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Americanisation in 20th Century Europe: business, culture, politics. Volume 2

 | 
Nick Tiratsoo
, 
Mathias Kipping

The productivity issue in the UK steel industry, 1945-1970

Ruggero Ranieri

Résumé

Dans le cadre du Conseil anglo-américain pour les missions de productivité, une équipe fut envoyée par l’industrie sidérurgique britannique aux États-Unis en 1951. Elle publia un rapport détaillé et de bonne qualité qui explique que le retard de productivité avec les États-Unis repose largement sur le fait que la dimension générale des usines était petite. Celui-ci contenait également des recommandations concernant les objectifs du management, l’organisation du travail, le marketing et la standardisation. Quelques-unes de ces remarques furent appliquées dans les années suivantes, mais la plupart furent rejetées par la Fédération Britannique du Fer et de l’Acier les jugeant irréalistes. Cependant, les faibles performances en terme de productivité de cette industrie durant les années suivantes donnèrent raison à ce Rapport.

Texte intégral

  • 1 N. Tiratsoo and J. Tomlinson, “Exporting the Gospel of Productivity: United States Technical Assis (...)

1How far did European industrialists, technicians and trade union leaders, who, generously funded by the US government, flocked in their hundreds to visit US plants and learn about new development in technology, management, accounting and industrial relations, return convinced of the superiority of the American System? The key word during the 1950s was Europe’s gap in productivity. Productivity lends itself to different definitions and measurements. The Americans took the productivity gap to embody all that was wrong with European industrial practice. Whereas some Europeans resisted the notion, others concurred. The debate has been recently rejoined.1

  • 2 S. Tolliday, business, Banking and Politics-The Case of British Steel 1918-1939, Cambridge, Mass., (...)

2This chapter reviews some evidence about the results of the productivity missions in the British Steel industry. The British Steel industry, at the time of the Marshall Plan, had the largest output in Western Europe. In 1949 it was nationalised by the Labour Government, after bitter resistance by the British Iron and Steel Federation (BISF), the industry trade association, backed by the Conservative Party. Its record was, in the best of terms, a mixed one. Performance during the inter-war years was generally considered to have been poor. Competition from Continental producers had made vast inroads into the UK market, forcing the Government to grant the industry tariff protection in 1932. At the same time the industry had been reorganised as a self-governing cartel, under a measure of public supervision. Industry-wide prices were set by the newly created BISF, together with a range of cross-subsidies and levies designed to minimise costs, encourage direct and indirect Steel exports and stifle competition.2

  • 3 R. Ranieri, “Partners and enemies: the decision to nationalise Steel, 1945-1948“, in R. Millward a (...)

3Calls had been made repeatedly, starting from the Board of Trade Committee Report of 1916, for concentration and rationalisation of Steel production. In 1944 the industry itself had set up an Efficiency Committee, which had recommended amalgamations and new investment plans.3 The industry’s first post-war Development Plan, centrally co-ordinated by the BISF, was based on the criteria of achieving larger output from a smaller number of plants. However, under pressure from a seller’s market and from the need to raise the country’s exports, investment, with a few exceptions, had consisted of ‘patchup’ projects rather than innovative ‘green-field’ ones. The industry remained scattered and diverse.

4The Productivity Team representing the British Steel industry visited the United States in May and June 1951. It was part of the Anglo-American Council on Productivity (AACP), organised by employers and trade unions in conjunction with the Economic Cooperation Administration (ECA). The UK government played no role in its activities, the employers’ associations having made this a condition of their engagement. None the less, as far as the BISF was concerned, the visit could not have come at a less auspicious time. In February 1951, the assets of all the steel companies had been vested by the Government in the newly formed Iron and Steel Corporation. There was talk of radical new schemes being imposed on the industry. A few months, later, the Conservatives, who were committed to bringing it back into private ownership, won a General Election. Privatisation lasted the best part of the 1950s, in conjunction with regulation by an Iron and Steel Board, appointed by the Government.

  • 4 Anglo-American Council on Productivity, Productivity Team Report. Iron and Steel, Report of a Prod (...)
  • 5 Burn 1961: 270 ff.

