Karl-Ulrich Köhler: Sheffield still has the steel to compete in world market

Today the rise of China has diminished the proportion of steel made in all of Europe’s steelmaking centres. UK output was less than 10 million tonnes in 2011 – less than one per cent of global output – and China consumes in five days what the UK consumes in a year.

Can Sheffield still compete in the steelmaking world? I passionately believe that the answer is yes.

Yes, because the issues and challenges that Sheffield manufacturers are facing today are ones that this city’s industrialists have often faced.

Competition may now be global in reach and colossal in scale. But Sheffield has had international competition since the late 1800s.

Similarly, there are today in the European steel industry problems of over-capacity, But such problems have existed for Sheffield steelmakers during many periods.

Sometimes we manufacturers do not feel properly appreciated by government. But this is nothing new. Albert Peech, who was managing director of one of Sheffield’s major steelmaking companies, Steel, Peech and Tozer, is quoted as complaining back in the 1920s of an “overwhelming burden of taxation and government policies”, which were “putting a stop to enterprise and affecting the trade of the country very seriously”. I can tell you I have a lot of sympathy with poor, unloved Mr Peech!

But I also think there is some good news as regards attitudes towards manufacturing. There are strong indications that government thinking is moving in our direction, with increasing noise about reviving the manufacturing sector – even of the creation of a government manufacturing strategy. This is extremely welcome. Unfortunately, however, the Government has not translated words into action.

Take energy policy. UK manufacturers such as Tata Steel can pay as much as 50 per cent more for their electricity than competitors in France and Germany. At our Speciality Steels business here, this amounts to some £20m more than others may pay in Europe. This isn’t because of the market. It’s because of costs caused by government regulations. And this regulatory environment is set to become even worse next month, thanks to changes in the Renewables Obligation and to Feed-in-Tariffs.

In his Autumn Statement, the Chancellor pledged to grant relief from measures like the Carbon Price Floor. But even after last week’s Budget, there remains an almost total lack of clarity about how the mitigation package for energy-intensive industries will work in practice.

All we know is that the competitive gap in electricity costs between us and our European peers is rising alarmingly – and is set to rise even further. I think it’s important for us to make sure government hears what we have to say, not just for the sake of our own businesses, but for the sake of the huge variety of manufacturing supply chains we serve.

Without the support of an advanced metals supply base here in the UK, all these supply chains will themselves suffer. We must not let that happen.

Of course we must play our part in building our own futures. We must build on the best of what Sheffield can teach us from its past. That means constantly innovating and seeking out new and better ways to carry out our business.

We must focus on what our customers need, providing the right product, of the right quality with the right level of service.

We must supply innovative products made using innovative processes. We must aim at being better operators than our competition and at being responsible in everything we do.

Wee have made huge strides in the Sheffield region towards a more sustainable future. There is much to be proud of here. Today this region is home to local, value-adding supply chains that are critical to solving many of the challenges the world faces: aerospace, oil and gas exploration, nuclear, renewables, tooling and machining, industrial bearings and medical.

And the Sheffield region is home to thousands of small and medium size enterprises that provide highly skilled jobs and boost the economy.

So, let’s be clear – we are not short of skills. In a time when it has not always been fashionable, we are the men and women who have kept the faith. For too many decades, industry has been dismissed as an embarrassing reminder of a faded past.

But things are beginning to change. Let’s take this opportunity and get involved. Let’s make crystal clear to the Government what the real situation is as regards electricity costs in this country.

We can see from the example of Sheffield that manufacturing in the UK has a wonderful past and is showing the way in an uncertain present. Now we have the opportunity to give it a great future.

*Karl-Ulrich Köhler is the European CEO of Tata Steel. This is an edited version of the speech that he delivered to the Made in Sheffield Awards Dinner at the Cutlers’ Hall.