The UK could lose its last remaining steel manufacturer Corus after it announced it has built up a £2bn loss since its creation in 1999
Britain, the world's first industrial society, is on the brink of being kicked out of the club of industrial nations. Traditionally, membership is contingent on making steel. The UK may soon close its last steelmill.
Britain makes the metal that made the Industrial Revolution via Corus Group, formed from the merger of British Steel and Royal Hoogovens in 1999. That combination hasn't gone well.
Corus has lost £2bn ($3.2bn) since it was created. Former chief executive Tony Pedder tried to stop the rot by selling the company's aluminium business to French metalproducer Pechiney for e861m ($925m).
The Dutch board opposed the sale. Earlier this month, an Amsterdam court blocked it and then Pedder resigned.
The fate of Britain's last toehold in the steel business may be of greater interest to historians than investors. The company's market value on 14 March stood at just £172m. Still, Corus illustrates a point investors overlook.
The bear market of the past three years followed the bursting of the technology, media and telecommunications bubble.
At first, during the fall in stock prices, investors focused on the collapse of dot.coms. More recently, they have paid close attention to the demise of phone companies including WorldCom and the efforts of media and other phone companies such as Vivendi Universal and Ericsson to revive themselves.
Only now is it becoming clear some of the worst pain of the past three years has been felt by traditional businesses, rather than internet companies.
ABB, Europe's largest electrical-engineering company, has racked up losses of $1.5bn in two years and lost executives, while its stock price has collapsed.
Fiat, Italy's largest manufacturing business, is selling units such as its Toro insurance division in an effort to keep its auto business alive. In Britain, many of the big old names of the manufacturing industry are fading away with Corus. General Electric turned itself into Marconi and then all but disappeared.
Imperial Chemical Industries has shrunk so much its assets are dwarfed by those of its pension fund.
The shares of Rolls-Royce, the world's second-biggest aircraft-engine maker, have slumped to a 16-year low as orders stall and its pension deficit swells.
Then there is Germany. Old-style manufacturing is the heart of the German economy, which explains why the country's Dax index, down 17% this year, is among the world's worst-performing benchmarks.
Why is European manufacturing suffering so much in what is meant to be an internet slump? There are three reasons.
One, globalisation. Labour-intensive manufacturing jobs are shifting to China and other fast-developing nations.
Two, credit. When growth slows, capital grows scarce, banks shut their doors and investors become reluctant to fork out new equity. They prefer bonds from companies or governments with strong credit ratings.
Many manufacturers need cash to stay afloat yet are finding it increasingly expensive.
Three, pensions. The bear market, one of the longest since the crash of 1929, has exposed deficits in all but the best-funded pension programmes. Among the worst hit are the old manufacturers supporting the largest number of retirees.
Even though it hasn't happened yet, don't be surprised if a large European manufacturer is forced to shut down because of its pension obligations.
Global investors need not worry too much about the hollowing out of European manufacturing.
European investors, though, including the continent's insurance companies, may be stuck. Many have large amounts of European manufacturing shares as a result of old asset allocations. UK insurers, for example, are among Corus's largest shareholders.
European investors may pay a price if they are slow to realise the pain of the internet collapse is often felt most by traditional companies.
Bloomberg newsroom London
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