Steel Yourself

Over the past week steelworks in the UK have ceased production one after the other. First SSI in Redcar, then Caparo and Tata Steel. The basic reason for this is that the global price of steel has fallen significantly from $500 a tonne when SSI spent £1bn on taking the Redcar plant it acquired from Tata out of mothballs five years ago to $300 a tonne now. Even without looking at the economics in any detail that sort of a price crash in such a short period of time would cause any business serious difficulties and even more so in an industry for commoditised products with typically low margins like steel.

Many commentators have said, “surely something can be done”. Britain has a long and proud industrial tradition in the manufacture of steel. Middlesbrough even briefly had a league football club called Middlesbrough Ironopolis and at one point produced more steel than the rest of the world combined. It seems wrong that apparently at the stroke of a liquidator’s pen so much history and so many jobs could vanish. While it seems that Tata Steel will be mothballing its remaining plant (as it did with Redcar in 2008*), the furnaces have been switched off at Redcar. This means that they cannot subsequently be restarted so this really is the end for much British production. But, the sad reality is that there is probably nothing which can be done quickly enough to save production, jobs and heritage, even if the money could be found to support the steel industry until global prices rose sufficiently to make it viable again (and that itself is unlikely to happen while there is substantial overcapacity elsewhere in the world).

However, even if there were the means for the government to afford to rescue British steelmakers, there’s a bigger obstacle in the form of the EU State Aid rules. In brief, these prohibit the provision of state support where that could distort competition. In a market economy that means that bailing out bankrupt businesses is almost always prohibited. There are provisions for notifications of proposed aid to be made to the European Commission to seek approval and these have, for example been used when RBS and Lloyds/HBOS were rescued during the crash of 2008. The approvals granted then were subject to significant conditions involving divestments of profitable parts of the business and spinning off divisions which had too large a share of the market. These were then updated later in the process of nursing those banks back towards health to include prohibitions on paying out dividends.

Well, why not provide aid to the steel companies and have some conditions like this? Unfortunately, steel has been considered a special case, along with coal, since the European Coal and Steel Community (ECSC) Treaty of 1952 which predated the Treaty of Rome establishing what is now the EU (the existence of this treaty and the community it established is the reason you sometimes still hear references to the European Communities rather than European Community, ECSC, the European Atomic Energy Community and the EEC were merged in 1965 and the UK joined the merged Community in 1972). The ECSC Treaty arose in the aftermath of World War II and specifically sought to create a single market across its signatory states for coal and steel. The reason for this is that coal and steel were at the time the raw materials for the building of national military strength. By looking at capacity requirements on a transnational basis the thinking was that it would not be possible for any country to ramp up production in preparation for building a load of tanks, planes and warships as had occurred prior to both World Wars. Article 4(c) abolished and prohibited “subsidies or state assistance… in any form whatsoever” and the Treaty more broadly set out the basis for competitive markets in coal and steel to operate in the absence of such subsidy.

The ECSC Treaty expired after 50 years in 2002 and the case law and guidance which had built up over the previous 50 years on what was covered by the prohibition of subsidies was summarised in the Commission’s Notice under EU law of 19 March 2002. This was titled “Rescue and restructuring aid and closure aid for the steel sector” and covered two different scenarios. First, the rules to apply in respect of aid for rescuing or restructuring steel firms in financial difficulties and second, the rules in respect of assisting steel workers who lost their jobs when steel works closed.

Article 1 of the Notice concludes:

“In these circumstances [referring to prior decisions], the Commission considers that rescue aid and restructuring aid for firms in difficulty in the steel sector …are not compatible with the common market.”

Under the EU State Aid laws, it is up to the Commission to decide, where a proposed aid package is notified to it (such as with RBS), whether that aid package is “compatible with the common market” and therefore can be approved. This Notice makes it clear that the Commission does not have any power to determine whether aid to bail out a steel company is compatible with the common market by deeming that it never would be. Although the Notice expired in 2009, this is very unlikely to make any difference at all to the position because the previous history of the industry and its regulation by the Commission is so clearly against the provision of such aid in any circumstances. The Commission would technically have discretion to consider a notification, but it is difficult to see how it could conclude that aid of a form which had been prohibited for 57 years could now be seen as compatible with the common market. This can be simply illustrated by putting yourself in the position of say a German steel maker which had managed to remain solvent despite the drop in steel prices. That business would rightly feel aggrieved that the reward for having run itself so as to be able to bear a 40% drop in steel prices was to find its British competitors being given a handout to let them carry on trying to win business from them. 