5The visiting team was composed of sixteen members, including company executives, engineers, accountants and supervisors from some of the main companies such as Colvilles, The United Steel Co., Dorman Long and a few others. There were two trade union representatives, Executive Council members respectively of the Iron and Steel Trade Confederation and National Union of Blastfurnacemen.4 The Team spent about six weeks in the United States, visiting plants in the new steel-making centres of the South and West. It also spent some time visiting Bethlehem’s East Coast integrated plant at Sparrows Point. When the members returned, they considered and discussed their recommendations at length, producing some months later a very lengthy and detailed report. Because of the authority of the team, the report was bound to be influential. It generated a lot of attention and a protracted debate.5

6The First section of this chapter will look at the measurement of comparative UK/US productivity levels within the two industries. It will compare the estimates made by the AACP report with other estimates made at the time. The second part will analyse the broad thrust of the AACP report and its main recommendations. It will focus both on the key issue of the size of the plant, as well as on labour issues, marketing and management strategies. The third section will examine the reaction to the Report’s findings in the course of the following years, highlighting how far the Report’s main recommendations were implemented.

measuring the productivity gap

  • 6 AACP 1952: chapter 2, table 3.
  • 7 L. Rostas, “Industrial Production, Productivity and Distribution in Britain, Germany and the Unite (...)
  • 8 British Iron and Steel Federation, “Productivity in the Steel industry”, Monthly Statistical Bulle (...)
  • 9 Burn 1961: 271.

7The core of the AACP report consisted of a measurement of comparative levels of productivity within the two industries. The figures produced by the mission were based on a fairly simple measurement of labour productivity in comparable types of plant. They considered separately three stages carried out with the same kind of technology: smelting in blast furnaces, steel-making in open-hearth furnaces and rolling in rolling mills. They estimated that US labour productivity in terms of in man/year output was three times as high as in the UK for blast furnaces, 1.8 times for open-hearth and roughly 1.5 times for rolling mills. Narrowing the figure down to a man/hour estimate increased the advantage of the US, given the shorter working hours there (40 hours per week as compared to 48 in Britain).6 The figures produced by the AACP showed a wider gap than the estimates that had been published by the economist L. Rostas between 1943 and 1948.7 Rostas’s estimates were based on the physical output of the industry as a whole, standardised by using an elaborate weighting technique. The British Iron and Steel Federation was critical of Rostas’s figures and constructed a different index, which showed a narrower productivity gap.8 It also highlighted how the productivity record of the industry since 1945 had been excellent. However, Duncan Burn, of Cambridge University, challenged the BISF’s figures and produced estimates much closer to those of Rostas and the AACP.9

  • 10 R. Ranieri, “Between America and Europe: the Introduction of Wide Strip Mills in Britain and Italy (...)

8On balance it would appear that the method employed by the AACP-comparing productivity at plant level-was solid. It was an estimate by technicians rather than economists. Particularly as far as blast furnaces and open-hearth basic Steel were concerned, the AACP knew that it was on very strong ground. When it came to rolling mills, the comparability of output was more open to question, and the AACP acknowledged this by placing its figures within a band and pointing to their provisional nature. In fact it would appear that the US had acquired a substantial lead in rolling mill technology by introducing continuous throughput mills, and that it was driving its mills much more fully and efficiently. Hot and cold wide strip mills, which best embodied this advantage, were not considered in the AACP report.10

  • 11 Crafts and Broadberry 1990.
  • 12 E. F. Denison, Why Growth Rates Differ, Washington D. C, Brookings Institute, 1967; I.B. Kravis,(...)
  • 13 Broadberry 1997: 105 ff.

9One of the questions which was raised at the time, and has been pursued by the more recent literature, is whether capital was perhaps being used more efficiently in Britain than in the US, thus offsetting the advantage in labour productivity. The evidence examined by Burn relative to the early 1950s does not, however, seem to bear this out. Crafts and Broadberry have presented estimates for capital productivity for the whole of manufacturing for a slightly earlier period (1929-1930) and have concluded that capital in the US was used more efficiently. For the Steel industry, their figures are not very firm, but they point to a slight US advantage.11 Calculations of total factor productivity, introduced on the basis of Denison’s growth accounting calculations, are meant to discover the contribution to growth of the inputs of all factors of production.12 If the contribution of inputs of labour and capital to growth can be determined, the rest-or total factor productivity-is deemed to be accountable to a ‘residual’. Broadberry’s results suggest that the total factor productivity gap between the UK and US Steel industries was as large as the labour productivity one.13 By his own figures, the AACP report is vindicated.

the findings and recommendations of the aacp report

  • 14 AACP 1952:

10The AACP Report was a detailed document containing both analyses and recommendations. The main point to emerge from it was that the UK productivity gap with the US was, in large measure, due to the low average size of plant in the UK. It came to that conclusion by assessing minimum size requirements for efficiency at the different stages of the steel making process and by working out the size of possible realistic and efficient combinations within an ideal integrated Steel works. The average capacity of an ideal steelworks fell somewhere between 750,000 and 1 million tons of Steel output per year. By contrast, UK steelworks had an average capacity of less than 350,000 tons.14

  • 15 Burn 1961: 77 ff.

11Although the standard set by the report was higher than previous recommendations aimed at rationalising the industry, it fell well short of the benchmark for American best practice. During the Second World War, the Efficiency Committee’s conclusion had been that integrated steelworks should aim at a capacity range between 500,000 and 800,000 tons per year. It was argued, in fact, that the AACP report was a minimalist one.15 It made numerous allowances for the specific market environment of the UK industry. Furthermore it was fully aware that its recommendations would be difficult to implement, difficult choices of concentrating investment in the most appropriate locations would have to be made and this would generate a number of regional and local problems.

