British steel appeared this week to be in almost terminal crisis, with 16 of Indian entrepreneur Lord Swraj Paul’s Caparo plants placed “in administration”, putting 1,700 jobs at risk, while Tata Steel announced they were cutting a further 1,200 jobs.
The latter development was expected, but not the first, and it has left the British Asian business community – which holds the much respected Lord Paul as one of its “big beasts” – in shock.
Dumping of cheap Chinese steel and the strengthening of the pound against the euro have been blamed for the wave of job cuts in the British steel industry.
Prime minister David Cameron has promised the Commons that he would take up the question of cheap steel with the Chinese president Xi Jinping, who arrived in London on Monday (19) for a four-day state visit.
Business secretary Sajid Javid, who was summoned to the Commons on Tuesday (20) to make a statement, said the government would offer more infrastructural contracts to British steel companies.
But he also pointed out: “There are limits to what the government can do in response – no government can change the price of steel in the global market.
“No government can dictate foreign exchange rates. And no government can simply disregard international regulations on free trade and state aid – regulations that are regularly used to protect British workers and British industry.”
“Excess capacity in global steel is enormous – more than 570 million tonnes last year, almost 50 times the UK’s annual production,” he said. “The price of steel slab has halved in the past year alone.”
On Monday (19), it was announced that at the request of Caparo’s directors, PricewaterhouseCoopers (PwC) had been appointed joint administrators in an attempt to rescue the business. The decision was speedily ratified by the courts to make the process legal.
Being “placed in administration” allows the Caparo companies to be protected from their creditors, thereby allowing PwC time to find a buyer.
Matt Hammond, lead administrator and partner at PwC, made clear: “This is a significant business with a wide range of interests across steel, engineering, vehicles products and technologies. Its scale and reach into significant customers and its importance to suppliers cannot be understated. We will be rapidly assessing all options for the businesses through this week and beyond.”
He acknowledged: “Steel prices and exchange rates has had an impact on some parts of the Caparo Industries group.
“However, there are businesses in the group that are not directly affected by steel prices, and likewise many where there is both strong customer demand and critical supplier support.”
These are difficult times for 84-year-old Lord Paul, who is mourning the loss last week of his sister, Parkashvanti Gupta, who passed away in Delhi at the age of 93.
“She was more like a mother,” Lord Paul said.
Caparo’s 1,700 employees will be “attending work as normal and will be paid as normal, so in these respects it is business as usual while the administrators’ review gets underway”.
In a statement following the takeover, PwC said: “Caparo Industries plc is a Midlands and London headquartered diversified industrial group. CIP comprises approximately 20 individual businesses which are active in UK steel and associated engineering businesses.
“Specific activities include the forging and pressing of metal products for aerospace, automotive and other industries. It also produces fastenings, wire, tubes and other accessories.”
It explained: “CIP is part of a global network of businesses under the Caparo name, with operations in China, India and the US. In addition to steel, Caparo’s global business is also involved in product development, materials testing services, hotels, media, furniture and interior design, financial services, energy and private equity investment.”
The statement emphasised: “Other than the companies specifically listed above, all other business interests of Caparo are unaffected.
“Specifically three subsidiaries of Caparo Industries plc are not in administration – these are Caparo Merchant Bar and Caparo India (both UK entities) and Bomet SA (a Polish business), those businesses continue to operate normally.”
Almost alone among Indian-origin businessmen in Britain, Lord Paul has tried to make a go of manufacturing. He came to Britain from (then) Calcutta in 1966 to seek treatment for his daughter, Ambika, who was suffering from leukaemia. He stayed on after she died, and founded Caparo, which has been his lifetime’s achievement.
Next month and in December, Lord Paul will open buildings named after Ambika and himself at Wolverhampton University, which has received a £1 million gift from him and where he has been chancellor since 1999.
Tata Steel, meanwhile, confirmed on Tuesday (20) that it was cutting about 900 jobs in Scunthorpe in North Lincolnshire and 270 in Scotland. On August 25, the company announced 250 redundancies in strip steel at Llanwern in Wales, while on July 16, it said there would be 720 jobs losses at its plants in Rotherham, in Stocksbridge in Yorkshire and Wednesbury in the West Midlands.
On September 18, SSI’s Thai owners said that 2,200 jobs would be lost at Redcar on Teeside.
Karl Koehler, chief executive of Tata Steel’s European operations, said: “The UK steel industry is struggling for survival in the face of extremely challenging market conditions. This industry has a crucial role to play in rebalancing the UK economy, but we need a fairer system to encourage growth. The European Commission needs to do much more to deal with unfairly traded imports – inaction threatens the future of the entire European steel industry.”
Roy Rickhuss, general secretary of steelworkers’ union Community, summed up: “The government should hang its head in shame. The cruel irony of the prime minister welcoming the Chinese president Xi Jinping as UK steel jobs are cut partly due to Chinese steel dumping will not be lost on the UK’s steelworkers and their communities.”