Job losses from steel crisis could cost the UK government £4.6bn
A loss of up to 40,000 jobs from Tata Steel UK and the supply chain, as previously estimated by IPPR, could cost government a total of £4.6bn in tax revenue and benefits and reduce household spending in the economy by £3bn, over 10 years.
Following the decision by India’s Tata Steel to sell all or part of its UK business, IPPR looked at the potential job losses at the plants themselves and in the supply chain, in the event that no buyer can be found. Further research now shows the effect this might have on the government’s finances and the economy.
If the UK loses 40,000 jobs this year from Tata Steel plants and their suppliers, the cost to government in 2016/17 could be £0.8bn, or £2.2 million per day. This reflects lost revenue from income taxes and VAT, and additional benefit payments. Over the course of ten years this could come to a cumulative total of £4.6bn. In addition, the economy will also suffer from a drop in spending from affected households by £0.5bn in 2016/17, worth a cumulative total of £3bn over ten years.
Alfie Stirling, IPPR Research Fellow, said: “The effects of plant closures on the UK could be very serious indeed. Our new analysis shows that there is significant fiscal and economic cost to inaction, which the government must take account of when considering its options for Tata Steel.
“It is of the upmost importance that the government recognise that the UK economy is more resilient when we retain a more diverse industrial base. The steel crisis acts as a reminder that we need to work harder to embed our core material producers into supply chains around strategic sectors like car-manufacturing and aerospace engineering.”