Memorandum submitted by The ISTCthe
1.1 The ISTC is the UK's largest steel union
and the largest union in Corus.
1.2 When Corus was created in 1999 it employed
33,000 people in the UK. If the redundancy announced in February
2001 are put into effect this will be reduced to 22,000 by 2003a
reduction of over 33 per cent.
1.3 In Wales, Corus employed 11,500 in 1999.
Should the redundancies go ahead this will have been be reduced
to 7,000 between 2000 and 2003a reduction of over 40 per
1.4 UK steelworkers are the most productive
in Europe, and at least as productive as the best American and
1.4 Corus has rejected offers from the ISTC
and other trade unions to work in partnership for the good of
the company, its employees and its shareholders.
1.5 Corus refused to engage in discussions
with the ISTC about possible action to weather its short-term
difficulties in advance of its announcement. The ISTC calls on
Corus to think again.
1.6 Corus rejected discussions with an ISTC-led
consortium to take-over Llanwern.
1.7 Corus has made no significant investment
in the UK since the merger. Its restructuring review contained
no plansit merely intends to "sweat" its UK assets.
This places a question mark over the company's long-term commitment
to steel making in Wales and the rest of the UK.
1.8 The redundancies announced in Wales,
should they be carried out, will be a body blow to the economic
and social fabric of Welsh steel communities and the Welsh economy
in general. It is an unnecessary, irreversible long-term action
to tackle a short-term problem.
1.9 The ISTC, the other steel unions, the
UK Government and the Welsh Assembly will shortly be putting a
proposal to Corus that we believe is in the best interests of
its employees, its shareholders and the country. We hope that
they will be willing to grasp the hand of partnership.
1.10 The UK Government needs to adopt a
strategy to preserve this important strategic industry.
1.11 The ISTC believes that the ease with
which UK employees can be dismissed promotes overtime and redundancy
as the flexibility adapted by bad employers. This irresponsible
"boom and bust" approach is hampering the efforts of
the UK's international competitiveness.
1.12 All the promises made by the ISTC and
the other unions since the merger have been kept: all the promises
made by the company have been broken.
2.1 The ISTCthe Community Union welcomes
the opportunity to submit a memorandum of evidence to the House
of Commons Welsh Affairs Select Committee's inquiry into Job Losses
in the Steel Industry in Wales.
2.2 The ISTC is the United Kingdom (UK)
steel industry's major trade union, representing between 70 and
80 per cent of UK steelworkers. Corus is the UK's largest steel
producer, with a market share of between 52 per cent to 54 per
cent in carbon steel products the UK. The union represents the
largest number of workers employed by Corus.
2.3 The ISTC and other unions representing
Corus employees have pressed consistently for consultations with
the company in advance of the announcement of major restructuring
plans. However, despite promises that consultation would be extended,
the unions have never had the opportunity to see or to discuss
the company's proposals before they were announced publicly.
2.4 At the time of the merger the Corus
Board announced that it wished to increase market-share in the
UK and the EU as a whole, and retain the existing UK plant configuration,
and that no redundancies would result from the merger.
3. CORUS REDUNDANCY
3.1 On 16 June 2000, Corus announced 4,500
redundancies, of which approximately 1300 where in Wales at the
Bryngwyn plant in Gorseinon, the Llanwern plant near Newport,
the Aluminised Products in Pontardulais, the Port Talbot plant,
the Shotton Plant in Deeside, the Tafarnaubach plant near Tredegar
and the Trostre plan near Llanelli. On 11 October 2000 the company
announced another 210 job cuts, 145 of which were in Wales, at
Port Talbot and Shotton. Prior to these redundancies, Corus employed
33,000 people in the UK, of which 11,500 where employed in Wales.
3.2 On 30 August 2000, following months
of lobbying by the ISTC and the other steel unions, Corus announced
that it would proceed with its maintenance plan at Llanwern, which
would include the relining of the No. 3 blast furnace. This was
due for completion by the end of September 2001, subject to:
"An ongoing business viability within Corus
in order to ensure that it continues to be in the overall interests
of the company".
