How the end of coal in the UK and closure of Port Talbot steelworks are related
It’s a momentous day in UK industrial history, in two respects. But what have the closures of the last blast furnace at Port Talbot and the final British coal-fired power station at Ratcliffe-on-Soar got to do with one other?
In one respect the common factor is coal. The blast furnace at Port Talbot is one of the last remaining descendants of the key technology invented in Britain during the early Industrial Revolution.
Abraham Darby pioneered the process of using coal (a baked form of coal called coking coal, to be precise) to refined iron ore – turning it into what is known as pig iron.
That, along with the basic oxygen process devised by Henry Bessemer, was among the foundational inventions which happened in Britain, and helped to kick-start the fossil fuel age that followed.
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Blast Furnace No 4 at Port Talbot is not the last remaining such facility in the country – there are also two blast furnaces still operating at British Steel in Scunthorpe – but all of these furnaces will soon be gone, replaced with electric arc furnaces, which produce steel in a far less carbon-intensive way.
All of which sounds like good news – but there’s a catch we’ll come back to in a moment. In the meantime, let’s take a second to ponder another landmark moment: the end of coal power.
Port Talbot in Wales. Pic: PA
Britain was also the first country in the world to have an operational coal-fired power station – the 1882 plant in Holborn. And today it has closed its last remaining coal-fired power station.
In one sense this is only a formalisation of something that has been creeping up on the UK for some time: the gradual switch from coal-fired power to a combination of gas power and renewables.
Ratcliffe-on-Soar Power Station. Pic: PA
Gas-fired power stations are better than coal plants in at least three respects: they are more efficient at turning fuel into power, they are quicker to switch on and off and they emit about half the amount of carbon.
But this switch is not without its consequences. Coal, like it or not, is still a cheaper form of power than gas – at least before you take into account carbon costs. And unlike gas, coal supplies are not as dependent on Russia.
Also, Britain’s switch from cheap-ish coal towards more expensive gas and renewables (themselves dependent on a rainbow of government subsidies) is part of the explanation for why the country currently has some of the most expensive power costs in the developed world.
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Indeed, industrial power prices, which are most directly affected since they absorb most of the subsidies for renewables, are higher than in any other developed country.
And since electric arc furnaces are powered by electricity (as the name suggests), our ability to make steel at a reasonable price will be determined in future by those industrial power costs.
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In other words, green steel in the UK is likely to be considerably more expensive, in part because of how quickly the UK is pushing towards green power.
It’s worth saying, that the push towards renewables is not the only reason for high UK power prices. There is also the fact that the grid in this country is short of investment – not to mention the dysfunctionalities of the way wholesale power markets are structured.
But eye-wateringly high power prices are part of the explanation for why industry is shifting away from Britain to cheaper locations. It is part of the explanation for why this country is de-industrialising faster than nearly every other developed nation.
That, in turn, is helping to reduce the amount of carbon emitted in this country. But it’s also helping to diminish the number of people employed in manufacturing and the amount of economic output generated by the sector.
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You probably recall the stories about Leicester’s clothing industry in recent years: grim labour conditions, pay below the minimum wage, “dark factories” serving the fast fashion sector. What is less well known is what happened next. In short, the industry has cratered.
In the wake of the recurrent scandals over “sweatshop” conditions in Leicester, the majority of major brands have now abandoned the city, triggering an implosion in production in the place that once boasted that it “clothed the world”.
And now Leicester faces a further existential double-threat: competition from Chinese companies like Shein and Temu, and the impending arrival of cheap imports from India, following the recent trade deal signed with the UK. Many worry it could spell an end for the city’s fashion business altogether.
Gauging the scale of the recent collapse is challenging because many of the textile and apparel factories in Leicester are small operations that can start up and shut down rapidly, but according to data provided to Sky News by SP&KO, a consultancy founded by fashion sector veterans Kathy O’Driscoll and Simon Platts, the number has fallen from 1,500 in 2017 to just 96 this year. This 94% collapse comes amid growing concerns that British clothes-making more broadly is facing an existential crisis.
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In an in-depth investigation carried out over recent months, Sky News has visited sites in the city shut down in the face of a collapse of demand. Thousands of fashion workers are understood to have lost their jobs. Many factories lie empty, their machines gathering dust.
