Losing the government's investment in Forgemasters is a huge blow to Sheffield. The company may have fallen victim to the combination of a crude approach to cuts and Lib Dem antipathy to nuclear power.
Although Britain can claim to have led the first industrial revolution, its history since is marked by a number of lost opportunities to gain early advantage at times of major economic and technological transition.
The decision this week by the Government to axe the proposed loan for Sheffield Forgemasters risks Britain missing out on just such an opportunity which is being created by the worldwide trend towards greater use of civil nuclear power both as a response to climate change and for reasons of energy security.
The overall amount cut in this week’s spending announcement was relatively small in relation to overall expenditure and the new Government’s confirmation of Labour’s plans to finance expansion by Nissan and Ford prove there was no scorched earth or irresponsible grants policy by the outgoing administration.
Yet the Forgemasters decision exposes a complete lack of vision and ambition when it comes to making the most of the transition to a lower carbon economy.
To be clear, the Labour Government’s proposal was for an £80m loan to this company, not a grant. It would have been repaid over time and interest was being charged on it.
And the decision to approve this loan was never just about helping one company or creating a specific number of jobs in Sheffield – it represented a wider ambition for Britain to become stronger in the growing worldwide nuclear supply chain in the future.
The purpose of the loan – which also involved £40m in finance from Westinghouse, one of the world’s leading manufacturers of nuclear power stations – was to enable Forgemasters to buy a 15,000 tonne press. This would have given the company capability to make the ultra heavy forgings for civil nuclear and other sectors which currently can only be sourced from Japan or Korea because the capacity does not exist elsewhere in Europe.
For all those who want the response to climate change to be about new industries and new jobs and not just a discussion around targets and emissions, this was a project that mattered because it was about the real opportunities presented by the transition to low carbon.
It would have given the UK an important manufacturing capability in a growing field and would have brought a positive knock on boost to the whole nuclear supply chain in this country.
Conversely, the absence of the 15,000 tonne press will mean that more of the key components for new power stations, both here and elsewhere in Europe will have to be sourced from outside the UK. Good news for Japanese and Korean steelmakers but hardly good news for Britain’s lower carbon industrial future.
It has been suggested that Forgemasters should simply borrow the money privately. But this was a big investment for a company of that size and if the banks were willing to lend the company would not have needed to come to the Government in the first place. It is government’s role to consider whether there is a wider interest which makes projects like this worth backing, even when banks won’t do so. It is also important to state that this particular proposal was under discussion for a full two years and went through painstaking examination by officials in both the Department of Business and the Treasury before clearance by Ministers.
Whether the driving force behind this decision was the Treasury view of spending cuts at all costs, hostility to civil nuclear power among Liberal Democrat Ministers or a desperation to find an industrial project – any project – that could be axed is beside the point. The end result is that in axing this repayable loan to an important and potentially growing part of manufacturing the new Government has behaved like the banks they like to attack for favouring finance over industry.
The decision also exposes a wider issue about how the deficit should be cut. It is a huge assumption to believe that we can simply cut the state and assume the private sector will step into the gap, particularly if Ministers axe projects that involve private finance and are geared to industrial growth. The truth is that borrowing had to grow in recent years precisely because the private sector was not spending or investing. It would be wrong to oppose all cuts and the deficit does have to come down but deficit reduction without regard for industrial and employment opportunities in the future risks hurting more than it cures. Deficit reduction with a plan for such growth can make Britain stronger. The new Government, by turning their backs on the low carbon industrial ambition represented by the Sheffield Forgemasters proposal, appears to be opting for the former path.
This article is also available on the Progress Online website. Posted on 19 June 2010.