British Steel Going Private, Tories Decide
Britain’s Conservative government announced Thursday that it will privatize the British Steel Corp. following news that half-year profits at the state-owned company tripled.
Industry Minister Kenneth Clarke told parliament that legislation needed to turn BSC into a privately owned company will be introduced in the current session of Parliament. The company first returned to profitability in 1986 after a decade of heavy losses.
“It is quite apparent that BSC is now at the stage where it would benefit from a fully commercial environment,” he said. “I am therefore pleased to announce that I am setting in hand the work necessary to privatize (it) as soon as possible, subject to market conditions.”
Clarke’s announcement was the latest move in the government’s sweeping privatization drive, in the face of political opposition, since Prime Minister Margaret Thatcher took office in 1979. The plan to privatize BSC follows the recent flop of the British Petroleum Co. stock issue and political complications from selling off state-owned water and electricity companies.
The government announcement was immediately attacked by the Labor opposition, whose industry spokesman Bryan Gould said: “This is another example of the taxpayer footing the bill but the city picking up the profit.”
Earlier Thursday, BSC said net profit tripled to $334 million for the six-month period ending Oct. 3 from $108 million in the same period last year.
“This was a further and impressive step forward for BSC,” said Sir Robert Scholey, company chairman, adding that output, manufacturing costs and deliveries had all improved.
During the past decade, BSC has cut its work force to less than 52,000 from about 200,000. Losses of more than $1.8 billion in 1980 have been reversed, and exports, sales and productivity have jumped.
BSC’s furnaces have been helped by higher demand in Britain and abroad, and Scholey said exports accounted for more than one-third of deliveries in the past six months. But he said uncertainties in the European steel industry and currency fluctuations made it hard to predict whether its recent success would continue.
“The immediate order book for the rest of the year remains strong, but the outlook beyond that time is not at all clear. There is still a need to restructure the industry adequately in Europe,” he said.
Trade and industry ministers from the European Community will meet next week to discuss proposed cuts in production quotas to reduce a continuing steel glut, but BSC maintains it has already fulfilled its share of the pruning.