Skip to main content

Tata Steel

Volume 586: debated on Thursday 16 October 2014

(Urgent Question): To ask the Secretary of State for Business, Innovation and Skills if he will make a statement on the proposal for Tata Steel to sell its long products division, and the resulting effect on the economy, manufacturing capability and employment in the United Kingdom.

Tata Steel yesterday announced that it is in negotiations to sell its long products division based in Scunthorpe. At the same time, it has committed to invest further in its Port Talbot strip products business as it focuses its European business on strip products. I can understand that any announcement of this sort brings uncertainty, and we will do all we reasonably can to support the companies in ensuring a competitive future for the business.

Hon. Members will know that, over the past four years, we have seen steel production restart in Redcar, we have introduced support for energy-intensive industries and steel production in the UK is higher now than it was in 2010. The steel industry has an important role to play in generating future economic growth. It underpins a number of key advanced manufacturing sectors, and sustains the livelihoods of many local communities.

Decisions on company ownership are of course commercial matters for the companies involved. Nevertheless, we are working with the metals sector to develop further our metals industrial strategy. The Government believe that there is a sustainable long-term future for the steel industry in the UK.

We have already taken the following actions. We are in contact with both companies to work to secure the future of the business. In India this week, my right hon. Friend the Secretary of State for Business, Innovation and Skills met the global head of Tata, who re-affirmed his commitment to the British steel industry. The national infrastructure plan identifies a pipeline of more than 500 projects—costing about £250 billion to 2015—almost all of which need steel. That includes £1.4 billion in railway infrastructure, and 95% of the steel for the UK’s rail network will come from Tata Steel for the next five to 10 years. We have of course reduced energy costs, including through a £7 billion package for energy-intensive industries.

After decades of decline, steel production in the UK is rising, and we will not rest in our determination to ensure that manufacturing, including steel, has a strong future in our country. I commend this statement to the House.

Thank you for granting this urgent question, Mr Speaker. The House will appreciate the uncertainty and anxiety, as the Minister said, that yesterday’s announcement by Tata Steel will have caused for thousands of steelworkers, their families, affected communities and firms throughout the manufacturing supply chain.

I want the Minister to respond on four issues. First, steel is a vital foundation for much of the UK’s manufacturing supply chain. The UK is the leading global player in industrial sectors such as aerospace, automotives, construction and energy. The production of steel in the UK underpins—the Minister himself used that word—much of that competitiveness. Britain’s largest steel manufacturer is preparing to sell half its capacity, so what contingencies have been put in place to maintain and enhance the skills and manufacturing capability in this industry, and to ensure that they are not permanently lost to the UK?

Linked to that first point, what commitments have the Government obtained from the potential new owner on the maintenance of existing sites and industrial capability, the safeguarding of jobs, and additional investment? How binding are any of those commitments? Is the Minister concerned by the unions’ criticism of the absence of any consultation or communication with the work force so far, and what will the Government do about that?

Thirdly, the sale affects sites not just in Scunthorpe, but throughout England and Scotland. What discussions have the Government had with their counterparts in Scotland to ensure that there is a co-ordinated and united response for the good of the steel industry in the United Kingdom?

Finally, what will happen if the negotiations on the sale break down? It is clear that Tata wishes to divest itself of its long products division. What active role are the Government taking in the maintenance of the UK’s long products capability for the long term? What are the implications for the Government’s so-called “march of the makers”, which places high-value manufacturing at the heart of the economy? Should not an effective industrial strategy consider, identify and mitigate such risks? It is not good enough for the Government to say, “Let’s wait and see. This is a purely commercial consideration.” They need to show that they are prepared to act for the long-term good of the steel industry and UK manufacturing.

First, may I say that there is a remarkable amount on which the three main parties agree? I will go through the hon. Gentleman’s questions in turn.

The hon. Gentleman is right that steel underpins, quite literally, a huge amount of manufacturing and construction activity in the UK. We have taken strides to strengthen the skills provision for manufacturing, not least by strengthening and expanding the apprenticeships programme, but also more broadly. Should there be changes in employment, we will be there to ensure, as we do everywhere in the country, that people have the opportunity to reskill. However, that is not the situation at the moment because this is a sale.

On the hon. Gentleman’s point about the sale, we are consulting on strengthening the takeover code, as he knows, to ensure that the assurances that are given are binding. He talked about consultation and communication with the work force. Of course, the sale was announced yesterday, hence that is when the consultation and communication started. Although we are at an early stage, with the memorandum of understanding having just been announced, I would point out that the proposed purchaser brought a long products plant in Italy back into operation last year. We will, of course, be in constant communication with the proposed purchaser and Tata, as well as with the Scottish Government when devolved issues are concerned.