The vast majority of high street and fast fashion brands that once sourced their clothes in Leicester have now shifted their supply chains to North Africa and South Asia.
And a new report from UKFT – Britain’s fashion and textiles lobby group – has found that a staggering 95% of clothes companies have either trimmed or completely eliminated clothes manufacturing in the UK. Some 58% of brands, by turnover, now have an explicit policy not to source clothes from the UK.
Seamstresses in one of the city’s former factories
Clothing industry workers in Leicester
Jenny Holloway, chair of the Apparel & Textile Manufacturers Association, said: “We know of factories that were asked to become a potential supplier [to high street brands], got so far down the line, invested on sampling, invested time and money, policies, and then it’s like: ‘oh, sorry, we can’t use you, because Leicester is embargoed.'”
Tejas Shah, a third-generation manufacturer whose family company Shahtex used to make materials for Marks & Spencer, said: “I’ve spoken to brands in the past who, if I moved my factory 15 miles north into Loughborough, would be happy to work with me. But because I have an LE1, LE4 postcode, they don’t want to work for me.”
Shahtex in Leicester used to make materials for Marks & Spencer
Tejas Shah, of Leicester-based firm Shahtex
Threat of Chinese brands Shein and Temu
That pain has been exacerbated by a new phenomenon: the rise of Chinese fast fashion brands Shein and Temu.
They offer consumers ultra-cheap clothes and goods, made in Chinese factories and flown direct to UK households. And, thanks to a customs loophole known as “de minimis”, those goods don’t even incur tariffs when they arrive in the country.
An online advert for Chinese fast fashion company Shein
According to Satvir Singh, who runs Our Fashion, one of the last remaining knitwear producers in the city, this threat could prove the final straw for Leicester’s garments sector.
“It is having an impact on our production – and I think the whole retail sector, at least for clothing, are feeling that pinch.”
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While Donald Trump has threatened to abolish the loophole in the US, the UK has only announced a review with no timeline.
“If we look at what Trump’s done, he’s just thinking more about his local economy because he can see the long-term effects,” said Mr Singh. “I think [abolishing de minimis exceptions] will make a huge difference. I think ultimately it’s about a level playing field.”
A spokesperson for Temu told Sky News: “We welcome UK manufacturers and businesses to explore a low-cost way to grow with us. By the end of 2025, we expect half our UK sales to come from local sellers and local warehouses.”
Thames Water, the UK’s biggest water provider, has been hit by a record fine by regulator Ofwat.
The company has been fined £122.7m following Ofwat’s “biggest and most complex” investigation.
It follows two investigations related to Thames Water’s wastewater operations and dividend payouts.
Of the total fine, £104.5m – 9% of Thames Water‘s turnover – has been levied for breaches of wastewater rules – just below the maximum 10% of turnover that Ofwat could have applied.
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Pic: istock
Another £18.2m penalty will be paid for breaches of dividend payment rules.
It is the first time Ofwat has fined a company for shareholders’ payments which do not “properly reflect” its performance for customers and the environment.
The fine will be paid by Thames Water and its shareholders, Ofwat said, rather than customers.
‘Unacceptable’ environmental impact
The regulator was highly critical of Thames Water’s handling of wastewater, describing it as having an “unacceptable” impact on the environment.
Its investigation of treatment works and the wider wastewater network uncovered failings which “amounted to a significant breach of the company’s legal obligations” and caused that unacceptable environmental impact.
The company announced a 40% spike in sewage spills in December for the period from January to September 2024.
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The fine was so large because Ofwat’s chief executive, David Black, said Thames Water “failed to come up with an acceptable redress package that would have benefited the environment”.
“This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment,” Mr Black said.
“Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.”
As a result, Thames Water is required to agree to a remediation plan with Ofwat within six months.
Another investigation by the Environment Agency into environmental permits at sewage treatment works is ongoing.
Bad news for Thames Water finances
Thames Water serves 16 million customers across London and the South East and has just about fended off effective nationalisation, having secured an emergency £3bn loan. Its debts now top £19bn.
These fines were not factored into Thames Water’s financial planning for the next five years. The company’s chief executive, Chris Weston, told a recent sitting of the Environment, Food and Rural Affairs select committee that Thames Water’s future was dependent on Ofwat being lenient with fines.
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A Thames Water spokesperson said: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.
“The dividends were declared following a consideration of the company’s legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues.”
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