Unions warn over massive job cuts at British Steel

Soaring pound puts as many as 10,000 workers at risk

Union leaders warned British Steel last night that they would resist any compulsory redundancies as the company prepared to spell out its plans for 5,000-10,000 job losses over the next five years.

At a meeting with senior British Steel executives in London today, the unions will be told that job losses will need to rise "significantly" from their current level of 1,000 a year if the company is to maintain its competitiveness in the face of the strong pound and cheap imports.

Meanwhile, a Labour MP, Dennis McShane, blamed the cutbacks on the Chancellor's "incompetence in managing the value of sterling" and claimed that the job losses could hit nearly 100 constituencies, some of them marginal Tory seats.

City analysts estimate that about pounds 100m is wiped off British Steel's profits for every 10-pfennig rise in the value of sterling against the German mark, the currency in which steel is traded in Europe.

Profits for the year to the end of March are set to tumble from pounds 1.1bn last year to about pounds 400m-pounds 450m as the pound has appreciated by more than 10 per cent against the mark and some analysts are pencilling in profits for 1997/98 of just pounds 150m.

A British Steel spokesman said that it had originally planned to introduce the job losses over a four to eight-year period as part of a wider cost efficiency programme, but they had been brought forward because of the exchange rate threat to its competitiveness.

He stressed that none of the group's four integrated steel plants - Llanwern and Port Talbot in South Wales, Scunthorpe and Teesside - nor its engineering steels division in Rotherham was threatened by closure.

But he could not rule out forced redundancies: "Initially, the job cuts will be sought through voluntary means but inevitably there will have to be some compulsory redundancies," he added.

The unions were forewarned of the cutbacks in a letter from the British Steel chairman, Sir Brian Moffat, and will be formally notified of the plans today. The Amalgamated Engineering and Electrical Union's national officer Bob Shannon said it would seek urgent clarification of the job losses, adding: "We will resist any attempt at compulsory redundancies."

Keith Brookman, general secretary of the Iron and Steel Trades Confederation, said: "We are extremely concerned about the effects that unfair, illegally subsidised imports and the rising strength of the pound are having on British Steel's profitability and the knock-on effect that has on jobs." Mr Brookman said the union has been given no specific details of job losses.

Mr MacShane, the Labour MP for Rotherham, called for an urgent meeting with the Chancellor to discuss ways of stopping the wild rise and fluctuations in sterling which were threatening mass job losses. "Ken Clarke has deliberately chosen to let sterling rise to help fuel his pre-election boom," he added.

British Steel has been warning for some months about the threat to profits from the pound's rise. In 1995/96, the average pound/mark exchange rate was DM2.25 but in the current financial year it has averaged DM2.45 and may well be higher in the coming year based on the present level of sterling.

About 30 per cent of British Steel's pounds 8bn revenues are directly or indirectly in marks. But the group estimates that four-fifths of its sales are affected by the value of the German currency because it determines how competitive British Steel is against continental imports in the UK market, where the company's share of sales is around 60 per cent.

The strength of the pound also affects the competitiveness of British Steel's customers, particularly those in the car and engineering industries.

However, a strong pound also has a beneficial effect by making it cheaper for British Steel to import raw materials such as the iron ore and coking coal which are priced in dollars. Against this it also now generates 20 per cent of its annual sales in dollars.

The company stressed that the efficiency programme would not just centre on job cuts. The group is also looking at ways of improving raw material procurement and its use of information technology.

Merrill Lynch recently cut its 1997/98 profit estimate from pounds 650m to pounds 280m, based on an average pound/mark rate of DM2.60 throughout the period. Other City forecasts are pitched at around pounds 300m to pounds 400m.

British Steel's fluctuating fortunes

Profit Output W/force Market DM/pounds

(pounds m) (m tonnes) share (UK)

1992-3 (149) 12.5 46,000 56% 2.85

1993-4 80 12.7 41,000 56% 2.40

1994-5 578 13.4 40,000 56% 2.50

1995-6 1,102 15.6 50,000 58% 2.25

1996-7* 400 16.0 54,000 60% 2.45

*estimated

Other victims of the pound Vickers

Sir Colin Chandler, the chief executive, predicted the strong pound could knock pounds 7m off the group's profits this year. Some of Vickers' hedging against currency fluctuations ran out last year. Sir Colin said he had asked his divisional managers to mitigate sterling's rise with strategies such as price cuts in certain markets.

LONRHO Lonrho has warned that the strong pound, combined with falling precious metal prices, could lower half-year profits by one-third. That would imply a profit fall of about pounds 19m from the pounds 58m it made in the first half of last year. Lonrho is one of the world's largest producers of gold and platinum. Gold prices are down from $415 an ounce in February 1996 to $351.

KINGFISHER Analysts said that the strong pound could knock 10 per cent off profits at the French group Darty, Kingfisher's electrical retail subsidiary this year. Profits at Darty were flat at pounds 113m last year in local currency terms. It was the only Kingfisher division not to produce record profits. ICI

ICI said that if the pound stays at its current levels it will knock pounds 80m-pounds 90m off profits this year. Sterling's strength cost ICI pounds 15m in the final quarter of 1996 but the impact for the year as a whole was negligible. The group says that every one cent rise in sterling against the dollar knocks pounds 5m off profits.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
life
Arts and Entertainment
Cold case: Aaron McCusker and Christopher Eccleston in ‘Fortitude’
tvReview: Sky Atlantic's ambitious new series Fortitude has begun with a feature-length special
Voices
Three people wearing masks depicting Ed Miliband, David Cameron and Nick Clegg
voicesPolitics is in the gutter – but there is an alternative, says Nigel Farage
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
News
i100
News
people
ebooks
ebooksA special investigation by Andy McSmith
Sport
Chelsea manager Jose Mourinho
footballThe more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Life and Style
Vote green: Benoit Berenger at The Duke of Cambridge in London's Islington
food + drinkBanishes thoughts of soggy school dinners and turn over a new leaf
News
Joel Grey (left) poses next to a poster featuring his character in the film
peopleActor Joel Grey comes out at 82
News
i100
News
business
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee