Читать книгу From Empire to Europe: The Decline and Revival of British Industry Since the Second World War - Geoffrey Owen - Страница 36

In the years leading up to the First World War the British steel industry was exporting some 40 per cent of its production, and its prosperity was linked to the continued expansion of world trade. In the aftermath of the war prospects for demand at home and abroad looked good, and competition from the Continent seemed likely be less severe than before the war. The return of Lorraine to France under the terms of the Versailles treaty deprived the German steel industry of most of its ore mines and part of its steel-making capacity; it would take several years before production and exports got back to pre-war levels. But the brief post-war boom collapsed in 1921, and the British steel industry was plunged into one of the worst recessions it had ever experienced. Moreover, at a time when protectionist pressures were spreading around the world, Britain was still a free-trading country, and a natural outlet for steel which Continental and American producers could not sell at home.

By the mid-1920s it was clear that steel-making capacity in Britain was far in excess of likely demand. Rationalisation, involving the closure of smaller works and the concentration of production in more modern facilities, was widely agreed to be necessary. A few amalgamations had already taken place – the most important was the creation of United Steel Companies in 1920, bringing together a group of firms based in Sheffield, Lincolnshire and Workington – and merger activity quickened in the late 1920s as the outlook for demand worsened. As in the case of cotton textiles, Montagu Norman, governor of the Bank of England, took an active interest in the reorganisation of the steel industry, partly because he was anxious to avoid direct intervention by the government.¹⁶ In 1927 the Bank helped to set up English Steel Corporation, which pooled the steel-making interests of the three major armaments manufacturers, Vickers, Armstrong-Whitworth and Cammell Laird. Several more ambitious proposals were canvassed, but the companies concerned were reluctant to give up their independence. In the north-east, for example, the logic of combining Dorman Long with its near neighbour on the River Tees, South Durham, was accepted by both sides, but the financial complexity of the proposed merger, together with the difficulty of reconciling a large number of sectional interests, proved an insuperable obstacle.

The issue of rationalisation was closely bound up with protection. The steel-makers argued that there was no incentive to modernise and re-equip as long as other countries were free to dump their surplus steel in Britain. This case was considered in 1929 by a government committee chaired by Lord Sankey. The committee agreed that rationalisation was needed, but rejected protection on the grounds that it would keep inefficient producers alive; the pressure on firms to participate in mergers would be reduced if a tariff was introduced.¹⁷ However, by the time the committee reported, the world depression was deepening and demands for protection were becoming irresistible. A general tariff of 10 per cent was introduced in 1932, but steel was deemed to be a special case, justifying a higher duty of 33⅓ per cent.

The government hoped that the introduction of the tariff would produce a more stable environment in which industries which were suffering from excess capacity could reorganise themselves. A committee of civil servants, the Import Duties Advisory Committee (IDAC), was set up to supervise the industries concerned and to ensure that rationalisation took place. This was a new departure in government policy, a shift from Victorian laissez-faire to regulated competition based on a partnership between the state and industry. To make the partnership work, stronger trade associations were needed to exert tighter control over individual firms and to act as interlocutors with the government. The British Iron and Steel Federation was formed in 1934 to take over some of the authority previously exercised by regional trade associations. One of its tasks was to operate a price maintenance scheme under the supervision of IDAC. In 1935 the government encouraged the Federation to join the International Steel Cartel, which had been formed by the leading Continental steel-makers two years earlier.

Part of the purpose of these arrangements was to facilitate rationalisation, but neither the Federation nor IDAC had the power to enforce mergers, and only limited progress was made. In Scotland Colvilles acquired several smaller firms and by the end of the 1930s this company controlled about 80 per cent of the region’s steel-making capacity.¹⁸ There was also some consolidation in the South Wales tinplate trade under the leadership of William Firth, chairman of the largest producer, Richard Thomas. But these moves fell short of the sweeping reorganisation which many observers felt was necessary, and by the time of the Second World War the industry was only slightly less fragmented than it had been twenty years earlier. The three largest firms – United Steel, Colvilles and Dorman Long – each accounted for 12–13 per cent of the industry’s production.

