In recent years British Steel has committed substantial investment to three operations in the United States. It has acquired Tuscaloosa Steel, a mini-mill producing plate, together with a direct reduced iron facility at Mobile, Alabama. In addition, BS is a partner in the establishment of Trico Steel, a joint venture with LTV of the USA and Sumitomo of Japan to build a flat product mini-mill in the United States to produce hot rolled coil, and due to be commissioned in early 1997. Of British Steel's total of £331 million of capital investment in progress in March 1996, over half (£171 m) was accounted for by its two investments at Tuscaloosa and Mobile. The latter involves the relocation of two DRI (direct reduced iron) units from the BS plant at Hunterston in Scotland to Mobile, Alabama. It is expected that both will be in operation by the end of 1997. However, even when these three US facilities are in full operation, they will account for only about 10% of British Steel's total output.
In terms of future investment strategy, a stated objective of British Steel is to develop this international aspect of the company further in coming years by seeking business opportunities in countries within the Asia Pacific region, such as China and India. To date, however, no investment in production facilities in Asia has been made.
In terms of the markets for its products, just over half (52% in 1995) of British Steel's output of finished steel goes to the home market, the remainder exported. British Steel had 58% of the UK market share for finished products in 1995/6 (6.6 Mt of the total of 11.3 Mt for the UK market). This proportion is comparable with its share in the early 1990s, though is below the 64% market share achieved by BS in the home market in 1990. Of the finished products exported by British Steel in 1995/96, almost 62% of exports went to mainland Europe, the remainder going to other markets. Products sold abroad include steel for the construction, automotive and packaging industries, together with the domestic appliance, transport and energy sectors. Of these, the construction industry is the largest single market sector for British Steel products; this sector purchases a wide range of BS products including hot rolled beams and columns, structural hollow sections, roof and wall cladding, cold formed sections, piling and coated steels.
As regards the company's profitability, since privatisation in 1988, the company has recorded five profitable and two loss-making years. The loss-making years came in the early 1990s and reflected a fall in the European price level, coupled with a marked fall in UK steel demand (Beauman, 1996: 25). Following a small pre-tax profit in 1993/94 (£80 m), a high level of profitability was achieved in 1994/95 (£578 m), rising to over £1.1 billion pre-tax profit in 1995/6. Profits for 1996/7 may be somewhat lower than the 1995/6 level, partly reflecting an anticipated decline in European finished steel demand during 1996. Nevertheless, British Steel is expected to continue to show a considerable pre-tax profit in the current financial year.
The size of British Steel's workforce has fluctuated somewhat during the 1990s as a result both of plant closures and acquisitions. In 1990 the number employed by BS was 54,000; the figure had fallen to 41,000 by 1994, but had risen to 53,900 by 1996 largely as a result of the acquisition of majority shareholdings in United Engineering Steels (4,700 employees) and Avesta Sheffield (8,200 employees). Of the total of 53,900 employees in British Steel in 1996, 44,300 were located in the UK and 9,600 overseas. In 1996, the largest number of British Steel employees were engaged in the production of sections and strip, though significant numbers were also involved in stainless and engineering steel production (table 5).
Table 5. Employees by business in British Steel, March 1996
British Steel's employment costs currently represent just over one-fifth of total costs. This proportion is considerably lower than the level in the 1970s, and early 1980s, when employment costs were 30% or more of total costs; however, the 1996 figure represents a slight increase over 1990 (table 6). In parts of British Steel, employment costs are significantly lower than the overall average figure. In strip products, for example, employment costs represented 16% of total turnover in 1995/6 (Johnson, 1996).
Table 6. Employment costs in British Steel, 1990-96 (% of turnover)
The nature of industrial relations has radically altered in the company during the 1980s and 1990s. In structural terms, the main features of this include: a decentralisation of industrial relations from national level to individual businesses and works within BS; an increased emphasis on single table bargaining (that is, agreements being made with all the unions together rather than separately), and plant level bargaining containing a significant element of agreed changes in working practices. In addition, the climate of industrial relations is much altered in the company compared to when it operated as a nationalized industry; the main aspect of this is the reduced role which trade unions play within the company, and overall a significant reduction in their influence compared with their position in the 1970s.