So, why not do as Nigel Farage suggested and simply ignore the EU rules? After all, apparently we Brits are far too overzealous and scrupulous about complying with them, whereas those perfidious Europeans simply ignore them if they aren’t in their national interests. The problem here is that the sanction for illegal state aid is that the amount provided has to be repaid immediately and in full. As the businesses in question here are bankrupt, if the aid is considered to be a loan which is repayable when the ECJ gets round to making an order, the value of those loans would have to be calculated on the basis of the sort of interest rates which a significantly distressed borrower might have had to pay (ie a very high interest rate!). It is not too fanciful to imagine that SSI, Tata and Caparo would not wish to borrow at those sorts of rate and so would not accept an offer of aid, which is probably why one thing which has not been reported is any of those companies complaining they couldn’t get any financing from the government. It is also worth noting that when in 1993 the Italian government wanted to write off €4bn of debts for the Italian steelmaker, Ilva, as part of the preparations for privatisation this was blocked by the Commission. This is also noteworthy because investment by a state in a nationalised industry with the intention of maximising the return on privatisation is something which is generally allowed as long as that investment is proportionate to that aim.

An alternative might be to nationalise and then pump whatever was needed in. At least this would in theory take away the risk to the business of repayment, right? No, unfortunately not, the Commission isn’t that stupid! It would be as if after the government bailed out RBS it was told it was not allowed to guarantee its massive debts. Instant collapse of RBS. Or here, instant collapse of “National Steel”. At the moment, the Commission is in fact investigating a complaint about the aid Italy has given to Ilva this year (Ilva having been renationalised in January to protect it from the consequences of breaches of environmental law) so nationalisation is no magic bullet either,

In summary, while remaining in the EU, the state bailing out the steel companies is not an option. It probably wouldn’t be an option even if we were outside the EU as enabling them to export steel at market price while it cost 40% more to produce would be a pretty clear violation of the anti-dumping rules, but that is another set of laws entirely (as is the question whether the global market price has been artificially depressed by the Chinese or Russians subsidising exports – which might in theory provide a defence were either of them to bring an anti-dumping case against a hypothetical non-EU UK). The best we could do would in those circumstances would be to require the use of domestically produced steel by British users of steel for products which were not to be exported.

Sadly, those who think more could be done are I think indulging in wishful thinking.

* After Redcar was mothballed in 2008 I advised various public sector funding bodies and possible users of the site on what uses for the facilities could be supported by the state without falling foul of the State Aid rules. From memory, these were largely confined to using the testing and laboratory facilities to develop new product prototypes and research rather than any form of commercial production. I did enjoy a few Parmos while taking the bracing sea air though. 

Botzarelli’s Third Law

There’s a lot of talk these days, particularly with respect to politicians and public figures about authenticity. What does it mean? I’m not sure it means much more than just acting normal. What does that mean? This is where my Third Law comes in to help.

“Almost everybody thinks their life is normal. Not that it is the same as everybody else’s but that it is ordinary. And almost everybody is right when they think that.”

Of course, some people have completely unusual and obviously extraordinary lives. Some of them can’t really avoid this – for example, the Royal Family are born into very peculiar circumstances which they have little real way of changing. But even they don’t have to be so different in their private lives as can be seen by the sheer cringeworthy embarrassment of the details of Charles and Diana’s accounts of their relationships or on a happier note, the very natural way in which Princes William and Harry talk of the Queen as their grandmother. Others choose to design extraordinary lives for themselves, particularly professional celebrities who deliberately turn their lives into public soap operas with differing degrees of stage management and artifice. Some are better at this than others – Jordan is the consummate professional at this, as are the Kardashians. Peter Andre and Kerry Katona on the other hand can’t stop being themselves or letting this break through the facade of PR gloss. 

