Impact of New Steel Tariffs on the UK Construction Industry

The UK construction industry is facing heightened cost pressures following the government's decision to double tariffs on imported steel and reduce the quotas for overseas purchases. This move, aimed at supporting domestic steelmakers such as Tata and British Steel, has raised concerns among contractors involved in major infrastructure projects, including the £100 billion High Speed 2 (HS2) railway. Mark Reynolds, chair of the construction firm Mace, stated that the timing of these tariffs is “ill-timed and unhelpful,” exacerbating existing challenges in a sector already grappling with rising energy costs due to the ongoing conflict in Iran.

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The government has justified the tariff increases as a necessary measure to protect the UK steel industry, which employs approximately 10,000 people and has faced significant job losses over the years. A spokesperson for HS2 Ltd noted that over half of the steel used for the HS2 project in 2023-24 would be sourced from the UK, with plans to increase this to two-thirds by 2024-25. However, industry leaders argue that the tariffs will lead to a “cost shock” for infrastructure projects, particularly affecting public sector work, which is already under financial strain.

The Guardian

Paul Gandy, former head of Tilbury Douglas and current president of the Chartered Institute of Building, emphasized that the tariffs are detrimental to the construction market and the broader economy. He highlighted that many public sector projects are already struggling financially, and the increased costs from tariffs will further complicate their viability.

The Guardian

Critics within the construction sector have voiced strong opposition to the tariff increases. Milda Manomaityte, chief executive of the Association for Consultancy and Engineering, warned that the impact of these tariffs would be “felt sharply” on essential infrastructure such as bridges and railways. The sentiment among industry leaders is that while the tariffs may protect domestic steel production in the short term, they could hinder the progress of critical public infrastructure projects.

The Guardian

In response to the backlash, a government spokesperson indicated that the tariffs aim to reduce reliance on foreign steel and would be reviewed after one year to assess their effectiveness. The government is also exploring various options to mitigate the financial impact on HS2, including potentially reducing train speeds to save costs.

The Guardian

As the construction industry prepares for the upcoming changes, contractors are advised to procure steel in advance to avoid future price increases. The situation remains fluid, with ongoing discussions about the balance between supporting domestic industries and ensuring the viability of crucial infrastructure projects.

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• “We have to be honest that tariffs on imported steel will hit infrastructure projects with a cost shock,” — Milda Manomaityte, Chief Executive, Association for Consultancy and Engineering

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• “The steel industry needs to compete with cheap imports coming in from all over the world … once it’s gone you can’t just start it up again.” — Source close to a primary steelmaker

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• “A lot of this steel is going to go into public sector work,” — Paul Gandy, President, Chartered Institute of Building

The Guardian