Midlands Steel Supply Chain

1. The Midlands Steel Supply Chain

Across the 5 principal sectors primarily associated with the Midlands steel supply chain (namely basic metals production’ metals fabrication, machinery manufacture, motor vehicle manufacture and other transport equipment manufacture), there are close to 260,00 people employed in close to 12,000 companies. This is equivalent to approximately a fifth of all employees and companies located in these sectors across GB. (See attached appendix for details).

2. The Midlands Economy

The Midlands economy remains globally competitive, and continues to be amongst the most dynamic and innovative.

In 2013 (the latest for which data available), the Midlands economy, that is the East and West combined, contributed of close to £200 billion of Gross Value Added (GVA), equivalent to approximately a sixth of total English output. Whilst the formal (ONS-defined) manufacturing sector is equivalent to 15% of GVA in the region, other production sectors as well as services sector enterprises solely or partially dependent on manufacturing, ensure that the secondary impact of manufacturing is equivalent to 38% of the overall regional economy.

Moreover core features of manufacturing are its specialist clusters producing high-quality precision components and preponderance of small and micro- producers. This structure lends itself to collaborative innovation and access to the latest technological shifts, through loose business alliances based around specific product manufacture. The capacity to produce high-quality components is itself founded on the access to high-quality inputs, including raw materials and the ease of access to these inputs, given the current orientation of manufacturing to just-in-time production operations.

in conjunction with Given the extent of the Midlands steel supply chain (see attached datasheet), the provision and rapid accessibility of high quality steel is a key foundation of growth in the regional economy

Within the context of the English economy, the manufacturing sector in the Midlands accounts for almost a quarter of total output.

Furthermore in contrast to other regions, in the period of output recovery since the recession, manufacturing growth has been strongest in the East and West Midlands, with the weakest performance registered in the North West.

in conjunction with The basis of this growth has been the relative diversity of the regional manufacturing structure, although it is important to note that there are significant cross-sectoral relationships and the technological knowledge transfer between sectors is an important facet of product innovation and refinement. Most notably, the Food manufacturing sector, with its acute sensitivity to shifts in market fashions and demands is perhaps the strongest sector, adopting a sophisticated array of practices that enable a comprehensive of customer trends. Additionally, the associated agri-tech sector deploys some of the most advanced manufacturing techniques and processing, including geo-positioning, robotics and quality assessment.

in conjunction with Transport equipment manufacture, for which the region, especially the West Midlands, is renowned remains a key sector contributing over 17% of all output and in excess of half of all exports. Again the understanding of market demand and customer aspirations is a core component strength. The interaction of design and brand is perhaps key feature of this sector’s success.

Export growth post crisis has been dramatic with merchandise export expanding some 70% since the depth of the recession and almost 50% above the previous peak in 2008.

Whilst data is not readily available for regional services exports (which anecdotally are most probably the strongest outside London), the export sector is heavily dependent on road vehicles, power generation equipment and general machinery. The adoption by many, if not most of the major manufacturing exports of servitisation practices suggest that there is considerable, but as yet

in conjunction with largely unquantified, strength and robustness in the Midlands services export sector.

3. The UK Steel Industry

According to the EEF Steel group, UK steel output, until the recent shifts in global factors, had recovered a growth trajectory, and was providing close to half of all UK demand.

More significantly, again according to EEF Steel analysis, the value-added contribution of the UK steel sector has risen progressively since 2009 and was now equivalent to a positive contribution of £ 3 billion to the UK trade balance.

in conjunction with This recovery must also be set in the context of the marked improvement in energy utilisation by the industry, whereby environmentally sensitive approaches, have reduced energy consumption per tonne by close to half by 2014.

4. External Environment

Externally three combined factors have contributed to the temporary erosion of the steel industries international competitiveness, namely: the appreciation of Sterling against the Euro; the over-capacity of Chinese steel production contributing to a surge in Chinese exports; and a deep widening of comparative energy costs differentials between the UK and our major international competitors, most notably within the EU as a result of pro-active state policies adopted elsewhere. Given the current tax incentivised approach

in conjunction with to moving toward a carbon-neutral economy by the government, energy price policy is a key area that government could rapidly make a difference.

The steel industry, which despite previously mentioned progress remains an acutely intensive energy user, is vulnerable to international energy prices shifts.

Disclaimer: The analysis presented in this report accurately represents the personal assessment of the analyst(s) and no part of the compensation of the analyst(s) was, or will be directly or indirectly related to the inclusion of specific views in this report. Further information is available on request. The information contained, and any views expressed, herein are based upon data currently available within the public domain. The contents of this Report are not a substitute for specific advice and should not be relied upon as such. Accordingly, whilst every care has been taken in the preparation of this publication, no representation or warranty is made or given in respect of its contents and no responsibility is accepted for the consequences of any reliance placed on it by any person.

The MEF is funded via corporate and institutional sponsorship, which supports both our administrative structure and our research capacity. Funding for this report was drawn from the West Midlands Economic Forum, of which the MEF is part, Research Budget.

The West Midlands Economic Forum is a neutral, independent forum bringing together representatives of the public, private and voluntary sectors to evaluate real trends in the local economy. The West Midlands Economic Forum is a registered limited liability company Cardiff, number: 07025784 8, Beaufort Way, Aldridge, WS9 0HJ

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