  • 16 AACP 1952: 90-91.

12Works’ size and concentration issues in the UK had of course to take account of a long, tortuous historical legacy. Most of the sixteen main British integrated plants had an inefficient layout: they could not expand because of lack of premises and the physical obstacles that surrounded them (such as main railway lines). There was a lesson to be learnt here; any new investment had to planned far in advance. It was inconceivable that all the existing steelworks should expand. There needed to be selective investment at a few favoured sites and the development of new greenfield sites. Concentration should be achieved not just 12 horizontally, closing down inefficient firms, but also vertically, so that integrated plant could carry out production further into the finishing stages. This would provide better technical links between the units, save on expensive cross haulage, generate better materials handling and make companies more profitable.16

  • 17 M. Kipping, R. Ranieri, and J. Dankers, “The emergence of new competitor nations in the European S (...)

13On one key point, however, the Report said very little. It did not endorse the trend towards large Coastal integrated plant, to which raw materials could be shipped in huge carriers. In America the largest post-war development at Fairless, on the East Coast, was being built in that way. The Bethlehem plant at Sparrows Point, which the AACP mission visited extensively, was also a Coastal plant. Yet there was no recognition here of fact that large deep-water coastal steelworks were the industry’s future, not just in the US, but also in Japan, and in many countries in Continental Europe.17

14The need for new investment at greenfield sites in the UK was also hampered, according to the Report, by high costs of capital construction, and long completion times. This was clearly beyond the control of the Steel industry and pointed to a general weakness in the performance of the UK capital goods’ sector. Despite lower wage costs than in the US, labour productivity in the plant making and constructional sectors was low. As the Report noted: “At the present time it takes two or three times as long to complete a given piece of plant as it does in America”. This raised costs and extra charges from unproductive capital, increasing the opportunity costs of new investment projects. The reasons for this gap were many but they were partly traceable, the Report observed, to the current System of priority allocation of raw materials and labour.

  • 18 AACP 1952: 72.

15In addition to the more technical side, the Report delved into a number of areas where it acknowledged the superiority of US methods. American firms selected their workforce more carefully and were particularly careful to offer managers appropriate training. They had introduced job evaluation Systems in order to remove strident inequalities, rationalise the wage structure and ease the introduction of technological innovation. US steelworkers were paid much better and driven harder, and they seemed to appreciate the need for higher productivity. There was “no serious opposition to the introduction of new equipment or to the continuous operation of plant and machinery”.18

  • 19 AACP 1952: 83.

16Hierarchical Systems in US companies were better structured and standard costing, although only at an early stage in Steel companies, promised to introduce greater transparency and accountability. Measurement of productivity, particularly in the rolling mill sector, was much more developed and firms made regular and consistent use of manning information in managerial control – for example, actual manning was recorded on a daily basis against the standard and variations, with the information immediately available to the departmental offices. Such practices, the Report admitted, were virtually unknown in the UK. Another advantage of US companies lay in their comprehensive specialised training schemes for technical and supervisory operatives and in their regular practice of recruiting university graduates to fill staff positions. The majority were science graduates, but some were non-technical and were recruited for purchasing, sales, accounting and industrial relations.19

  • 20 AACP 1952: 20.

17The AACP’s recommendations on matters of industrial relations were, on the other hand, very bland. Reforming the wage structure in the UK on the American example was deemed impossible, given the large, even bewildering, variety of separate UK craft and general unions, which operated independently of one another. This, the Report implied, gave rise to serious demarcation problems and created a strong bias towards inflexibility. Nevertheless, it observed, industrial relations in Britain were better than in the US. The impression is that the presence in the visiting team of trade union members was a contributory factor behind these generalities.20

  • 21 OWEN 1999: 122.

18The Report had even less to say on management, organisation and training. The UK had little to learn in matters of training for operatives and craftsmen, and given its shortage of labour could probably not afford the formal selection processes of US firms. In fact selection of personnel was mostly informal and ‘traditional’, that is along family and community lines. When it came to middle and top managers, the gap with the US practices was quite glaring, although there was little recognition of this in the Report. Most UK companies were family concerns and although there were a few professional top managers, Corning mostly from an accounting background, they were still an exception rather than the rule. Recruitment of graduates into the industry seems to have been at this stage very limited, confined to the industry’s research laboratories. The Report made no recommendations worth mentioning on these points.21

  • 22 22 AACP 1952: 105.

19Marketing was also an area in which US Steel companies were far ahead. Their attitude was positive and optimistic: “The American manufacturer... feels that it is possible to create a market for practically everything and is therefore prepared to take a chance by installing new plant”.22 They had recently been very successful in introducing new types of Steel products such as broad flanged beams, wide strip, and electrolytic tinplate and stainless Steel sheet. By implication the attitude of UK companies came out at best as conservative. Market research departments, quite common in US companies, were virtually unknown in Britain.

