Be careful what you wish for: comparative advantage and the Wilson Smelters Project, 1967-82

This chapter looks at the Wilson Smelters Project, 1967-82. The 1967 announcement of the Wilson Government of its intention to commission the construction of two new aluminium smelters marks an important juncture in the British Aluminium industry’s lifetime. Prior to Wilson’s announcement, UK annual domestic aluminium production was 38,200 tonnes compared to a UK annual consumption of 360,500 tonnes.1 The two new smelters were to be financed by governmental loans and grants and were to produce 200,000 tonnes annually between them whilst being powered by two newly constructed AGR nuclear power stations – a first for aluminium production globally. British Aluminium (BACo) and a consortium headed by Rio Tinto Zinc (RTZ), both multinational aluminium companies, tendered for and won the right to operate the smelters locating
them at Invergordon in Scotland and Anglesey in Wales respectively. The paper
charts the genesis of the smelters and details the diverging experiences of each
company in their dealings with the UK government during the construction and
operation of each smelter, focusing specifically on the contracts agreed between each company and the government for the provision of electricity for the smelters.
Consistent within this discussion is an analysis of the failure of the Invergordon
smelter and reasons for its closure in 1982 in comparison to the continued operation of the Anglesey smelter. The paper explores the complex motivations on the parts of both companies and government for the creation and operation of the smelters. For the companies the issues of profit motivation, market accessibility and comparative advantage were key in their decision to tender for the smelters. For the government the issues of joining the European Free Trade Association, the balance of payments, regional economic development and technological modernity were primary motivations behind pursuing what was a massive increase in capacity in domestic aluminium production. Consequently the paper is divided into two parts focusing firstly on BACo and RTZ’s experiences of the smelters project and secondly on the role the UK government played in their creation and subsequent operation.