24 January 2024

If Port Talbot steelworks goes under, what next?


Tata Steel’s plans to cut 2,800 jobs at its Port Talbot site is a devastating blow to the people working in those roles, their families, and the local community. These are highly skilled and hard working people who will find themselves out of work through no fault of their own. This means there will be calls for the government to step in with extra funding or even nationalise the steel works and perhaps the entire steel industry in the UK. 

While we shouldn’t normally try to protect businesses and industries, I think there is a case for the government being more proactive in this scenario. Jobs in advanced manufacturing do tend to be highly productive and so it is worth trying to preserve them if possible. Moreover, given how unstable the world currently is we might find ourselves in a situation where we have to massively increase the production of military equipment and vehicles of which steel would be a core component. 

What is more, UK steelworkers are not facing losses due to any fault of their own. They face crippling energy bills and are undercut by producers in countries like China with unfair trade practices. As such, I think there is an argument to be made that this is one of the rare occasions where the government should intervene in some way.

Nationalisation or a huge increase in subsidies would not be appropriate and would ultimately be a waste of taxpayers’ money. However, the government should look at providing support with energy bills while expediting the introduction of the Carbon Border Adjustment Mechanism as Dillon Smith argued on these pages yesterday

However, what I am more interested in thinking about is what happens if Port Talbot does lose the steel works. What comes next?

It will be tempting for whoever is in charge to think up some grand (and very expensive) plan to regenerate Port Talbot or incentivise companies to set up base there. While there is nothing necessarily wrong with that, it would still be the wrong approach.

Instead, the government should focus its efforts on allowing nearby Cardiff and Swansea to grow which would not only benefit those cities and Port Talbot, but the whole of South Wales as well. 

Cardiff and Swansea are excellent cities and have so much potential. Unfortunately, they are not as successful as they could be and this is down, in part, to the fact that they are smaller than they should be. I experienced this first hand when I went to see My Chemical Romance with a friend in 2022. Although the band was performing in Cardiff, we had to stay in a hotel in Swansea as everywhere had booked up so quickly. Cardiff and the surrounding area descended into chaos as there was also an Ed Sheeran concert that night. The roads and railways struggled to get people to and from the city, the pubs, bars, and restaurants were all overcrowded, and there was nowhere to sleep. 

Given that Cardiff routinely hosts major sporting and music events, this is a regular issue for the city. Not only is it annoying for local people who see their lives disrupted, it means that local business owners and potential entrepreneurs are missing out on custom. There is clearly the demand for new hotels, pubs, bars, clubs, and restaurants in Cardiff, but unfortunately there simply isn’t the supply. 

The government needs to urgently liberalise the planning system to make it easier to build more homes, hotels, pubs, and other venues in Cardiff and Swansea. The economic benefits for these cities are obvious. However, it will also provide a boost for nearby communities such as Port Talbot. This is because we know that highly productive cities tend to spread wealth and opportunities to nearby towns. Conversely, if a city is unproductive then so is the surrounding area.

The local universities could also play an important role in bringing new economic life to Port Talbot. Swansea and Cardiff Universities should be given money to expand and to accept more students while being incentivised to build student halls or perhaps an entire campus in or near to Port Talbot. Universities have a positive impact on their local communities and not only provide jobs in the universities themselves, but also support jobs in other industries.

Allowing Cardiff and Swansea to grow will not be enough. It is no use producing all these new jobs and opportunities if people in Port Talbot and the other neighbouring towns can’t access them. The government needs to urgently invest in the roads and the railways in order to connect the people of South Wales to its major cities.

We do not know what the future will be for Port Talbot and its people. If it is one without steel then we must prepare now. The planning system needs to be liberalised to allow Cardiff and Swansea to grow, the universities need to expand, and the transport infrastructure must be upgraded. Doing so can help to ensure a brighter future for the workers and community of Port Talbot.

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Ben Ramanauskas is Research Fellow at Oxford University.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.