  • 23 AACP 1952: 19-20.

20Research and technical progress were areas in which British Steel prided itself for having achieved excellence. The Report urged the industry not to be complacent. American firms might have had less prestigious metallurgical laboratories, but they were flanked by a clutch of dynamic and enterprising plant engineering firms, were supported by government and university research-institutes and were eager and capable of innovation. Standardisation of final shapes was also important. In the US special sizes and small orders were actively discouraged by a System of extra pricing; they were catered for not by Steel companies but by warehouses. UK companies did the opposite; they encouraged small batches and were clogged by congestion at the finishing end, having to make all the minor adjustments themselves. This practice also involved large administrative overhead costs. The Report advocated cautious reform. Although the British home market was relatively small compared to the US, and both reliance on diversified export markets and a record of high quality also discouraged standardisation, still it was recommended that the product price structure should be modified to discourage small orders. The advice was clear: “Price concessions should be used to encourage broader tolerances and less rigid specifications in finish so as to permit longer runs in rolling mills and higher yields”.23

  • 24 Ranieri 1998; W.E. Minchinton, The British Tinplate Industry - A History, Oxford, Clarendon Press, (...)

21It seems that the gist of the Report’s recommendations was sensible and correct. The problem of achieving amalgamation, closing down obsolete capacity and building new efficiently sized units and plants had been for some time at the heart of the discussion over the industry’s performance. The American model had also been often considered by British steel-makers, at least since the 1920s when the comparative standing of US industry had so manifestly risen.24 What was new in the AACP document was the detailed examination of some of the things that could realistically be done to catch up.

responses to the report: an opportunity lost?

  • 25 British Productivity Council, A Review of Productivity in the Iron and Steel Industry, London, Bri (...)
  • 26 Tiratsoo and Tomlinson 1997: 77

22The main response to the AACP report came in the form of a paper by the British Productivity Council (BPC), published in 195 6.25 This effectively emanated from the BISF. The BPC was the successor organisation of the AACP, set up when the ERP programme ended, to monitor the results of the productivity missions and preach of the ‘gospel’ of Americanisation, helping firms to implement best practice.26 The evidence is that it lacked the teeth of its predecessor and that both sides of industry, as well as successive Conservative Governments, were quite happy to pay formal tribute to it whilst taking little heed of its recommendations. It published a large number of pamphlets and journals, set up local branches and encouraged pilot firms to carry out applications of this or that section of the productivity programme. The feeling, however, is that its impact on British manufacturing practice remained marginal.

23The evidence of the 1956 Report issued by the BPC on the Steel industry seems to confirm this. What happened was that the Council was happy to let the BISF adjudicate on its own performance in meeting the challenge of raising productivity. Not surprisingly the industry’s own regulating body awarded itself high marks. Its report was a skilful mixture of compliance and evasion. It picked up a few of the AACP’s recommendations and purported to show how much had been achieved in meeting them, but it presented few firm facts and figures to prove this. Essentially it seemed to argue that because British prices of Steel goods were competitive (and US prices were not) the industry could afford to look at its performance and organisation with some detachment, even with complacency. Other voices within the industry suggested likewise, in some cases aggressively defending established practices against any innovation.

influential conservatives voice from within the industry

  • 27 A. McCance. “Production in the Steel industry. Its growth, distribution and further course”, Iron (...)

24A number of influential executives within the industry dissented from the AACP line. Sir Andrew McCance, Deputy Chairman of Colvilles, a large firm accounting for most of the Steel capacity in Scotland, delivered a lecture at the Cleveland Technical Institute in November 1950 (just before the AACP Team made its trip) in which he staunchly defended the status quo.27 The size of American and British Steel making facilities, he argued, simply reflected the respective size of the two industries. Using a number of econometric projections, he argued that “what is real is rational”: the size of the industry and average plant capacity were perfectly proportionate in the UK and the US. All that was needed to increase productivity was to increase total output: it was an “exponential law”.

  • 28 E. T. Sara, “Progress in the Iron and Steel Industry. Lines of Future Development”, Iron and Coal (...)
  • 29 Sara 1956: 675.

