Outlook: Nonsense from John Redwood

BRITISH STEEL has quite enough problems to deal with as it is, what with the Far East and the high pound, so the last thing it needs is a bit of Vulcan support from John Redwood. The shadow trade and industry secretary yesterday depicted the company as a sad and down-trodden victim of Labour economic policy. Job losses at British Steel are typical of what is happening to UK manufacturing, he ranted, inexplicably throwing a condemnation of Labour's "vindictive attacks on savers" into the same sentence.

The Government should say sorry and change policy, he screamed. Just what can he mean?

Rather than worrying about BS's vulnerability, Mr Redwood should instead be marvelling at the robustness of the world's number five steel producer. BS is a success story that ranks alongside the very best of Mrs Thatcher's privatisations. Let's go back in history.

In 1980, British Steel entered the Guinness Book of Records for being the largest loss-making enterprise the country had ever seen: it lost pounds 1.7bn in 1979-80 alone. By that stage, the company was already shedding jobs at a pace of knots, but it still took 150,000 of them to produce 17 million tonnes of steel.

Now, nine years after privatisation, British Steel is still producing 17 million tonnes of steel a year, but it does so with a workforce of fewer than 48,000. Four or its original five plants - Port Talbot, Llanwern, Scunthorpe and Teesside - are still in production and performing well.

Nobody likes job losses, but they are, in this day and age, a necessary part of staying competitive, as Mr Redwood must know. British Steel is now one of the very few manufacturing industries in Britain whose levels of productivity and profit compare favourably to its Continental peers.

Since commodity steel is priced in deutschmarks, there are few other industries quite as sensitive to the vagaries of the exchange rate as this one.

However, even after pounds 500m of exchange rate losses, BS's chairman, Sir Brian Moffatt, has still managed to produce pre-tax profits of pounds 315m this year and keep the dividend fixed at 10p per share.

He is able to do so because BS has taken steps to ensure it is competitive even at a very high exchange rate.

Would that other manufacturers were productive enough that they didn't have to be supported by an artificially depressed currency. Sir Brian never did hold politicians in high regard and his view can only have been strengthened by Mr Redwood's nonsensical utterances.