British Steel’s Brexit-fuelled collapse is further evidence of the government’s economic incompetence

Analysis: The fact that the banks were bailed out, and British Steel is being hung out to dry, suggests the British state will step in to help the City but not the industrial Midlands or north

This isn’t the end for British Steel yet. But it’s fast approaching and absent a unicorn – yes another one of those – the bell will soon be tolling for the jobs of nearly 5,000 people directly employed by the company and another 20,000 or so in the supply chain.

The business is now in the hands of the official receiver after talks over a government lifeline ended in failure.

Administrators from EY (formerly Ernst & Young) will temporarily run the business, ostensibly in the interests of creditors. They include Greybull Capital, the somewhat controversial private equity owner, which has been in this situation many times before (Monarch Airlines, Comet to name a couple of notable examples) and is also a lender to the business.

What went wrong? In a word, Brexit.

Its supporters can lie and twist and turn as much as they like. However, the company was faced with falling orders from the continent because customers were understandably reluctant to trade with a business when no one yet knows what the trading arrangements and tariffs will be.

At the other end, it’s faced rising raw material costs as a result of the Brexit-related tumble in the value of the pound amid rising fears of no deal. You can call it a perfect storm.

“The government shouldn’t be in the business of propping up failures. No one was arguing we should bail out Jamie Oliver when his restaurants went down yesterday,” summarises what the free market zealots have been telling broadcasters today.

But the thing with this business, by contrast to Jamie’s restaurants, is that it has been broken in large part by the government’s failure on that crucial issue of policy, although it’s true there are other issues such as the trade war between the US and China and Donald Trump’s tariffs to contend with.

British Steel, unlike Jamie’s diners, also plays an important role in British manufacturing, supplying the rail industry and the defence industry, for example. The government keeps saying it has an industrial policy. While it’s vague at best, British Steel ought to play a key role in it (Jamie Oliver probably won’t).

Another thing to remember is that once it’s gone, it’s gone. There are plenty of alternative eateries out there, and the premises of those that fail can be bought and refitted by other restaurateurs quite easily. If British Steel’s Scunthorpe blast furnace goes cold, however, it won’t be restarted. That’s it. Done.

But, but, but if we were out of Europe, the government could more easily step in, say the Brexiteers. Set aside the fact that many of them are free market zealots for whom that would be anathema, is that true?

Potentially. However, it ignores the fact that the government still has options open to it as things stand.

There is nothing to stop it nationalising the business, even if it were to do so only temporarily, as has been done with several rail franchises and the partially privatised probation services, which is being permanently restored to state hands.

EU rules bar state aid. They do not prohibit state ownership. Nor do they prohibit lending money to businesses on commercial terms, as the government has already done once to enable British Steel to purchase a carbon credit.

History also shows that the rules have been interpreted with a degree of flexibility, although the EU tends to be more open to listening to countries that haven’t set themselves to antagonising the entire continent.

Banks, remember, received billions of pounds of state aid during the financial crisis. In return, they were simply required to submit to remedies. So Lloyds had to spin off TSB, and RBS had to fund rivals’ business banking plans after it tried and failed to spin off Williams & Glyn.

The fact that the banks were bailed out, and British Steel is being hung out to dry, creates a further difficulty for the government. It sends out a message that the British state will step in to help the City but not the industrial Midlands or north. The juxtaposition of the two events is already creating high levels of anger and with good reason. It is a terrible message for the government to be sending out right now, and almost certainly an electorally damaging one.

But with many of the Conservatives’ members fiercely opposed to nationalisation on ideological grounds, despite what it has done in other sectors, the party is standing aside all the same.

By doing so, the Tories are handing Jeremy Corbyn a gift. The Labour leader will be able to exploit it and divert attention from the cracks Brexit has created in his own party.

This is an issue, as with so many others, that is pouring white-hot molten steel all over the government’s already shaky record when it comes to economic competence. There are ways out, but it doesn’t seem minded to take them as things stand; and if that continues the next step is for the liquidators to be called in. Then the show really will be over.