25E. T. Sara, who, as an economist at United Steel Companies, was a member of the AACP mission, expressed a more considered view.28 He argued that the Report should be reconsidered in the light of the size and character of the UK market and taking account of company profitability. His own company, among others, had spent the last few years investing heavily, but such investment was, he argued, by necessity “organic”, in other words it emanated from short term commercial opportunities, rather than responding to long-term plans. Not surprisingly, therefore, it was piece-meal and patchy: “Sometimes it is a matter of altering the machinery or the layout: sometimes a new piece of equipment is called for, rarely is the call for a complete new works”. New works on greenfield sites were expensive to build and difficult to manage. So, he concluded, the record was satisfactory: “The Steel industry need not apologise for appearing to patch and repair its existing works. This is the most economical method of procedure unless there is some major change in technique such as the... wide strip mill, which makes rebuilding a virtual necessity”.29

26Sara, therefore, suggested that the AACP recommendations should apply merely to plants built around wide strip mills. Such plants required an output of up to 2 million tons per annum. But for the rest of the industry, other solutions were in order. There was no point in maximising the size of furnaces, for example when special qualities were demanded in small batches. Sub-optimal plant was often worth keeping: indeed it was still possible to install undersized primary mills if they could be used as finishing mills as well. Smaller works could survive by reconverting to higher-value finished goods, for example alloy Steel, to offset diseconomies of scale. If all this was not enough, then the industry should look ahead, in the hope that beckoning new technologies such as continuous casting could shift the balance again in favour of the smaller scale.

management, and labour issues

  • 30 British Productivity Council 1956: 33.
  • 31 B. S. Keeling and E. A. G. Wright, The Development of the Modem British Steel Industry, London, Lo (...)

27What of the other recommendations of the AACP Report, touching on the areas of organisation, management, industrial relations? On management training, there seems to have been a positive response. Despite the claim by the BPC Report that in the industry “training for management takes place mainly within the works and ‘learning by doing’ remains the normal procedure”,30 the BISF did set up the Ashorne Hill Management College to provide formai training for Steel managers. This was an innovative step, one of the first projects of its kind, although it is difficult to gauge its actual impact.31

  • 32 Keeling and Wright 1964: 154.

28Accident prevention was another area were robust action was taken. American practice was revealed to be superior. The BISF launched its own investigation and published a number of reports. In 1956 league tables were set up benchmarking and rating different companies and plants for security.32 This was an example of the kind of transparency the AACP had demanded. There is little evidence, however, that it was extended to company costs, productivity and capacity figures or indeed to job classification. The material emanating from the industry remained opaque on all these areas. There was no evidence that sharper emphasis had been given to standardising products or to vertical integration, while better marketing received only a fleeting reference in the BPC’s document.

  • 33 University of Liverpool, Industrial Research Section, Department of Social Science, Men Steel and (...)

29The evidence is, on the other hand, that it was precisely in these areas that new developments were catching up with an outmoded industry culture. A detailed survey of Shotton works, conducted by a team from the University of Liverpool in 1957, shows why. The Shotton plant belonged to John Summers and employed in the region of 6,000 operatives. The plant had been equipped in 1940 with a wide strip mill and a cold strip mill. After the war the blast furnace and Steel making areas had been expanded and re-equipped. These technical changes had greatly increased the importance of salaried staff, including managers, specialists and skilled men engaged in service and maintenance. The family-owned company had had to change its organisation, its training and its culture in order to cope with continuous throughput technology. The production units had become more interdependent, calling for flows of material from one unit to another. A scheduling and production department and a progress and statistics department had been created, together with a development and constructional engineering department to examine new engineering problems in the construction of the plant. New functions such as statistics and negotiations and work relations were linked with changes in the structure of occupations that had come with the new mills.33

30The company needed more managers with technical qualifications and had to recruit them, largely, outside its ranks, a practice it had never followed in the past. In 1958 over half the departmental heads had degrees, as compared with a third in 1935. The proportion of professionally qualified managers had doubled among departmental heads and trebled among middle managers.

  • 34 E. Owen Smith, Productivity Bargaining. A Case Study in the Steel Industry, London, Pan Books Limi (...)

31Shotton’s case study provides illuminating insight into the organisational changes brought about by technological change and higher productivity. The problem was that neither the industry’s top managers nor its trade union leaders seemed to have been fully equipped to deal with them. There is evidence, for example, of considerable resistance to modernising the wage structure and streamlining the work force in accordance to the needs of the new production processes, which “made nonsense of traditional manning practices and requirements”. At Port Talbot attempts were finally made in the 1960s to introduce a System of job evaluation against considerable trade union antipathy. The situation at Port Talbot was characterised by over-manning, little use being made of modem measuring techniques, while demarcation issues between and within unions causing significant production losses.34

the industry judged: size, structure and performance

  • 35 Keeling and Wright 1964.
  • 36 British Iron and Steel Federation, The Steel Industry, The Stage I Report of the Development Coord (...)
  • 37 D. L. Burn, “Steel”, in D. Burn (ed.), The Structure of British Industry, London, Cambridge U. P., (...)

