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Closures in the UK steel sector will have knock on effects

Commenting on the job losses and closures in the UK steel sector, Stephen Cooper, head of manufacturing at KPMG in the UK, said: “The metals sector is currently facing a bigger threat than in 2009 when the global financial crisis sent shockwaves through the industry. Today we heard the news of up to 1,200 job cuts in Scunthorpe and Scotland, which follows the confirmed closure of the entire steel site in Teesside, with the loss of around 2,200 jobs.

 

“Adding to this, yesterday another site announced that 1,700 jobs were set to go. This is not only a crisis for the metals industry but a crisis that goes to the very heart of the UK’s industrial manufacturing. The negative knock on effects of this crisis for the UK economy cannot be underestimated.

Mark Firmin, head of Restructuring at KPMG, added: “While much of the news so far has been dominated by metal producing businesses, the current crisis has much wider implications throughout the whole supply chain. Knock-on effects will be felt by steel processors, stockholders, distributors, scrap metal dealers, metal traders, maintenance providers and equipment suppliers who will all be impacted by a falling steel price in different ways.

 

“We also forecast significant distress within metal product manufacturing businesses.  Whilst they will be benefiting from decreased input costs, their revenue will likely decline in turn.  Survival will depend on having a niche and flexible product portfolio and associated supply chain.”

Stephen Cooper concluded: “Companies that are highly dependent on consistently high quality grade metals, such as those in the automotive, aerospace and the oil & gas sectors need to also keep a close watch on what is happening in the market, because it could have a significant impact on their own supply chains. This ‘supplier risk’ which involves thousands of different grades of metal for key components is currently underestimated in our view.”

 
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