But, once you get onto pretty much everyone else, the reality is that behind closed doors their lives (rather than the jobs they do) are ordinary to them. Whether you are very wealthy or desperately poor, most of the time I don’t think you spend a lot of effort ruminating on that but on the relationships you have and the pleasures and pains that life visits on you in reality. Life would be largely intolerable otherwise. We all get ill, fall out with people, fall in love, fight, get bereaved, worry about our children, laugh with friends, enjoy our leisure activities and all the other petty things that make up ordinary everyday life. If someone we are close to dies the grief we feel is not greater or less if they or we are rich or poor. The joy of the Kolkata street children on winning a game of cricket improvised on a street with a running sewer is not different in kind to that of the Etonian hitting the winning runs against Harrow at Lords.

None of this means at all that there aren’t differences and that we shouldn’t try to improve people’s material position or support the vulnerable. Rather that it is dangerous to start to think of there being only one way of being authentic and normal and that those whose lives are not like ours are somehow not normal or could not understand ours just because we refuse to understand theirs.

If you observe Botzarelli’s Third you can avoid the peril of seeming odd because it is the key to how to act normal. People who have to try to act normal almost invariably come across as odd. You can only act normal if you are a very good actor and few really are – in Jon Ronson’s book, The Psychopath Test, he interviews a psychopathic prisoner who comes across as incredibly normal and reasonable, but it is that which is the real giveaway. Everyone else, in attempting to act differently in presenting themselves as themselves will just emphasise what others might already have thought made them a bit unusual. That’s why the more poor Ed Miliband tried to look and sound what he had been told was “normal” the less like himself and the more peculiar he looked and sounded. And its why the actually quite odd Boris Johnson can “get away” with looking and sounding odd because he doesn’t seem to try to be any other way and it is hard to imagine him in private stopping looking and sounding like an overgrown and unruly schoolboy. It’s also why I think it’ll be a mistake if Jeremy Corbyn really does spend a lot of time trying to persuade people he really does love Britain in his first Labour Conference leader’s speech later today rather than just shrugging it off.

Don’t act normal, just be.

Now then, Now then, Brentford 

 One of the “advantages” of living so far away from  Brentford is that the same away games each season form the majority of the games I see. This does allow at least for me to make comparisons between them from season to season and therefore to see how we have progressed (eg against Sheffield United from here to here). Or not. There was a big difference between the 1-1 draw against Leeds at Elland Road we managed in League 1 under Andy Scott and the 1-0 victory last season in the Championship. In the former, we were still a small club, just back up from League 2 and pleased to be able to come away with a point from such a big name club on its way back to promotion to nearer its more natural home and a promised land which had evaded us for all but one season in over 50. In the latter, just before the revelations of the imminent parting between the club and its most successful post-war manager, we had, for once, genuine cause to believe that we could not only match such illustrious clubs but be on a trajectory to pass them.

Since then, there has been a great deal of upheaval with not just Mark Warburton and the management team departing but also many players. Only four of the Brentford players who appeared in that game a mere 7 months ago are still at the club. And, while Leeds continue to live in the past, particularly with their risible “Champions of Europe” chant, and indeed in Brentford’s past with the appointment of Uwe Rosler and the acquisition of Stuart Dallas, they have progressed too. So, this afternoon was an interesting first look for me not only at the new Brentford in its early stages but also a chance to reflect on the old.

  – Lasse Vibe making a charge but who’s there to pass to?

In terms of the past, Rosler set Leeds out in his typically cautious fashion. This was reasssuring as one of the many things it seems Brentford has needed to do this season is to tighten up defensively – too many goals were conceded weakly last season in the entertainingly cavalier set up under Warburton which relied on continually pressing forward but this season, with the absence of the unseen work of Douglas, from reports it has sounded like we’ve been too weak in midfield to provide the cover to the back four that solving that problem demands. So it was unsurprising to see a very defensive midfield trio of McCormack, Diagouraga and Kerschbaumer and it was also pleasing in the first half to see this negate the prospects of any real threat from Leeds. 

