The decision to manufacture steam turbines for Rolls-Royce’s small modular reactors in Newcastle is important. It will return a major engineering capability to Britain after an absence of more than 20 years.

Siemens Energy plans to make the turbines at the historic Parsons Works. The investment is expected to create 550 skilled jobs. The factory will also service the turbines throughout their working lives, providing employment that could continue for decades.

The turbines will be used in three Rolls-Royce small modular reactors planned for Anglesey. Further reactors may be built in the Czech Republic and Sweden. Each reactor will be capable of generating 470 megawatts.

This is encouraging news for British manufacturing. It also raises an important question. How does such a large, centralised project fit into a future shaped by localism and a shrinking economy?

Localisation is not necessarily localism

Rolls-Royce describes the decision as part of its commitment to localisation. Manufacturing the turbines in Britain will certainly reduce dependence upon overseas production. It will create British jobs and help to rebuild a domestic supply chain.

That is localisation, but it is not quite the same as localism.

Localism is the movement of economic and social activity towards the places where people live. It involves local food production, care, maintenance, education, workshops and small businesses. It reduces dependence upon distant suppliers and energy-intensive transport.

A 470-megawatt nuclear reactor is not a local power station in this sense. It requires national finance, international supply chains, specialist regulation and connection to the national electricity grid.

The reactors will be situated in Anglesey, but their electricity will not belong principally to the surrounding communities. It will enter the national system and be distributed according to national demand and commercial arrangements.

The description “small modular reactor” can therefore be misleading. It is small in comparison with a conventional nuclear power station, but it remains an enormous and technically complex installation. It cannot be designed, financed, operated or decommissioned by a locality.

Rebuilding productive capability

Nevertheless, the return of turbine manufacturing to Newcastle has considerable relevance to localism.

Britain has allowed many of its productive capabilities to disappear. Machinery, electrical equipment and components for essential infrastructure are routinely imported. Once factories, workshops and skilled workforces have been lost, they are difficult and expensive to recreate.

The Parsons Works has an exceptional industrial history. It was established in 1889 by Sir Charles Parsons, whose steam turbine transformed marine propulsion and electricity generation. The turbine for Calder Hall, the world’s first commercial nuclear power station, was built there.

Returning large turbine production to Newcastle reconnects a modern project with that industrial inheritance. It means that Britain will recover some of the practical knowledge needed to construct and maintain essential equipment.

The effects could extend beyond the 550 direct jobs. The factory may support apprenticeships, engineering colleges, specialist contractors, metalworking businesses and maintenance services throughout the surrounding locality.

An economy cannot live indefinitely by consuming imported goods, providing services and increasing debt. It must retain the ability to make and repair essential things.

A national core supporting local economies

Localism does not mean that everything must be organised at village or town level. Some systems are too large or specialised to be provided locally.

A localist future is likely to have two levels.

The first would be a limited national core. It might include defence, telecommunications, the main railway network, specialist hospitals and major electricity generation.

The second would consist of numerous local economies providing food, care, education, housing, maintenance and everyday necessities.

Nuclear power belongs mainly to the national core. Its purpose would be to provide dependable electricity for activities that cannot function without it.

That electricity could then support local food processing, refrigeration, water supplies, sawmills, workshops, health facilities and small manufacturers. Nationally generated electricity would help localities meet their own essential needs.

The reactors would not themselves constitute localism. They could provide part of the framework within which localism develops.

The shrinking economy

The shrinking economy makes the proposed reactors both more valuable and more difficult to build.

They could provide secure electricity as fossil fuels become less affordable. At the same time, their construction depends upon the large and complex industrial economy that is beginning to contract.

Nuclear power requires enormous expenditure many years before any electricity is produced. The Anglesey project is intended to demonstrate commercial viability by the mid-2030s.

During that period, the Government may face declining tax revenues, rising borrowing costs and growing demands upon health and social care. It will also have to maintain roads, railways, water systems, public buildings and the electricity grid.

The Government will increasingly have to choose between maintaining existing essential services and financing new infrastructure. A project that appears affordable in a growing economy may become much less affordable when the economy is contracting.

Rising material and construction costs

A nuclear reactor requires large quantities of steel, concrete, copper and specialised components. Producing and transporting these materials requires energy.

As energy becomes more expensive, the cost of mining, steelmaking, manufacturing, transport and construction will rise. The costs of security, waste management and eventual decommissioning must also be met.

