The British Chambers of Commerce (BCC) is warning that planned changes to UK steel quotas could add millions of pounds to manufacturers’ costs, Kallanish learns.
In a letter to UK business secretary Peter Kyle, the BCC has said the proposed regime risks creating “real financial and logistics problems” for downstream industries. These include construction, engineering and manufacturing, which rely heavily on imported steel products that cannot be obtained domestically.
The reduction in quota allowances and increase in the above quota tariff is “creating a double hit for firms already grappling with high costs and fragile supply chains,” it adds.
The letter warns that policy decisions appear to favour primary steel production at the expense of manufacturers who depend on imports of the metal to remain competitive. It also points to a lack of any formal impact assessment of the changes on downstream users of steel.
The BCC adds that some manufacturers face millions of pounds in additional costs if quotas are exhausted and warns of disruption if production is halted where specialist steel grades are unavailable domestically. It also warns that firms could be left with little choice but to source steel from “cheaper, less sustainable overseas suppliers”, which would undermine the UK’s decarbonisation ambitions and encourage offshoring of production.
William Bain, head of trade policy, BCC, says: “The government rightly takes the protection of domestic steel production seriously, and action by both the EU and US on tariffs means the status quo is unsustainable. But there is a serious risk of unintended consequences from its tariff and quota proposals which could harm the UK’s manufacturing base at a critical time.”
He highlights the impact of the Middle East conflict and soaring energy prices on the economy, and says the changes will increase costs for firms who imported steel products that are not produced domestically.
“The scale and speed of the quota reductions, combined with steep tariff increases, will create a perfect storm for key supply chains. Many companies are already warning they will lose competitiveness, cancel orders or relocate
“Without intervention, we risk undermining both our industrial strategy and our net zero objectives. Ministers must act quickly to rebalance the proposals, so they support the entire steel ecosystem, not just a part of it,” he concludes.
The BCC has proposed that the scale of the quotas is reduced to align more closely with international partners, while also lowering or phasing in the 50% above tariff rate. It additionally calls for transitional easements for existing orders to be extended from three months to at least 12 months. It is also seeking the publishing of a full impact assessment on downstream sectors and adds that work should be accelerated towards a UK-EU agreement to remove tariffs on steel trade.
Author: Carrie Bone