The slow pace of rationalisation appeared to confirm the views of those who had warned that the reduction of competition, through tariffs and cartels, would preserve the status quo. But the steel-makers were not necessarily wrong to take a cautious view of what mergers could achieve. To have embarked on large-scale amalgamations in the depths of the Depression would have been extremely risky; it was impossible to predict the revival of demand that occurred, mainly because of rearmament, in the second half of the 1930s.¹⁹ Moreover, the industry’s inter-war performance cannot be judged simply on the basis of how many mergers took place. The most encouraging development was the willingness of several firms to launch ambitious investment projects. Stewarts & Lloyds, the steel tube manufacturers, built a large integrated works at Corby in Northamptonshire to exploit the East Midlands ore fields. Richard Thomas installed Britain’s first continuous wide strip mill at Ebbw Vale in South Wales. This was a new process which had been developed in the US to produce sheet steel on a large scale, principally for cars, domestic appliances and the canning industry. The British motor industry grew rapidly during the 1920s, partially offsetting the decline in traditional steel-using industries such as shipbuilding, and William Firth believed there was sufficient demand to support at least one wide strip mill; his persistence eventually overcame the opposition of other steel-makers to the project.²⁰ Work on a second strip mill, at John Summers’ Shotton works in North Wales, began in 1939.

These projects contributed to a partial modernisation of the industry. There was modernisation, too, in management and organisation. Although many of the leading firms continued to be controlled by the owning families, professional managers were playing a larger role. For example, Robert Hilton, appointed managing director of United Steel in 1928, was a capable engineer who reorganised what had previously been a loosely run group, and under his direction United Steel became the best-managed firm in the industry; Hilton had previously been in charge of Metropolitan Vickers, one of the leading electrical equipment manufacturers. Another outstanding manager was Allan Macdiarmid, who joined Stewarts & Lloyds as a chartered accountant in 1909, was appointed company secretary, and worked his way up to become chairman. He steered Stewarts & Lloyds into a dominant position in the steel tube trade, supported by low-cost steel-making at Corby.²¹ Macdiarmid was one of several ex-accountants who rose to senior positions in industry during this period.²²

Meanwhile the German steel industry, which had been a formidable rival in export markets before the war, faced great difficulties in the inter-war years. To make up for the loss of Lorraine, a large capital spending programme was set in train in the Ruhr, but the expansion went too far, and by the mid-1920s action was needed to reduce surplus capacity. In 1926 twelve firms came together to form a giant steel trust, Vereinigte Stahlwerke (Vestag), controlling about half the industry’s production. Thyssen was the prime mover behind this enterprise, which was modelled on United States Steel Corporation and partly financed by American capital.²³ The aim was to cut out duplication and close down obsolete plant. But, although some rationalisation was carried out after the merger, the concentration of the industry did little to improve its competitiveness. With fewer firms to keep in line, cartels were easier to enforce. The absence of price competition, together with continuing protection against imports, weakened the incentive for firms to specialise in the products where they had the lowest costs. When demand recovered in the second half of the 1930s, the priority was to maximise production from existing plant. Of the 418 rolling mills which were operating in Germany at the end of the decade, 300 had been built before the First World War; only one wide strip mill was built, at Dinslaken in the Ruhr.²⁴

TABLE 6.2 Steel production 1913–39

The inter-war period checked the advance of the German steel industry and allowed British steel-makers to recover some of the ground they had lost before 1914. Although the average size of German plants was slightly larger than in Britain, there was no great difference between the two industries in terms of overall productivity.²⁵ The productivity leader, by a wide margin, was the US. Not only was the US the largest steel-making nation (TABLE 6.2), with opportunities for economies of scale which were not available in Europe, but American steel-makers also benefited from the presence of a dynamic, technically demanding and fast-growing customer, the motor industry. By the end of the 1930s there were twenty-eight continuous wide strip mills in operation in the US.

To get closer to the American level of efficiency, European steel-makers needed a market as large and competitive as that of the US. As it was, the proliferation of cartels and tariffs limited the scope for intra-European trade in steel, and made the larger European industries more dependent on their domestic markets. In the British case, thanks to the system of imperial preference introduced after the Ottawa conference in 1932, the steel-makers had access to partially protected Empire and Commonwealth markets; this provided a useful addition to demand, although exports amounted to only 12 per cent of production during the 1930s. The British steel industry was largely insulated from international competition, but this was also true of Germany, where there was a much longer tradition of tariffs and cartels.

Steel is not an industry where the legacy of the past imposed a uniquely heavy burden on British manufacturers. All the European steel-making countries would have an equal opportunity to narrow the productivity gap with the US when the external environment became more favourable. How quickly they did so would depend, not on history, but on the policies adopted by companies and governments after 1945.