Another worry has been the loss of the scorers of about 70% of last season’s league goals. While that is pretty much the proportion of the goalscorers from our League 1 promotion season who moved on before the beginning of last season so that we at least have a precedent for our ability to absorb such a turnover, until the newcomers have showed they can score with similar regularity, it will remain a concern. Our front three in the new 433 formation which replaced the 451 possibly adopted due to the necessity of living with only a single effective striker last season, lined up as Judge, Djuricin and Vibe. Djuricin was making his debut on season long loan from Red Bull Salzburg and was particularly interesting to see because it seems that his was one of the transfers which the club wanted to make last January but which were rejected by Warburton. If he turns out to be a donkey, the plethora of voices on facebook castigating owner, Matthew Benham, for not abandoning his own strategy for the club and giving Warburton his head, will have a big glass of “told you so”.

Thankfully, Djuricin looked to me like precisely the sort of traditional, strong, striker with an instinct for goal that we possibly haven’t had since the days of Bobby Taylor. It was he who scored Brentford’s goal and could have had at least another couple. His final act before being substituted in the second half was to hit the post with a neatly directed shot. If he carries on as he did today, I think he could be an excellent signing. Vibe, the Danish international, also impressed with tireless running down the wings and it was clear from the post-match interview with Uwe Rosler and the many Leeds fans’ messages into BBC Radio Leeds that Leeds could not cope with either him or Judge.

Unfortunately, I was much less impressed by Hofmann who came on for Djuricin. Indeed, I have to say that to me he had rather too much of Nick Proschwitz about his performance today at least until he did what strikers should do, and so rarely seem to for us, and ghosted ahead of the pack at a corner and hit a chance tantalisingly wide. But the rest of the time, he was the missing striker in the photo above, undoing the work of Vibe and Judge in unflattering contrast to Djuricin. I was unsurprised when he was himself substituted, although it was evidently for an injury as he appeared to have his arm in a sling. That did, however, give the opportunity to see the 18 year old Liverpool loanee Sergi Canos who looked very lively and an exciting prospect. But, unfortunately, as a winger, he was probably not what we needed in the final moments having conceded an equaliser.

The equaliser had come, almost inevitably, from Dallas capitalising on a slip in midfield as we sought to play the ball out from the back and the ball then being played to Antenucci who had come on in the second half in an uncharacteristically attacking move for Rosler (much of the post match radio comment from Leeds fans focused on the disappointment of them playing 451 with the lumbering Wood up front on his own against our decent centre backs).

More disappointingly, the error which led to this was of another of our new signings, Ryan Woods, described by fans of his former club, Shewsbury, as the ginger Pirlo. He had come on a few minutes earlier for his debut replacing McCormack in defensive midfield, with McCormack moving to right back as Odubajo’s replacement, Maxime Colin, went off. I thought Colin had a good game and looks more of a natural defender than Moses. The back four do now seem to have the makings of a solid and settled unit.

Woods’ first touch was a Pritchard-esque backheel flick over his shoulder and there were plenty of signs of his wanting to be at the centre of things and pinging passes round the ground. Unfortunately, he still on this showing has a little way to go to adjust to the pace and intensity of Championship football and to develop the understandings with his team mates to allow him to do what he seems capable of. I hope that my fellow fans will give him the opportunity to do so rather than turn into boo boys for the loss of two further points we deserved to have won.

Next stop, Middlesbrough, and with it, the biggest test of how and whether we have progressed since last season. If we can compete at all at the Riverside on Tuesday, it might just start to help those who hanker for the world which disappeared just after we last played Leeds to see why the changes have happened. It’ll take longer and a lot more points for them to like it, but it’ll be a(nother) start.

A final word about Uwe Rosler. I was not one of the fans who got particularly upset when he left us midway through our last season in League 1 for the bright lights of Wigan. Yes we have some big new ambitions and most of us (and most importantly, our owner) believe in them and will be doing what they can to achieve them, but going to a club that had only just come down from the Premier League and was the reigning holder of the FA Cup was a good move. I can’t blame him for it and was even prepared to put the underhand way in which Forshaw was lured there down more to the unpleasant owners of the club than Rosler himself.

However, after his fist pumps and celebrations directed at the Brentford fans when Leeds equalised, frankly I’m out of reasonableness. He’d have been within his rights to celebrate with the 25,000 Leeds fans who had, to their credit, not got on his or his team’s back despite them trailing to us. But goading us? That puts him only a couple of rungs up from Martin Rowlands’ badge kissing. Sorry.