I am sure I am not the only one who is horrified to see the sudden and rapid decline of the steel industry, but it shows just how fragile things can be.
Not too long ago steel making in this country was robust and families that had been employed at plants for generations were confident of their future employment.
But then the Chinese economy started to falter and construction slowed down. However, like something akin to the sorcerer’s apprentice, steel kept being churned out in China.
I have enormous sympathy with those about to lose their jobs, especially when they saw the welcome the President of China, Xi Jinping, received from dignitaries and ministers. I am not sure how much benefit we received when China was enjoying the boom times but there is no doubt it is causing us to suffer now when it is not looking too rosy for them.
It would have been good PR if, when the Prime Minister and the President announced the building of the nuclear reactor at Hinckley Point, they had committed British steel to the project. But unfortunately they didn’t.
We were quick to bail out the banks when they went into freefall on the understanding that they would recover one day. So couldn’t a similar argument be made for steel? Granted, the sector cannot currently compete because the market is flooded with cheap imports, but what happens when the Chinese economy recovers and they want to keep the steel for themselves? We certainly can’t start manufacturing it again, as they are closing down the coking machines and plants for good, rather than mothballing them.
So when demand is high and steel is in short supply prices will rise, building will become more expensive, inflation will increase and on this occasion China will have a negative effect on our economy because they are doing well again.
In the meantime, thousands of workers, not just those producing steel, are worrying about their future job security – from the guy selling bacon butties on the industrial estate, to those selling them stationery and computer consumables. Indeed, there are so many companies who rely on these factories to help their businesses succeed.
No doubt suppliers’ cash flow will be hit as companies ‘up the line’ batten down the hatches and hang on to their money so they can pay essentials like wages, bank interest, and the ’more important’ suppliers.
So perhaps now is the time for the banks to pay back the faith shown in them when they were struggling? Wouldn’t it be good if they were to exercise a little patience while those ‘support’ companies affected seek new sources of income and restructure their companies?
What are the chances of that happening? Probably as likely as keeping warm round a steel coking furnace!
But something must be done because a strong business needs supporting when something like this momentarily knocks them off course.
At Ultimate Finance we have lost count of the number of companies we have helped that have been abandoned by the banks. By taking time to get to know the company, and how it operates, you can soon identify if they have strong management and a good strategy in place to trade out of the situation.
It certainly does not call for panic measures but a considered approach, with well thought through funding solutions within a responsible lending environment.
That way more companies would recover and thrive and, who knows, the banks might be able to repair some of their tarnished reputation.
Nick Smith is sales director of Ultimate Finance