SMRs are supposed to reduce costs through standardisation and factory production. This advantage will only be realised if sufficient numbers of identical reactors are ordered.

Three British reactors may not be enough to provide the expected economies of scale. Orders from the Czech Republic, Sweden and other countries are therefore important to the commercial case.

If weakening economies cause orders to be postponed or cancelled, the anticipated cost reductions may never appear.

Continuing international dependence

The Newcastle decision reduces one important dependency, but the reactors will not be wholly British.

Reactor pressure vessels may be imported from South Korea or the Czech Republic. Other specialised components will also depend upon international suppliers. Even the Newcastle turbines will be manufactured by Siemens Energy, a German-owned company.

A shrinking world economy may make these supply chains less dependable. Manufacturers may close. Governments may protect strategic industries. Transport costs may rise. Countries may give priority to their own energy projects.

Bringing production home wherever possible is therefore sensible. It reduces exposure to international disruption and preserves skills that might otherwise disappear.

The Government’s objective of manufacturing 70 per cent of the components in Britain should be regarded as a measure of resilience, not merely a way of creating jobs.

The cost of the grid

Generating electricity is only part of the undertaking. The national grid must carry it to consumers.

Britain must maintain transmission lines, substations, transformers, control equipment and local distribution systems. Much of this infrastructure will require renewal or expansion.

In a shrinking economy, the grid may become increasingly difficult to finance. A declining industrial base could reduce total electricity consumption while leaving the country with high fixed costs. Fewer economically active consumers would have to support an expensive national system.

Electricity could therefore remain costly even if the reactors operate successfully.

Energy security does not automatically mean energy affordability.

Competition for skilled workers

Nuclear construction requires engineers, welders, electricians, inspectors and project managers. These skills are also needed to maintain railways, water systems, power stations and other essential infrastructure.

A shrinking economy will not necessarily release the right workers in the right places. It may instead create intense competition for a limited supply of specialist labour.

The Newcastle factory could help by providing apprenticeships and continuous employment. But 550 jobs will not recreate the enormous industrial ecosystem Britain possessed when Calder Hall and Sizewell B were built.

Skills take years to develop. They must be supported by colleges, workshops, suppliers and a dependable stream of orders.

Nuclear power will not restore growth

The greatest danger is the belief that new nuclear power will restore the growth economy.

Electricity is not a complete replacement for fossil fuels. Nuclear reactors do not directly provide diesel for tractors, excavators, heavy lorries, ships and construction machinery.

Some of these activities may be electrified. Doing so would require another enormous programme of manufacturing and investment. The reactors themselves will be built using an economy still heavily dependent upon oil, gas and internationally traded materials.

Nuclear power cannot reproduce the conditions of cheap and abundant fossil energy upon which the modern industrial economy was built.

It may help to preserve essential services within a smaller economy. That is a more limited purpose, but it is still an important one.

Reindustrialisation on different terms

The Newcastle announcement has been presented as evidence of the Government’s intention to reindustrialise Britain.

That should not be taken to mean that Britain can recreate the expanding industrial economy of the twentieth century. The energy and financial conditions that sustained that economy are disappearing.

Reindustrialisation in a shrinking economy will have to be selective. Britain must decide which productive capabilities are essential and ensure that they are retained. Turbine manufacturing may be one of them. Much discretionary production will not be.

The purpose of industry will increasingly be to maintain essential systems rather than to support ever-rising consumption.

This means producing equipment that can be maintained, repaired and used for many years. The servicing operation at Newcastle may ultimately be as important as the original manufacture of the turbines.

Build while the capability remains

There is an argument for proceeding while Britain still possesses the capital, skills, international purchasing power and industrial organisation needed to build the reactors.

These capabilities cannot be assumed to exist indefinitely. Delay could allow costs to rise until the projects are no longer possible.

This creates a difficult choice. Building the reactors will consume capital, energy and materials that could be used elsewhere. Failing to build them could leave Britain without enough dependable electricity to maintain essential services later.

The decision should therefore be based upon realistic expectations of a smaller economy. The reactors should be designed as part of an essential national core, not as instruments for restoring perpetual growth.

The shrinking economy strengthens the need for secure electricity while weakening our ability to finance it.

The return of turbine manufacturing to Newcastle is encouraging because it restores a valuable productive capability. But the ultimate importance of the reactors will not be measured by whether they revive the former growth economy.

It will be measured by whether they can provide affordable and dependable electricity for the essential national systems and resilient local economies upon which life in a smaller economy will depend.