3.3 Following the resignation of Corus'
joint Chief Executives on 5 December, the company Chairman Sir
Brian Moffat was appointed acting Chief Executive and announced
a "radical restructuring" of its UK operations.
3.4 The ISTC requested meetings with Corus
to discuss its plans. An initial meeting with Sir Brian Moffat,
Allan Johnstone, Corus' Human Resources Director and other senior
managers was held on 22 December, followed by a subsequent meeting
on 8 January. No details of the proposals were given at either
meeting, despite the ISTC requests for the opportunity to work
in partnership with the company to overcome its short-term difficulties
before any firm decisions were taken. The company rejected these
3.5 On 1 February 2001 Corus announced a
further 6,050 redundancies in its UK operations by 2003. Over
three thousand of these job losses would be in Wales. They are
made up of the closure of its Ebbw Vale and Bryngwyn plants; the
closure of the pickle line, cold mill and one electro-zinc line
at Shotton and the closure of iron and steel making operations,
of the annealing and tempering facilities, a reduction in activity
levels at the hot strip mill and cold mill operations, at Llanwern.
3.6 The redundancies announced do not include
former Corus employees whose posts have been contracted out in
the last several years. This may well result in a further 1,000
jobs being lost in Wales. These redundancies, if put into effect,
will reduce Corus' UK workforce to 22,000a reduction of
over a third within three years. In Wales the figure will have
declined to 7,000, a reduction of over 40 per cent during this
short period. The announcement meant that Corus had gone back
on their decision to reline the No. 3 blast furnace at Llanwern.
3.7 The 1 February Corus statement showed
projected losses for the 12 months is estimated to be £1,050
million of which all but £23 million is caused by redundancy
payments and writing off capital assets.
3.8 Following the announcement on 1 February,
Corus agreed to suspend the commencement of the compulsory 90-day
consultation exercise required by the Trade Union and Labour Relations
(Consolidations) Act for a period of 14 daysin effect extending
the consultation period for this length. The 90-day consultation
period commenced on 15 February.
4. THE ISTC'S
4.1 Throughout December and January, following
the restructuring review announcement, speculation, which apparently
came from sources close to the company, suggested that a number
of UK plants were at risk. The focus of the speculation centred
on the integrated plant at Llanwern in Newport.
4.2 In the absence of any willingness on
the part of Corus to consult the ISTC or to the union's offer
of partnership, the ISTC explored contingency plans to preserve
the jobs of their members employed by Corus in the event of a
major redundancy announcement.
4.3 The Llanwern integrated steel plant
is one of four such Corus plants in the UK. Llanwern produces
crude steel and turns it into strip steel products. Because of
overcapacity in Western Europe and the imbalance between Sterling
and the Euro exchange rates, Llanwern is currently a major source
of losses for Corus on carbon steel production in the UK. The
ISTC believed that, should the company choose to close the whole
plant, it should explore the possibility of taking it over, in
the informed belief that the plant could be operated profitably
and the jobs secured. This would have had the additional effect
of stemming the company's major source of losses and allow it
to focus upon managing its other UK plants where they were making
4.4 The ISTC identified sources of industry
expertise and of finance who were confident that Llanwern had
good prospects of producing and selling three million tonnes per
year of strip steel products as an integrated plant. They were
ready to form a consortium with the union to take over the plant
should Corus be willing to discuss a transferral of ownership.
4.5 On 23 January the ISTC wrote to Corus
formally asking for discussions with the company in a co-operative
spirit about taking over the plant should Corus decide to close
it in full or in part.
4.6 On 29 January ISTC received a reply
from Sir Brian Moffat stating that:
"I do not think it appropriate to meet to
discuss a possible acquisition of Llanwern by you".
The reason given by Sir Brian for this was:
"We do not wish to invite any more competition
in the UK over that which is already present from imports."
4.7 The partial closure at Llanwern ruled
out ISTC's hope of being able to take over the plant: the profit
for the plant would reside in the sale of finished steel products.
