THE North East economy has received two major boosts in the past month, with deals signed to bring train building back to County Durham and the future of steel making on Teesside seemingly secured Karen McLauchan reports.
THERE have been storm clouds gathering on the horizon of the North East economy over the past year or so, with worrying predictions about the impact of looming spending cuts on a region so heavily dependent on the public sector for jobs.
The big challenges ahead remain, of course. But any visitor to the region expecting to find an area downbeat about its future prospects may be surprised by what they find, especially in the wake of two major announcements over the past month.
The news that giant Thai firm SSI has signed on the dotted line to take over the once apparently doomed Teesside Cast Products plant in Redcar was the result of years of behind-the-scenes negotiations and political lobbying. More than that, however, it was the utterly determined efforts of the people of Redcar to secure the future of this plant which is synonymous with the town which seems to have proved pivotal in securing the deal.
There was a similarly determined effort down the road in Newton Aycliffe, too, where politicians, business leaders and local people waged a determined campaign to bring train building back to the region where the railways were born.
That campaign paid off in spectacular fashion earlier this month when Transport Secretary Philip Hammond confirmed the Government is moving ahead with a £4.5bn contract with Japanese firm Hitachi to build a fleet of new trains in the town.
He said 500-plus permanent jobs would be based at Hitachi’s new European assembly and manufacturing plant, with thousands more created in the supply chain. Comparisons have already been drawn with the transformational impact that the arrival of Nissan had on the Wearside and wider North East economy.
It is a happy coincidence, of course, that both long-standing campaigns have paid dividends in such a short space of time. Yet it’s a huge vote of confidence in the North East economy and proves that the region does have an important role to play in these two industries so closely connected to its industrial heritage.
The SSI deal, which represents $1bn of investment in the region, came 656 days after Teesside’s steel crisis began, when Corus – now Tata Steel – announced a 90-day consultation process with a view to mothballing the site after consortium members of a 10-year deal secured in 2004 had walked out on the agreement.
The £290m deal with SSI will see 700 jobs secured at the Teesside site, 800 created, the blast furnace re-ignited and steel-making resume in the coming months, reviving the sector’s proud 150-year history.
SSI boss Win Viriyaprapaikit has pledged his long-term commitment to the area and has said the site will start producing steel again in the final three months of this year.
First he wants to have the plant operating at full capacity, churning out 3.5m tonnes of steel a year.
But his long-term goal is to boost production significantly – pushing it up towards the 10 million tonnes a year achieved in Teesside’s 1970s heyday.
“The plant has enough land and infrastructure so there is a lot of potential,” he said, describing the signing of the deal as a historic moment for Teesside and for SSI. “We plan to diversify geographically and expand into new markets. We have no exit strategy. We plan to be here for the long haul.”
Mr Viriyaprapaikit also revealed plans for a €2m (£1.7m) fund to train local graduates and skilled workers currently out of a job – a striking commitment to the local area. He said the money could be used to retrain former Tata workers who were made redundant when the plant was mothballed.
SSI is seeking to raise the money from the Government’s Regional Growth Fund – a £1bn, two-year initiative to boost UK trade and get the economy back on track. Its $1bn (£620m) investment includes the purchase price of TCP, which is valued at $469m (£291m).
Around $150m (£93m) will be spent on improving the efficiency and environmental footprint of the plant. Meanwhile, $400m (£248m) will be set aside for day-to-day operations – taking the total investment to $1bn and giving SSI a vital war-chest to expand its Teesside operations.
The deal will see the Redcar Blast Furnace, the Redcar and South Bank Coke Ovens, TCP’s power generation facilities and sister plant and the Lackenby steel-making and casting facilities transferred to SSI ownership.
It will also result in a Tata-SSI joint venture to operate Redcar Wharf, TCP’s bulk terminal, which will enable the Indian-owned firm to use Teesside to serve its other steel-making operations.
Tata will continue to operate two tube mills in Hartlepool, the Skinningrove special sections mill, Teesside Beam Mill and Teesside Technology Centre.
For the past two years Teesside has marched, lobbied and campaigned to give TCP a future.
Geoff Waterfield, chairman of the multi-union works committee, has described the deal as momentous news for Teesside.
“The people of Teesside have shown tremendous strength, tolerance and patience during the Save Our Steel fight,” he said.
“People were spread to the four winds following the mothballing, lives have changed immensely but people have still fought on to save the site.
“People who didn’t necessarily have that much power came together to make a difference.”
Mr Waterfield says a huge amount of work now needs to be done to bring the site back on line.
“We’ve got part one done with the signing of the deal. Now we want to get on with part two and get the site going again.
“But that’s work we’re happy about. We need to work with SSI on employing people and training new people.
“SSI wants to develop and grow the business and we want to help them do that.”
Timeline: How steel making on Teesside was saved
May 8, 2009: Corus – now Tata Steel – announces a 90-day consultation process with a view to mothballing the Teesside Cast Products blast furnace after confirming members of the consortium that signed the 10-year deal with TCP in 2004 had walked out on the agreement.
July 18, 2009: Thousands take to the streets of Redcar in support of steel industry.
October 2, 2009: TCP announces it has secured orders until the end of the year.
December 2009: Corus says it will mothball TCP with the loss of about 1,700 jobs. The decision comes as a shock to national unions. By now TCP has rebuilt 80% of its order book and returned to profit. But Corus says there’s no long-term solution. Local MPs meet Gordon Brown in Scotland to plead for his intervention. An emergency inquiry into the Corus crisis gets under way.
January 2010: Corus reverses its decision to mothball the South Bank coke ovens, saving about 100 jobs and says TCP can run until raw materials run out. The first inquiry hearing into the TCP crisis is held in Redcar. Kirby Adams meets Business Minister Pat McFadden.
February 19, 2010: Mothballing of TCP’s blast furnace finally begins. Workers gather at the gates of the plant to mark the end of 150 years of steel-making on Teesside. Two days later the final molten steel trickles from the blast furnace.
March 2010: A group of North East venture capitalists goes public with a bid for the plant, including Wynyard property magnate Chris Musgrave. The group terminates talks in July.
May 2010: Thai giant SSI visits the TCP plant, but Corus remains tight-lipped about talks. MPs and union leaders head to Thailand for tour of SSI.
June 2010: Corus announces chief executive Kirby Adams to leave in October.
August 2010: SSI, the biggest steel producer in Thailand, says it has signed a memorandum of understanding with Corus, to acquire TCP in a multi-million pound deal.
September 2010: Corus’s name is changed to Tata Steel.
November 2010: MPs say the SSI deal is just weeks from being sealed.
December 2010: SSI president gives the biggest indication yet that takeover is close.
January 2011: SSI says it may seek a London Stock Exchange listing to fund the deal and confirms it expects to add at least 800 staff to TCP’s current workforce of about 700 when it takes over the site.
February 24, 2011: The £290m takeover of TCP by SSI is signed.