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Potential collapse of Liberty Steel puts 5000 jobs at risk

After the collapse of Liberty steel’s key financial backer, Greensill capital, the steel manufacturer has struggled to stay afloat.


Because of this, concerns over the future of Liberty Steel have grown over the stability and future of the company, putting 5000 jobs at risk as well as 12 some of which are in Rotherham, Motherwell, and Newport.


With about 32,000 jobs in the steel industry, Liberty Steel is a significant employer as the 5000 engineers and workers which they employ is a sizeable chunk of the industry.


Due to these high stakes, shadow business secretary Ed Miliband said last week that the situation was "urgent and worrying" and nothing should be off the table, including nationalization.


The government is now looking to make sure the steel giant does not collapse. Business Secretary Kwasi Kwarteng has told MP’s that he had met with Liberty Steel management on multiple occasions in the past three weeks and has also spoken with unions.


The potential loss of 5,000 jobs due to the collapse of Liberty Steel puts the standards of living of these workers at risk. If these workers lose their jobs they will see a significant fall in income as they must claim job seekers allowance.


This limits workers’ disposable incomes which may force them to switch from normal goods to inferior goods such as frozen food and, takeaways that have less nutritional value, negatively impacting the health of these workers.


With 28% of adults being obese, an increase in consumption of these inferior goods will place increased pressure on the NHS.


This will increase NHS waiting times as the service will struggle to treat more patients with little spare capacity illustrated by there being 2.54 hospital beds per 1000 people in the UK.

Additionally, the rise in Job Seeker Allowance claims due to the collapse of Liberty steel will place additional pressure on government welfare schemes.


This will force the government to decide as it may have to allocate more resources towards Job Seekers Allowance to accommodate the increasing demand, resulting in an opportunity cost as other areas of the budget will have to be neglected.


Hence, because of these adverse effects, the government may have to bail out Liberty Steel.


The use of a government bailout may be effective as this allows Liberty steel to stay afloat protecting 5,000 jobs whilst not having to nationalize liberty steel assets.


Thus, the bailout will be an effective way of maintaining the disposable incomes of these workers, avoiding the issues which would occur if these individuals could not maintain their standards of living.


However, the government bailout may not be an effective long-term solution as it is likely Liberty Steels’ inefficiency will continue if the government supports the firm with a bailout as the firm will see no consequences for their actions, decreasing risk.


Instead, the government may decide to let Liberty steel collapse to focus on regenerating Northern regions to develop a specialisation in green energy.


This will create a large number of well-paying jobs within the green energy industry, and, the skills required in such industry correspond with that of steel.


Because of this, the 5000 workers who would be unemployed due to the collapse of Liberty Steel will be able to find new employment opportunities in a growing industry which is in demand as economic agents become more climate-conscious.


Overall, although the collapse of the company will lead to negative short-term effects, the government can intervene to mitigate these effects in the long-term by investing further into green energy, enabling these workers to work in a more prospective and stable industry.

 

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