32The BPC report of 1956 provides only patchy evidence. Additional information can be gleaned from the official history of the industry written by Keeling and Wright of the BISF.35 Keeling, an influential member of the Federation, had among other things, acted as Secretary to the AACP mission in 1951. The Benson Report produced in 1966 is also an interesting document emanating from the industry. It was written by a committee of the BISF chaired by Sir Henry Benson with the aim of fending off nationalisation, and was designed to give a positive, if not uncritical, account of the industry’s post-war record.36 These sources can be tested against some less apologetic literature, for example the work by Duncan Burn who, first as a disregarded insider and then as a dissident of the Steel establishment, and Industrial Editor of The Times, believed that the AACP had not gone far enough in calling for an overhaul of the industry along American lines.37

  • 38 British Productivity Council 1956: 10-11; Keeling and Wright 1964: 191-121.

33The general framework in which the industry operated throughout the 1950s was one of high rates of investment. However, the thrust of the AACP Report had been to recommend that as a result of more investment, the average size of units and works should be stepped up, whereas inefficient works be closed. It was of paramount importance, it had argued, that expansion should be selective. A distinction should be made here between the size of units, and the size of works. As far as units, particularly blast furnaces, were concerned some progress was made. With the aim of increasing pig iron production to meet scrap shortages, older blast furnaces were scrapped and bigger ones were built. In 1955 the average size of blast furnace, though still much below the AACP recommended target, had increased by 30 per cent since 1950. Progress in rolling mill productivity was also notable by 1955-6 and much of it was accounted for by the new wide strip mill set up at Port Talbot, with cold strip mill units in neighbouring South Wales locations, gradually replacing a number of old hand mills. Productivity in wide strip mills was estimated as being seven times higher than for hand mills.38

  • 39 Burn 1961: 554.
  • 40 Iron and Steel Board, Development in the Iron and Steel Industry; Special Report, 1961, p.58-59; D (...)

34If attention, however, is focused on the size of Works, progress was unclear. In 1957, nearly 50 per cent of Steel output was made in plants well below the Productivity Team standards and a further 8 per cent in plants at, or only slightly below, the minimum of the prescribed range.39 This left Steel made in compliance with AACP standards at about 43 per cent of the total. A large amount was still produced in works that were too small by the standards set by the AACP. In 1960 the picture is one of an industry divided between a handful of very large works and a proliferation of small ones. There were in fact only six works then that produced more than a million tons. A further five or six works reached the minimum AACP standard of 750,000 tonnes; the rest were well below it.40

  • 41 J. Aylen, “Innovation in the British Steel Industry”, in K. Pavitt (ed.), Technical Innovation and (...)

35By the early 1960s, steel technology had crossed another threshold, mainly thanks to the introduction of oxygen steel-making and also to progress in rolling mills, with a new generation of wide strip mills and other equipment being brought to fruition. This called for even greater concentration and economies of scale, although other developments in continuous casting and in electrical steelmaking acted in the opposite direction, opening opportunities for small-scale development of long products. On the whole the position of the British Steel industry became even more exposed: it was, for example, slow in taking up oxygen Steel making as well as continuous casting.41

  • 42 C. Pratten and R. M. Dean, The Economies of Large Scale Production in British Industry – An introd (...)
  • 43 R. Ranieri, “Steel and the State in Italy and the UK. The public sector of the Steel industry in c (...)

36Industry analyses at this time seemed to agree that the competitive position of UK steel was deteriorating. Writing in 1965, Pratten and Dean observed that “of the 310 works producing steel products only 8 had a capacity of more than 1 Mt/y and these produced only 40 per cent of the common Steel made in the UK”.42 There was evidence that UK companies were operating plant on a smaller scale than their overseas competitors, notably the United States, Western Germany, Russia and Japan. With the exception of the sheet and tinplate sector, where by the early 1960s a very small number of works dominated the trade, there had been no major concentration and re-direction of investment throughout the industry along the lines suggested by the AACP. The biggest companies had kept on juggling their output between their more modem and older works. The Second and Third Development Plans, just like the first one launched in 1945, had proved ineffective.43

  • 44 Burn 1961:586.
  • 45 R. Pryke, The Nationalised Industries. Policies and Performance since 1968, Oxford, Martin Roberts (...)
  • 46 Keeling and Wright 1964: 128.

37What about the productivity record? Starting in 1954 there were finds signs of decline. The industry’s output ceased to increase in 1957 and was thereupon subject to pronounced fluctuations. At the same rime there was a slow but constant increase in the workforce. In the low part of the cycle, productivity figures bottomed out. Thus, in terms of output per man-year, there was little progress between 1954 and 1961/1962. Burn attempted to compare output per man-year in the UK, Continental Europe and the US, for the period 1954-7. In the UK and US productivity continued to rise at the same annual rate of 2.7 per cent. In Germany, France and Belgium, however, output per man was rising faster than in the UK, although, initially, from a slightly lower level.44 In the following years the gap widened: between 1955 and 1965 labour productivity in the UK grew by 25 per cent, in West Germany by 58 per cent, and in Italy and Japan by 150 per cent.45 In 1967, again using a rather crude benchmark, it appeared that in the UK the per-man yearly rate of Steel output was 90 tonnes, whereas the US had achieved 210 and Japan 190 tonnes.46

  • 47 British Productivity Council 1956: 46.
  • 48 British Iron and Steel Federation 1966: 107 ff.

