Struggle for Steel

Britain's Labor government is determined to nationalize the country's steel industry--or die trying. The formal debate over nationalization has barely begun, but the intensity of the argument outside Parliament foretells a fight that could topple Labor.

Last week, while Laborites shaped the nationalization bill that they hope to bring before the House of Commons next month, Sir Julian Pode, president of the British Iron & Steel Foundation, charged that a takeover "cannot fail to harm" the industry. Nationalization would mean "disaster for the country," warned B. Chetwynd Talbot, chairman of the South Durham Steel & Iron Co., Ltd. And Alan James Peech, chairman of United Steel Companies, Britain's biggest steel company, moved on to the next big question: What compensation should the government pay if steel is nationalized? If Labor bases its offer on recent stock prices of the firms, said Peech, it will be guilty of "unfair expropriation."

Second Time Around. Whatever price Labor finally fixes--provided it can get the nationalization bill passed --will likely owe as much to politics as to a realistic appraisal of Britain's steel industry. Britain has the world's fifth-largest steel industry, after the U.S., Russia, West Germany and Japan. The industry's 260 companies, employing more than 300,000 workers, last year poured a record 26 million tons of steel, 88% of capacity but only 6% of global steel output. In 1951, most of the companies were nationalized by Labor--and two years later were returned to private hands by the Conservatives. This time Labor is generally expected to seize only the ten or twelve largest firms that account for some 80% of industry capacity.

Labor argues that the industry is a camouflaged monopoly that has grown inefficient behind the cover of government-sponsored price control. As Labor sees it, the industry needs the swift reorganization that only the state can provide. While Tories and Liberals concede the truth of many Labor complaints, they contend that nationalization is not only "irrelevant" to remedying them, but would also damage the whole economy by putting the nation's most important industry under a change-resistant bureaucracy.

Belated Burst. There is little argument about one thing: British steel, like most of British industry, is not all it should be. In a belated burst of modernization, many British steel companies have caught up technologically with the rest of Western Europe in the last five years, and Britain's low wages (an average of $41.80 a week in steel) enable them to price some steel lower than Common Market steel. But steel productivity in Britain is lower than in the Common Market and only half of productivity in the U.S. During a strike last year, analysts found that the 17,500-man force at the Steel Co. of Wales could be cut 7,000 without reducing output. Last week both the company and labor leaders agreed that the mill must cut its manpower.

Because of the plethora of workers and the presence of too many old, small mills, British steel suffers from chronically soggy profits. With Britain's high-grade domestic deposits of iron ore exhausted, the industry must import more and more ore. Yet import quotas rule out fueling British mills with U.S. coal, which is cheaper than British coal. The government sometimes assigns expansion by regions (so much to Scotland and so much to Wales) to increase jobs instead of efficiency. British steel managed to export only 18% of its production last year, despite the nation's need for more exports.

Bullied Lords. To achieve its goal of nationalizing steel before Parliament adjourns in August, Labor plans to rush things, despite its precarious majority. The bill must undergo from two to four days of debate and survive two crucial votes in Commons, where a defeat would almost certainly result in a new national election. Presuming the bill gets through Commons, Labor must then bully it through the House of Lords, probably by threatening that august body with dissolution. Win or lose, the outcome seems unlikely to improve steel's--or Britain's--economic troubles.

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