Any recent developments in human resources and industrial relations in the UK steel industry in general, and British Steel in particular, need to be understood against the background of the fundamental changes which took place during the 1970s and 1980s. In summary, these were:
-- a programme of mass redundancies, which led to more than seven out of ten workers leaving the industry;
-- a three month national steel strike in 1980, in which the unions failed to shift management or state policy towards the industry. The strike and the membership loss resulting from the redundancies marked a major diminution in union influence in the industry in the subsequent period;
-- a government and senior management determined to use the economic and industrial relations situation to alter radically the pattern of work organisation and industrial relations; and
-- while much of the major changes took place prior to the privatization of BS in 1988, privatization has consolidated a number of the changes, such as the shift away from national collective bargaining (see below).
The mass redundancies and the closure of less productive operations, coupled with selective new investment in larger, more modern sites, brought about major increases in productivity (see below). However, sustaining the gains in productivity after the main redundancies which occurred in the early 1980s required changes in the traditional working arrangements of those remaining in the industry. The various moves away from traditional patterns of work organization have come to represent a second major wave of restructuring in the industry.
Traditionally, work organization in the UK steel industry was characterized by two main features: first, a clear distinction between semi-skilled process operatives and skilled maintenance workers (a division reinforced by clear lines of job demarcation between the two groups, separate union representation, and distinct lines of promotion); and second, a seniority promotion system among process workers which entailed workers entering the firm on the lowest rung of a work crew and gradually advancing up the crew hierarchy to leading hand, on the basis of length of experience.
The mass redundancies from the first wave of restructuring put this traditional system under considerable pressure. Many areas were left with much reduced levels of staffing, with fewer people left to cover the various work duties. This was exacerbated by a continued search for further workforce cuts, which continue up to the present time. In addition, a system of advancement based on work experience is well suited to contexts where the technology used is changing only very slowly. However, in a period of more rapid change, for example in furnace, casting and rolling technologies, seniority based on training and qualifications as well as experience, becomes more desirable to management.
Management's response to these pressures has been, on the one hand, to increase the amount of work undertaken by sub-contractors, and on the other hand to reform work structures to create broader task and skill responsibilities, which in turn have acted to increase the degree of utilization of workers' time, extend the level of workforce flexibility, and locate a number of former separate functions (e.g. quality assurance) within the work groups themselves. There has also been a move away from seniority as the sole criterion for promotion. One outcome of these changes has been to pave the way for lower manning levels and further reductions in overall workforce numbers.
To achieve these ends of reform of work organization, various steps have been (and currently are being) taken. The picture overall remains patchy; while in some plants and work areas working practices have been only moderately changed, in others there has been much more radical change. The overall trend, however, is towards a greater degree of labour flexibility, entailing a gradual breakdown of the process-maintenance distinction, the abolition of many separate craft functions, and a shift away from seniority based promotion lines towards more teamworking structures. In all these developments, industrial relations agreements and the reform of previous industrial relations structures (see below) have been of major significance in bringing about the changes.
Among the various changes in work organisation which have occurred, two are particularly significant: the process of craft restructuring, and the introduction of teamworking.
In the maintenance functions there has been a concerted management effort to reduce the number of separate craft titles and increase the amount of flexibility across adjacent craft areas. Initially in BS, reform of maintenance functions took a number of individual forms, such as a reduction in some craft area demarcations, a transfer of some routine maintenance tasks to process operatives, and the ending of the grade of craftsman's "mate" ( assistants who accompanied the craftsmen and performed secondary duties). Further, in a number of plants it became common practice to create a mobile pool of maintenance workers, rather than maintain separate maintenance crews within individual departments. The most far-reaching development, however, has been the introduction of craft restructuring agreements, whereby the range of individual craft titles are replaced by two broad craft disciplines, covering electrical and mechanical crafts, with considerable flexibility within each of these disciplines and a small degree of cross-trade working across the disciplines. This arrangement abolishes separate skill titles such as boilermaker, plater and fitter, and replaces these with a generic title such as "mechanical craftsman". The result has been a widespread reduction in separate skill titles, from over 70 which existed in a typical steelworks in the 1960s, to two craft disciplines today. Craft restructuring has significant training implications, which are discussed separately, below.
Updated by BR. Approved by OdVR. Last update: 28 September 2000.