38British producers, however, were convinced that any international comparison, particularly with the US, while perhaps technically relevant, contained little of commercial significance. Despite the well known productivity gap, British and European prices were well below US prices. Other costs being more or less even, US productivity was not high enough to offset the fact that wages were three times higher in America than in Europe. Examining prices in 1956, the BPC remarked that for every single Steel product, the UK price was lower than the corresponding American, German, French and Belgian one.47 The position in 1965 was thought to be roughly the same.48 In the face, however, of sustained gains in productivity from the Continent, those figures should not have been so reassuring. UK prices were, in fact, kept artificially low by price-fixing, supported by a substantial measure of cross-subsidisation within the national cartel run by the BISF under the supervision of the Iron and Steel Board.

39The price-fixing mechanism, which had served the industry so well in rimes of depression and war, was becoming increasingly questionable in a period of fast expansion and technological change.

  • 49 S. Broadberry and N. Crafts, “Competition and Innovation in 1950s Britain”, business History, 43 ( (...)

40Price uniformity inevitably damaged the larger and more modem plants, by subsidising high cost producers. In 1964 the administered price System was challenged, for the first rime, by the Restrictive Practices Court and as many as 35 price agreements were ruled unlawful. The AACP Steel Report had said nothing about this, but many other of the AACP team reports had made telling comments on the need for more competition across Britain’s manufacturing industries, blaming restrictive practices for low productivity and technological conservatism.49

in conclusion

  • 50 Broadberry and Crafts 2001; Tiratsoo and Tomlinson 1997.

41As much recent literature has argued50, the AACP reports highlighted serious shortcomings in UK industrial practice. They were met, however, with little enthusiasm, even open and covert resistance. While a few of their recommendations were thus taken on board by the industry, the main points were not. The case of the Steel industry confirms this verdict. Failure to comply with the main thrust of the AACP report was due to a combination of factors but in no small measure it was the work of the BISF, acting as the industry-wide cartel.

  • 51 Tolliday 1987; Ranieri 1995.

42The bargain between the government and the BISF had been struck in the 1930s, at a time of collapsing prices and high unemployment. It was based on regulation, protection of the home market, and it ensured that modernisation and restructuring would be carried out only with the consent of all the Steel companies. The industry had since delivered higher output, and believed that this was enough to claim continued self-government in the national interest.51 Resistance to change also came from the trade unions. The proliferation of unions made it difficult to rationalise wages and to adapt working practices to technological innovations. This was not a key factor, but it contributed to the industry’s decline. In fact, there was a price to pay. By the early 1960s, the competitive position of the UK Steel industry had seriously deteriorated and a new productivity gap had opened up, this time with Western Europe.

***

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Notes

1 N. Tiratsoo and J. Tomlinson, “Exporting the Gospel of Productivity: United States Technical Assistance and British Industry, 1945-1960”, Business History Review, 71 (1), 1997, p. 41-81; J. Zeitlin, “Americanising British Engineering? Strategic Debate, Selective Adaptation and Hybrid Innovation in Post-War Reconstruction, 1945-1960”, in J. Zeitlin and G. Harrigel (eds.), Americanization and its Limits. Reworking US Technology and Management in Post-War Europe and Japan, Oxford, Oxford U. P, 2000; N. Crafts and S. Broadberry, “Explaining Anglo-American Productivity Differences in the Mid-Twentieth Century”, Bulletin of the Oxford Institute of Economics and Statistics, 52 (4), 1990, p.375-402; S. Broadberry, The Productivity Race. British Manufacturing in International Perspective 1850-1990, Cambridge, Cambridge U.P., 1997.

2 S. Tolliday, business, Banking and Politics-The Case of British Steel 1918-1939, Cambridge, Mass., Harvard U. P., 1987; D. L. Burn, The Steel Industry 1939-1959 - A Study in Competition and Planning, London, Cambridge U. P, 1961; G. Owen, From Empire to Europe. The Decline and Revival of British Industry Since the Second World War.; London, HarperCollins, 1999, chapter 6.

3 R. Ranieri, “Partners and enemies: the decision to nationalise Steel, 1945-1948“, in R. Millward and J. Singleton (eds.), Industrial Organization and the Road to Nationalisation in Britain 1920-1950, Cambridge, Cambridge U. P., 1995, p. 275-305.

4 Anglo-American Council on Productivity, Productivity Team Report. Iron and Steel, Report of a Productivity Team representing the British Iron and Steel Industry which visited the United States of America in 1951, London, 1952, [hereafter AACP 1952] pp. 1-3.

