Deal reached on Irish Steel privatisation

Date: 21/12/1995

THE UK and Irish governments have struck a last-minute deal on how to subsidise the privatisation of Ireland's only steel-maker.

The agreement reached yesterday (20 December) avoided souring relations between London and Dublin at a time when issues much larger than the fate of more than 300 jobs in Cork or Staffordshire depend on contacts between the two sides.

With the bilateral problem sorted out, EU industry ministers were able to clear the payment of 33 million ecu of state aid to the Irish Steel Company, designed to recapitalise its single Cobh Mill plant in County Cork and ready it for sale to the private sector.

This mixture of a 13-million-ecu capital injection and a write-off of non-performing loans worth 20 million ecu is part of a deal to sell the company to Ispat International, the world's thirty-second largest steel company, for the nominal sum of 1 Irish punt.

The problem for the UK was the impact this might have on British Steel. The world's fourth largest manufacturer warned that recapitalisation of this loss-making producer of steel medium sections could force it to shut down its plant at Shelton in Staffordshire, with the loss of 400 jobs and another 600 redundancies at local suppliers.

To offset this, the UK as well as Luxembourg, whose own manufacturer Arbed also felt threatened by the recapitalisation, argued for tough limits to prevent an expansion of output.

In an attempt to reach a compromise, the Irish government proposed new marketing curbs, and offered to divert up to 10&percent; of Irish Steel's future output to markets outside the EU. Production would also be capped at 350,000 tonnes a year for the next five years.

The last-minute agreement removed an obstacle standing in the way of UK Prime Minister John Major's plans to visit Dublin today (21 December) for scheduled Anglo-Irish talks at a crucial time in the Northern Ireland peace process.