Rishi Sunak sees steel as a 'sunset industry' but it could help the UK to its net zero future

IPPR North says there are clear opportunities to attract new investment and wealth to the region by investing in steel, where more than a third of the 32,000 people directly employed by firms in the UK are based in northern England.

Its report setting out a blueprint for green steel says employers such as British Steel, Liberty Steel, and Sheffield Forgemasters are significant local employers in Scunthorpe, Rotherham, and Sheffield, meaning "northern steel actively underpins much of the local economy in these areas".

The report sets out a plan for decarbonising northern steel with a £267m-a-year investment, harnessing the potential of electrification, carbon capture storage, and hydrogen technologies.

And author Jonathan Webb says: "A drive towards zero carbon steel would not just protect existing jobs; a modern and competitive industry would also attract new investment that can create new business opportunities, jobs, and wealth within the North.

"To achieve this transformation, significant barriers need to be overcome. The negative perception of steel as a sunset industry persists and this has meant that there is a lack of forward planning for decarbonisation."

The industry has faced significant challenges in recent decades, the report says, first with deindustrialisation and more recently with attempts to devalue steel through the dumping of steel on the international market.

And at the same time, the high cost of energy for the industry has made it increasingly difficult for it to compete with international and European competitors, who can buy energy at much lower prices.

The think-tank says the lack of long-term strategy from governments and a view that the industry has been stuck in a process of managed decline has reduced industry morale.

Since its peak in 1971, the industry in the UK has seen a gradual decline in the total number of people it employs reduced from over 320,000 to approximately 32,000 by 2016.

But the report adds: "Despite these challenges, the UK’s steel industry remains a crucial foundational industry and today, UK-based manufacturers produce enough high-quality steel to meet most of the UK’s steel needs."

There was virtually no mention of steel or similar industries in Rishi Sunak's Budget speech in March, with the Chancellor's one reference to the industry describing it as one which brought success to Teesside "in the past".

And according to the report: "This perception fails to realise the important role steel will play in both supporting the North’s economy and the UK’s wider transition to a low-carbon future.

"With the pursuit of the right technologies now and investment to create a competitive low-carbon steel industry, northern steel, as a foundational industry, can be central to the country’s prosperity in the decades to come."

And Miriam Cates, Conservative MP for Stocksbridge and Penistone, said the report "rightly highlights the opportunity for decarbonisation to drive a rebirth of the UK steel sector".

She said: "Not only is it an asset of strategic national importance, but communities such as Stocksbridge in my constituency are quite literally built around the steel industry.

"Investing in green steel will help the UK to reach our environmental and infrastructure targets, and stand as proof that the levelling up agenda can offer a better and more prosperous future for Yorkshire and the wider North."

Ed Miliband, a Doncaster MP and Labour's Shadow Business Secretary, said: "The Government must step up and secure a long-term future for our steel industry. Labour has repeatedly called for a green stimulus to protect these crucial skilled jobs - and create many more.

"The failure to stand up for steelworkers demonstrates the absence of boldness, imagination and strategy at the heart of government. The steel industry is key to our economic recovery and our greener future, but it wasn't mentioned even once in the Government's so-called plan for future growth and Ministers are holding back funding from the Clean Steel Fund until at least 2023.

"Investing in a green recovery would create skilled, secure steel manufacturing jobs in communities across the North, boosting employment and our economy. The Government must see sense and act to ensure the UK's proud steel-making tradition is followed by a proud future."

How can the North become a world leader in green steel?

The Government's industrial decarbonisation strategy, unveiled a month ago, says that in the next decade the UK will "begin the journey of switching away from fossil fuel combustion to low carbon alternatives such as hydrogen and electrification".

In its foreword, Business Minister Anne-Marie Trevelyan says: "As the UK leads the race to net zero, we will ensure that decarbonisation works for everybody and every region."

But IPPR North's report suggests the measures outlined in the strategy, which includes a £250 million Clean Steel Fund and £240 million Net Zero Hydrogen fund, do not offer the support needed to help decarbonise northern steel in the time required.

And it adds: "The UK’s current green growth plans could go further to harness the potential of the industry to decarbonise at pace.

"This includes long-term planning for industrial decarbonisation, a financial commitment to support the process and a political acknowledgement from central government as well as metro mayors, that steel still matters."

In terms of government aid, it says more support will be needed initially in the form of technological investment and low interest loans to industry to support decarbonisation.

But it says that by the 2030s "we expect that efforts to crowd in private investment will result in businesses providing at least 50 per cent of this annual cost by the mid-2030s before meeting the majority of the costs thereafter".

It adds: "The precise mix of support from government could include a combination of long-term industry loans and green bonds via the UK’s new infrastructure bank based in Leeds."

Other recommendations include combined and local authorities examining how they use their buying power to prioritise green steel from the UK, particularly in areas like infrastructure development, town centre regeneration strategies, planning policy and local transport schemes. And the report says research and development spending should be devolved to local leaders who can invest in industrial strategies in their areas.

The report calls for a jobs guarantee and a "just transition fund" to ensure that existing steel communities in the North feel the benefit of decarbonisation.

And it says that carbon pricing policies - where a cost applied to carbon pollution to encourage polluters to reduce the amount of greenhouse gases they emit - should be intensified once the technologies are available to create a premium for low-carbon steel.

The report says: "Carbon pricing mechanisms can create demand for low-carbon steel and disincentivise the future use of carbon-intensive steel. However, the introduction of these measures must be timed correctly.

"It must accelerate uptake of low-carbon technologies but also not stifle industry further given current concerns around competitiveness. To this end, the introduction of carbon pricing should be coupled with planned investment."