5 Burn 1961: 270 ff.

6 AACP 1952: chapter 2, table 3.

7 L. Rostas, “Industrial Production, Productivity and Distribution in Britain, Germany and the United States”, Economic Journal, 53, 1943; L. Rostas, “Changes in the Productivity of British Industry 1945-1950”, Economic journal, 62 (1), 1952.

8 British Iron and Steel Federation, “Productivity in the Steel industry”, Monthly Statistical Bullettin, 23 (8), 1948, p. 1-6.

9 Burn 1961: 271.

10 R. Ranieri, “Between America and Europe: the Introduction of Wide Strip Mills in Britain and Italy”, in E. Bussière and M. Dumoulin (eds.), Milieux économiques et integration européenne en Europe occidentale auXXe siècle, Arras, Artois Presses Un., 1998, p. 215-234

11 Crafts and Broadberry 1990.

12 E. F. Denison, Why Growth Rates Differ, Washington D. C, Brookings Institute, 1967; I.B. Kravis, “A survey of international comparisons of productivity”, Economic journal, 86, 1976, p. 1-4.

13 Broadberry 1997: 105 ff.

14 AACP 1952:

15 Burn 1961: 77 ff.

16 AACP 1952: 90-91.

17 M. Kipping, R. Ranieri, and J. Dankers, “The emergence of new competitor nations in the European Steel Industry: Italy and the Netherlands 1945-1965”, Business History, 43 (1), 2001, p. 69-96.

18 AACP 1952: 72.

19 AACP 1952: 83.

20 AACP 1952: 20.

21 OWEN 1999: 122.

22 22 AACP 1952: 105.

23 AACP 1952: 19-20.

24 Ranieri 1998; W.E. Minchinton, The British Tinplate Industry - A History, Oxford, Clarendon Press, 1957.

25 British Productivity Council, A Review of Productivity in the Iron and Steel Industry, London, British Poductivity Council, 1956.

26 Tiratsoo and Tomlinson 1997: 77

27 A. McCance. “Production in the Steel industry. Its growth, distribution and further course”, Iron and Coal Trades Review, 162, 1951, p. 6-10.

28 E. T. Sara, “Progress in the Iron and Steel Industry. Lines of Future Development”, Iron and Coal Trades Revient, 173, 1956, p. 671-7.

29 Sara 1956: 675.

30 British Productivity Council 1956: 33.

31 B. S. Keeling and E. A. G. Wright, The Development of the Modem British Steel Industry, London, Longmans, 1964, p. 152.

32 Keeling and Wright 1964: 154.

33 University of Liverpool, Industrial Research Section, Department of Social Science, Men Steel and Technical Change, [Department of Scientific and Industrial Research, 1, Problems of Progress in Industry] London, HMSO, 1957, p. 11.

34 E. Owen Smith, Productivity Bargaining. A Case Study in the Steel Industry, London, Pan Books Limited, 1971, p. 51-52.

35 Keeling and Wright 1964.

36 British Iron and Steel Federation, The Steel Industry, The Stage I Report of the Development Coordinating Committee, July 1966.

37 D. L. Burn, “Steel”, in D. Burn (ed.), The Structure of British Industry, London, Cambridge U. P., 1958, vol. 1, p. 260-308

38 British Productivity Council 1956: 10-11; Keeling and Wright 1964: 191-121.

39 Burn 1961: 554.

40 Iron and Steel Board, Development in the Iron and Steel Industry; Special Report, 1961, p.58-59; D. W. Heal, The Steel Industry in Post War Britain, Newton Abbot, David and Charles, 1974, p. 140 ff.

41 J. Aylen, “Innovation in the British Steel Industry”, in K. Pavitt (ed.), Technical Innovation and British Economic Performance, London, Macmillan, 1980, p. 200-234.

42 C. Pratten and R. M. Dean, The Economies of Large Scale Production in British Industry – An introductory Study, University of Cambridge, Department of Applied Economics, Occasional Papers, 3, Cambridge U. P., 1965, p. 81.

43 R. Ranieri, “Steel and the State in Italy and the UK. The public sector of the Steel industry in comparative perspective (1945-1996)”, European Yearbook of Business History, 2, 1999, p. 125-154.

44 Burn 1961:586.

45 R. Pryke, The Nationalised Industries. Policies and Performance since 1968, Oxford, Martin Robertson, 1981, p. 184.

46 Keeling and Wright 1964: 128.

47 British Productivity Council 1956: 46.

48 British Iron and Steel Federation 1966: 107 ff.

49 S. Broadberry and N. Crafts, “Competition and Innovation in 1950s Britain”, business History, 43 (1), 2001, p. 97-118.

50 Broadberry and Crafts 2001; Tiratsoo and Tomlinson 1997.

51 Tolliday 1987; Ranieri 1995.

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