Steel industry’s problems are benefiting the UK metal fabricators

Ironically, the causes of the woes currently besetting the UK’s steel industry are good news for the country’s metal fabricators.

The recent insolvency putting 1,700 jobs at Caparo at risk and job cuts affecting 1,200 employees announced by Tata Steel and closure of SSI in Redcar with 2,200 job losses are the result of both a slow-down in demand for steel and a reduction in prices worldwide, mainly due to ‘dumping’ from China but also due to the significant rise in energy costs in UK as a result of the government’s obligations on UK manufacturers to use renewable energy.

While yet to hit the insolvency statistics, the steel stock holders and distributors have also been affected. They have had to drop their prices, which is impacting on their own margins, and we are likely to see some significant losses due to writing down the value of their stock.

However the drop in steel prices for customers has benefited the UK metal fabrication industry who can now buy supplies at much lower cost while they have largely been able to maintain their prices.

This wasn’t always the case. The UK metal fabrication industry was significantly cut in the 1990s and 2000s, which led to a decline in apprenticeships and training for welders. Those that survived did so by improving their efficiency and often by investing in plant and machinery to reduce labour costs.

Many of the survivors are SMEs who also had a dire time after the 2008 collapse. More recently demand has returned to improve their order books and as a consequence their profits due to the double benefit of both the reduced steel prices and improved efficiency.

Metal fabricators have, however, been affected by a lack of UK-trained welders and machine operators following the decline of major industrial engineering industries such as ship building. Fortunately the European labour market has helped and they can easily recruit well-trained, highly skilled workers from Eastern Europe.

All this has meant that there are fewer UK fabricators overall but those that remain are becoming increasingly busy and in demand as growth in the economy kicks in.

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