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The Impact of the European Steel Industry on the EU Economy

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The Impact of the European Steel Industry on the EU Economy The Impact of the European Steel Industry on the EU Economy THE IMPACT OF THE EUROPEAN STEEL INDUSTRY ON THE EU ECONOMY AN UPDATED AND EXTENDED ANALYSIS JULY 2019 The Impact of the European Steel Industry on the EU Economy Oxford Economics Oxford Economics was founded in 1981 as a commercial venture with Oxford University’s business college to provide economic forecasting and modelling to UK companies and financial institutions expanding abroad. Since then, we have become one of the world’s foremost independent global advisory firms, providing reports, forecasts and analytical tools on more than 200 countries, 250 industrial sectors, and 7,000 cities and regions. Our best-of-class global economic and industry models and analytical tools give us an unparalleled ability to forecast external market trends and assess their economic, social and business impact. Headquartered in Oxford, England, with regional centres in London, New York, and Singapore, Oxford Economics has offices across the globe in Belfast, Boston, Cape Town, Chicago, Dubai, Frankfurt, Hong Kong, Houston, Johannesburg, Los Angeles, Melbourne, Mexico City, Milan, Paris, Philadelphia, Sydney, Tokyo, and Toronto. We employ 400 full-time staff, including more than 250 professional economists, industry experts and business editors—one of the largest teams of macroeconomists and thought leadership specialists. Our global team is highly skilled in a full range of research techniques and thought leadership capabilities, from econometric modelling, scenario framing, and economic impact analysis to market surveys, case studies, expert panels, and web analytics. Oxford Economics is a key adviser to corporate, financial and government decision-makers and thought leaders. Our worldwide client base now comprises over 1,500 international organisations, including leading multinational companies and financial institutions; key government bodies and trade associations; and top universities, consultancies, and think tanks. July 2019 All data shown in tables and charts are Oxford Economics’ own data, except where otherwise stated and cited in footnotes, and are copyright © Oxford Economics Ltd. This report is confidential to EUROFER and may not be published or distributed without their prior written permission. The modelling and results presented here are based on information provided by third parties, upon which Oxford Economics has relied in producing its report and forecasts in good faith. Any subsequent revision or update of those data will affect the assessments and projections shown. To discuss the report further please contact: Doug Godden: [email protected] Oxford Economics Broadwall House, 21 Broadwall, London, SE1 9PL, UK Tel: +44 20 3910 8000 The Impact of the European Steel Industry on the EU Economy TABLE OF CONTENTS Executive summary ............................................................................................. 1 1. Introduction...................................................................................................... 4 1.1 The steel industry’s standard economic footprint .................................... 4 1.2 The activity of key steel-using sectors ..................................................... 5 2. The EU steel industry’s direct economic contribution ..................................... 6 2.1 Value of production .................................................................................. 7 2.2 Direct gross value added ......................................................................... 8 2.3 Direct employment ................................................................................... 9 2.4 Direct tax contribution ............................................................................ 11 2.5 Procurement of goods and services from other sectors ........................ 12 2.6 Capital expenditure ................................................................................ 13 3. The EU steel industry’s wider economic footprint ......................................... 15 3.1 Indirect impacts ...................................................................................... 16 3.2 Induced impacts ..................................................................................... 19 3.3 Total economic contribution ................................................................... 21 4. The impact of key customer sectors ............................................................. 26 4.1 The activities of four key steel-using industries ..................................... 26 4.2 The wider economic footprint of the customer sectors .......................... 33 4.3 The role of steel in enabling customer-driven activity ............................ 39 5. Results by country ......................................................................................... 45 Appendix 1: Results tables ................................................................................ 75 Appendix 2: Methodology .................................................................................. 96 Appendix 3: Industrial sectors ........................................................................... 99 The Impact of the European Steel Industry on the EU Economy EXECUTIVE SUMMARY This report, commissioned by EUROFER and written by Oxford Economics, updates the results of a previous study examining the impact of the European steel industry on the EU economy. It takes three spending channels into account, namely the ‘direct impact’, concerned with the industry’s own activity, the ‘indirect impact’, relating to activity in its supply chain, and the ‘induced impact’, resulting €148 billion from the wage-funded spending of both industry and supply chain workers. The modelling takes a comprehensive view of supply chain linkages, ensuring that all Total GVA supported across impacts relating to cross-border trade within the EU are captured, along with the EU by the region’s steel complex supply chains that cross in and out of the EU. industry in 2017. Furthermore, this study extends the previous analysis in two ways: This includes support provided to other sectors 1) Taxes associated with the economic activity supported by the EU steel through supply chain and sector have been modelled in addition to the production and employment staff spending impacts. effects; and 2) An analysis of the impact of four key customer sectors, some of whose activity is arguably enabled by the use of EU-produced steel, is also included. THE EUROPEAN STEEL INDUSTRY’S IMPACT ON PRODUCTION AND JOBS: UPDATED RESULTS In 2017, the European steel industry made a €25 billion direct contribution to the standard ‘gross value added’ measure of EU-wide production (hereafter referred to as GVA). However, the industry’s total GVA impact that year, when supply chain and staff spending impacts are also included, was much higher, at €148 billion (see Fig. 1). This overall contribution exceeded the total GVA produced in the region of Berlin in 2017. Fig. 1. The European steel industry’s economic footprint across the EU 2.6 million Total number of EU jobs supported through the three channels of impact in 2017. Of these, just under 330,000 jobs were in the steel industry itself. 1 The Impact of the European Steel Industry on the EU Economy The indirect (supply chain) impact accounted for €86 billion of the steel industry’s total GVA impact in 2017, and is spread across goods and services providers in all EU states and a wide range of industries. The induced (staff spending) impact, which is felt across a range of more consumer-facing sectors, is estimated to have been €37 billion. The steel industry directly employed around 328,000 workers across 22 member 7.9 x states in 2017. But its total contribution to employment in the EU-28, through all three channels of impact, was again much bigger at 2.6 million jobs. To put that The number of jobs in context, the industry’s overall jobs impact is greater than the total number of supported through the three people employed in each of Slovakia, Finland, and Ireland. channels together is 7.9 times the steel industry’s The steel sector’s total contribution to EU GVA is 5.8 times its direct impact alone, own employment. meaning that for every €1 of value-added activity in the sector itself, a further €4.80-worth of work is supported elsewhere in the EU economy, due to supply This multiplier is much higher chain connections and wage-funded expenditure. The corresponding ratio for than typically found, as is the employment is 7.9, meaning that for every job in the industry, nearly seven roles multiplier for GVA of 5.8. are supported elsewhere through these knock-on effects for demand. These ratios, known as ‘multipliers’, are very high by the standards of a typical manufacturing sector of this size. With production rising sharply in 2017, European steel industry GVA per worker is now around 21 percent above the average for the overall EU economy, and 20 percent higher than that of the EU manufacturing sector as a whole. This efficiency in the use of personnel partly reflects the capital-intensive nature of the industry, which spends €3.9 billion per annum on new machinery and building work. THE INDUSTRY’S IMPACT ON TAX REVENUES: NEW RESULTS The direct tax impact—taxes paid by steel companies and their employees in the €60 billion course of their work—is estimated to have been €10 billion in 2017. The total tax impact, which also includes taxes on activity in the indirect (supply chain) and Annual direct, indirect
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