Re-published from Guardian - Sheffield Forgemasters Folly

Written by Gregor Gall of Strathclyde Uni....


The decision to scrap an £80m loan to Sheffield Forgemasters could turn into an act of considerable political folly for the still-young coalition government.

The loan was given to allow the company to install a new forging press for producing nuclear plant components. Its rationale was part of a policy to support successful businesses – especially in areas of high unemployment and low wage, unskilled jobs – to expand and prosper. The withdrawal of the loan not only threatens hundreds of jobs at the company and its suppliers, as well as the company's business strategy. It may also impede the ability of the new tranche of nuclear power plants to come on stream, for the company is almost alone in Britain in producing such steel products.

This decision appears particularly short-sighted, for it was a loan (rather than a non-returnable grant or gift) and to a company that is far from being a basket case or a lame duck. Not only does Sheffield Forgemasters have a long and illustrious history, but it is one of the few businesses from that age of the industrial revolution to have survived, grown and developed when others around it withered and failed. It now manufactures general and specialised high-quality steels, in either rolled or cast formats.

Some observers may say a successful company should not need state aid – they would say this almost axiomatic. Yet, the £80m loan was matched by the same amount raised in private money markets by the company, so this was not exactly a case of the government bailing out a company or encouraging it not to stand on its own two feet. Rather, relative to the worth and assets of the company, it would not have been able to raise such sums of money without government help.

On top of this, steel and Sheffield have a kind of resonance in the political fabric of Britain unlike many others industries and places because of the parts they played in the industrialisation of the economy. Indeed, in what many consider the last great Clash song, Joe Strummer sang "This is England … This knife of Sheffield steel." By the same token, bringing into doubt the future of a successful smokestack company speaks to a long-running sore in British political life, namely, that of deindustrialisation. The contrast with Corus, the owner of former British Steel operations, could not be greater. It has recently shut down and mothballed many of its production facilities.

But what will really give foundation to the loan withdrawal being an act of political folly for the price of a returnable £80m is that the MP for the constituency in which the company is based is the deputy prime minister, Nick Clegg. This makes his statement of lament in response look rather hollow and insincere.

However, the icing on the cake will be the extent to which the Labour opposition can land a blow on the coalition government for bringing about the danger of a "double dip" recession by cutting too much too soon. This was the political fault line in this year's general election between the main political parties. With Clegg as the local MP, Labour's leadership contenders should be able to have a field day. Added to this mix will be the accusation that the Liberal Democrats are no different from the "slash and burn" Tories. Or, put another way, rather than moderating the Tories, the Liberal Democrats have given in to them in return for a few ministerial Mondeos.

And at the back of all this, the longstanding Tory dogmas that people should get on their bikes to look elsewhere for work and that there is nothing wrong with becoming a nation of hairdressers are likely to fall on increasingly deaf and unreceptive ears. To many, it will look like the new face of the Tories under Cameron is pretty much the same as the old one under Thatcher.