Even if Corus felt forced by the weight of public opinion to offer
the steel-making facility to the ISTC consortium, it is clear
that the original consortium members would not feel confident
that Corus would not try to use its market dominance to damage
their current UK steel operations.
5. THE IMPACT
5.1 The 6,050 redundancies announced by
Corus on 1 February will have a devastating impact on the plants
themselves and on the communities in which they are based. No
area of the UK will be affected more than Wales, both North and
5.2 3,000 of the redundancies announced
will definitely be in Wales. 1,800 of these jobs are scheduled
to be lost in Bryngwyn, Llanwern and Shotton by the end of this
year. Following on from the 1,450 redundancies that were announced
last year this means that over 3,000 steel jobs in South Wales
will have gone within 18 months, should the redundancies be carried
5.3 A recent study,
suggests that for every 100 jobs lost in the steel industry,
another 40 jobs directly dependent upon them will be lost. The
cumulative impact of the loss of steel jobs in Wales would be
more than doubled, to at least 6,000, once the impact on the local
economy is taken into account. For communities such as Ebbw Vale
and Gorseinon this will mean an end to one of the few high quality,
high skill jobs in an already blighted area, for instance in Ebbw
Vale unemployment is already over 10 per centway above
the national average. The impact on Newport, and Deeside will
5.4 The same study suggests that, at best,
there would be limited re-employment of steel workers in other
industries. The chances of former steel workers achieving the
high wage, high quality jobs that they currently enjoy are slim,
to say the least. Thus, even if they do gain employment there
is still likely to be a net loss of income their family and community.
Nonetheless, if job losses cannot be avoided, the ISTC is committed
to providing steel workers with the best retraining that can be
5.5 Prior to the merger with Hoogovens to
form Corus, British Steel was the largest manufacturing industry
in Wales and accounted for a significant percentage of Welsh exports.
Steel still remains the single largest sector of the Welsh economy,
with nearly 6 per cent of the 200,000 Welsh manufacturing employees
employed by Corus alone.
5.6 The impact of the job losses in steel
communities, should they go ahead, will be felt far wider than
the steel communities in which they existthey will impact
on major sections of the Welsh Economy and society. The fall-out
would affect not only direct and indirect suppliers to the steel
industry, but also Building Societies and other mortgage companies,
education and health services, and other related community provisions.
5.7 It is clear that the social and economic
cost of the proposed Corus redundancies would be horrendous for
the communities in which they will fall, leading to an increase
in family breakdown, illness, drug and alcohol abuse and crime.
It is also clear that the cost will be disproportionately born
by North and South Wales.
6. THE STEEL
6.1 Immediately following Corus' announcement
on 1 February the ISTC began to formulate an alternative way for
the company that involved working in partnership with its employees,
the unions that represent them, the UK Government and the Welsh
6.2 The ISTC accepts and understands that
the trading conditions for all UK manufacturers have been difficult
for the past three years and Corus has suffered accordingly. However,
the steel industry is a highly cyclical industry: In 1996 Corus'
UK operations made a profit of £1.1 billon; if Corus' provisions
for capital write-offs, redundancy payments, and other costs related
to the cuts are stripped out the company made only a loss of £23
million in the 15 months from October 1999: thus the maintenance
of steel capacity in the UK makes not only strategic sense but
economic sense. It is for these reasons that the UK Government
and the trade unions are keen to work in partnership with Corus.
6.3 The ISTC, the other steel trade unions
and the Government are exploring ways that they could work within
the rules of the European Coal and Steel Community (ECSC) Treaty
and the competition rules of the European Union to provide the
opportunity to ride out the storm of temporary market conditions
of diminished demand for strip steel products and a weak Euro.
Their objective has been to provide Corus, working in partnership
with all its stakeholders, with an opportunity to ride out the
temporary market conditions so that it is able to take a more
rational analysis of future capacity and workforce requirements
during a potentially more positive market environment.
