considers significant the fact that it has been able to adapt its approach to funding and the services it provides. The way it provides finance now is very different from the strategies adopted in the early 1980s, and the basic business advice it was giving in the early years has today been transformed into specialist consultancy services. In terms of property, the company began by converting former British Steel/Corus premises into managed workspaces, but now invests in purpose-built, high specification innovation centres.

The company also establishes long-term relationships with many of the businesses it supports, providing not only financial assistance and mentoring services from start up but through to several stages in the business life cycle.

The latest figures from the company indicate that it has provided over GBP 63 million (€92.4 million) in finance and spent GBP 23 million (€33.7 million) on developing business properties. These monies have assisted 4,300 businesses in the creation of 67,000 new jobs.

Exemplary and contextual factors

UKSE is a leading example of business support for entrepreneurs and new businesses in areas affected by restructuring. It is exemplary in the fact that, although established, owned and initially funded by a state-owned corporation, it was given considerable independence to innovate and find the best ways of helping small and start-up businesses and community support initiatives.

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