6.4 The steel unions and the UK Government
recognise that the immediate priority for Corus is to reduce cash
outgoings and production at a time when demand and prices are
near the nadir of the cycle for strip steel products. However,
they also believe that it is unwise for the company to irreversibly
reduce its UK steel-making capacity and be prepared to add further
to its debts by borrowing to fund what may well be unnecessary
redundancies and capital asset write-offs.
6.5 Following consultations with the European
Commission, the ISTC has established that the ECSC Treaty permits
a range of flexible measures which will relieve the strain on
Corus. In particular, we have established that, since the jobs
are under risk, in-service training would qualify for UK Government
and European Union financial support.
6.6 The steel unions have drawn up national
"umbrella" proposals for the affected Corus plants based
upon on retraining. Under this umbrella each affected plant is
drawing up flexible, effective proposals which will allow output
to be reduced and retraining commenced. These proposals will not
only result in it being unnecessary for Corus to produce steel
which is not able to produce profits on, but will also maintain
the UK's current steel-making capacity.
6.7 Corus has already committed itself to
retraining ex-employees after they have been made redundant. The
steel unions and the Government believe that the company should
agree to shift this training to before redundancy. A retraining
package, associated with reduced overtimecurrently every
UK Corus plant has workers working unnecessary overtime at the
same time as overall staffing is being reducedand flexible
work patterns, would enable the company to delay any proposed
redundancies until market conditions improve for a period of up
to 12 months.
6.8 Corus has already said that it will
fund this post-redundancy retraining. In-work training would attract
European Social Fund resources as well as Government/Welsh Assembly
support, over and above that which could be garnered for post-redundancy
training, thus it would reduce the amount that the company itself
would be required to contribute. If trading conditions did improve
sufficiently, as the steel unions, the UK Government and many
market analysts expect them to, Corus would have a workforce with
improved skills and productivity: if conditions did not improve
within the 12 month period and redundancies were still required,
those entering the job market would do so with transferable skills.
These skills would not only benefit them individually but would
also make their communities more attractive places for domestic
or inward investors, thus helping to tackle the regional skills
and jobs imbalance that is affecting the UK.
6.9 The individual plant proposals are currently
being drawn up by the trade unions at each threatened plant. Outline
proposals for all the affected plants, including those in Wales,
will be put to Corus by the trade unions, with full Government
and Welsh Assembly support.
6.10 The lower level of activity at each
plant would enable essential maintenance to be carried out, including
the extension of the life of the No. 3 blast furnace at Llanwern
for up to a decade, at minimal cost to Corus.
7. THE FUTURE
7.1 UK steel workers, including those employed
by Corus, have made tremendous sacrifices in the past two decades,
with latest figures showing that they produce 571 tonnes per person,
up from 533 in the past year. This makes them the most productive
steel workers in Europe and as competitive as the most productive
steel workers in North America and Asia. The employees feel that
their efforts and flexibility have not been matched by equivalent
leadership, ability to make decisions and business acumen by the
Corus board, who have turned the cash-rich British Steel into
a company with debts of £1.8 billion dependent on bank support
to service its debt.
7.2 Since the merger, Corus have undergone
a complete u-turn in strategy: moving from proposals to increase
total market-share and production, to one of reducing production
and maintaining proportionate market-share i.e. managing decline.
The ISTC believes that Corus should be trying to exploit underlying
competitive advantage stemming from high labour productivity to
actively compete in the whole European market rather than to merely
maintain its UK market-share.
7.3 The ISTC is extremely disappointed that
Corus management have not sought to engage with trade unions to
develop further short-term flexibility and identify savings that
would reduce the financial pressures on the company until market
7.4 The ISTC finds it strange that Corus
should make a decision to significantly reduce its UK workforce
and steel-making capacity at a time when Sterling has consistently
weakened against the Euro. Sterling has fallen 11.5 per cent from
its peak against the Euro in May 2000, and the UK Government has
given strong indications of its desire to join the single currency
should the conditions be right.
7.5 All the actions of the Corus Board since
the merger suggest that they have no long-term commitment to the
production of steel making in Wales, or the rest of the UK for
that matter. The decision to close the steel making capacity at
Llanwern and instead send steel on a 580 mile round trip from
Teesidefollowing a period when Corus have highlighted high
transport costs within the UK as factor of major concern for other
areas of their operationssuggest that a shadow hangs over
the long-term future of the plant. The advantages flowing from
an integrated plant making its own steel will be lost forever
under the present proposals. Similar concern must be felt towards
7.6 The poor marketing and performance of
the Corus Executives since the merger suggests that the company
does not have managers of the calibre necessary to compete and
survive in the highly competitive global steel market.
7.7 Corus' refusal to make any substantial
investment in its UK operations since its creationfollowing
on from the tradition of the post-privatisation British Steelsuggests
that their primary focus is sweating the assets, both human and
physical, in order to satisfy short-term shareholder pressures.
8.1 The ISTC believes that Corus have been
guilty of grave short sightedness in response to short-term pressures.
These have been made worse by imprudent management decisions,
for example the decision to return £683 million to shareholders
at the time of the merger and to accumulate debts of over £1.8
8.2 Steel is an industry notoriously vulnerable
to sharp cyclical fluctuations and it is sensible business practice
to keep reserves to tide a company over low points in the cycle.
The ISTC made this clear to Corus when it decided to return the
£683 million to its shareholders: its views were ignored.
8.3 The ISTC believes that the efficiency
gains and sacrifices made by the British Steel, and then Corus
UK, workforce have not been matched by the standards one would
expect from visionary management intent on the company's growth.
Whilst there are pressures relating to the strength of Sterling
and demand in the UK, the union believes that these could be overcome
with greater entrepreneurial flair and strategic coherence.
8.4 The ISTC believes that it is perverse
for the UK Government to have a strategic approach to the maintenance
of key industries in the UK such as the power supply industry
B in the form of coal, and shipbuilding industry, in case of national
emergency and yet not for steel. The UK steel industry is a national
strategic asset, crucial to economic and defence interests. The
loss of critical mass in the steel industry is likely to lead
to a further run-down in UK manufacturing, arising from the need
for UK manufacturers to import steel from the continent with all
the disadvantages of high transport costs and uncertainty of supply.
8.5 Once steel capacity is lost it cannot
be reconstituted quickly and only at extreme cost to the Exchequer.
The ISTC believes that it is clear that Corus has no long-term
commitment to the retention of steel-making capacity in the UK
and that the Government and the Welsh Assembly must develop a
strategy for the steel industry in UK before it loses critical
mass and declines irretrievably.
8.6 Fundamentally the ISTC believes that
Corus can have a profitable long-term future as a steel producer
in Wales and the UK. However, no company can prosper if it does
not trust and utilise its major asset B its workforce. It is clear
to the ISTC that rejection of partnership in favour of paternalism
and secrecy is the major obstacle in the way of the company achieving
8.7 The ISTC, the other steel unions, the
UK Government and Welsh Assembly will shortly be putting plans
to Corus which we believe are in the best interests of the company,
its employees, its shareholders and the country. We hope that
they seek to work in partnership with us.
8.8 The ISTC welcomes the Government's commitment
to review the consultative rights of UK employees. The relative
ease with which UK employees cab made redundant is one of the
reasons for the short-termism of the Corus management. The chimera
of flexibility has for too long been used to drive down standards
for UK employees. The situation at Corus, where the unions have
offered to discuss flexibility but have had their offers spurned,
shows that the only flexibility that some UK companies, such as
Corus, are interested in are those of greater overtime and greater
redundancy. The "boom and bust" approach within companies
must be eradicated if the UK is to be truly internationally competitive.
8.9 Promise promises made by the ISTC and
the other unions since the merger have been kept: promises made
by the company have been broken.
Michael J Leathy
27 February 2001
1 Corus Press Release 8.1.01. Back
Corus Press release, 30.8.00. Back
Letter to Michael Leahy, ISTC General Secretary, from Sir Brian
Moffat, Chairman and Acting Chief Executive of Corus, 23.1.02. Back
Alternative Plans for the British Steel Industry, Edited by Professor
Peter Fairbrother, Cardiff University, November 2000. Back