Finally, on the big picture of the long-term future of the steel industry, the Government have overseen an increase not just in the amount of steel that is produced, but in employment in the steel industry. Far from the fall of 8 million tonnes of steel that we saw between 1997 and 2010, there has been an increase under this Government. Clear action is being taken and we will not rest. While we will support all those who may be affected by this decision, that is by no means the path down which we are going. We will keep working to expand manufacturing, as we have done over the past four years.

This matter is not just about Scunthorpe. The Tata beam mill in my constituency makes beams of such high quality that they are in nine of the 10 tallest buildings in the world and the new World Trade Centre in New York. The Government must do everything they can to protect that capability. I thank the Minister for the steps the Government have taken on energy costs, but I ask him to look at the extra taxes that are still paid by energy-intensive industries in this country, which reduce their competitiveness and dwarf the extra levies on financial services.

I pay tribute to my hon. Friend’s work in this area. The work that he did to restart steel production in Redcar was widely noticed. By getting on the plane around the world to bring investment into that plant, he bears personal responsibility for the restarting of that steel production. He makes an important point about the costs for energy-intensive industries. There is no point in having an economy like the one we had in the past, in which the costs that are laid on energy-intensive industries merely mean that the production moves to other jurisdictions, often with higher carbon emissions. We have taken £7 billion-worth of action, but I take on board his call for more.

My colleagues the hon. Members for Brigg and Goole (Andrew Percy) and for Cleethorpes (Martin Vickers) share my concerns. They are not here today because they are hosting a visit of the Under-Secretary of State for Transport, the hon. Member for Devizes (Claire Perry) to northern Lincolnshire. The Minister says warm words, but we need actions. He mentions the pipeline of investment in steel products coming down the line, but how will the Government ensure through procurement that UK-made steel is used, not foreign steel?

I pay tribute to the work that the hon. Gentleman has done alongside his parliamentary neighbours. On getting UK content into UK projects, we must ensure, within EU competition rules, that the market is competitive; we cannot restrict procurement to UK projects. Within that, however, we can do everything to support UK suppliers into projects. For instance, the fact that 95% of the steel for the UK’s rail network is expected to come from Tata is important. We work on supply chain management to strengthen supply chains. I am sure the hon. Gentleman will agree that we cannot close the borders for procurement, not least because we must ensure value for money for the taxpayer.

May I direct the Minister to an article in The Economist that mentions Gary Klesch, head of the Klesch company, which is thinking of taking over this Tata unit? It states that:

“Europe needs people like Mr Klesch…he brings discipline and fresh ideas.”

Will the Minister reject the doom-mongering of the Labour party, and support Gary Klesch in making the most of this business?

I and the Government will do everything that we reasonably can to secure the future of steel production. Being open to international investment means that there are other opportunities; Tata itself is an international investor. None the less, while I acknowledge my hon. Friend’s argument, we must be vigilant and careful to ensure that should any changes be made, we are ready to support the local community.

The Minister has already said that he will talk to Gary Klesch and the Klesch group very soon, but will he also extend that courtesy to trade unions prior to meeting the Klesch group on the issue? Secondly, given that Tata has made this announcement about 50% of its European operations, which are primarily based in the UK, will the Minister also talk to Tata about its future developments in strip and tube? These types of decisions obviously lead to uncertainty, and we do not want to be here again in a few years’ time.

I commend the hon. Gentleman for the tone of his question, and he is absolutely right. We are having those conversations—the Business Secretary is in India as we speak having those conversations with Tata. Tata also has big strip product operations in the Netherlands, but the other announcement it has made on investment in Port Talbot demonstrates its commitment to steel in the UK.

Given that 2 million more people have been employed in the private sector since the last general election, does the Minister agree that that should be a source of optimism for anyone who loses their job that they will find a new one?

Employment in steel manufacturing has gone up in the past few years, and unemployment in all the constituencies affected has come down. None the less, first and foremost my task is to ensure that we support the continuing development of steel manufacturing in the UK, and where there are changes to employment, that we support those who are affected. We will be vigilant in doing so.

Be in no doubt that thousands of steelworkers, suppliers and contractors had a sleepless night last night and woke up this morning with great fear for the future. That is not me talking up a doomsday scenario; that is the reality of working in heavy industry, especially the steel industry in the United Kingdom. Will the Minister give me a more specific answer than he gave to my hon. Friend the Member for Hartlepool (Mr Wright)? It is now more than 24 hours since the announcement. Have the Government contacted the Scottish Government? If not, why not, and when exactly will they do so?

The Government are in constant contact with the Scottish Government. It is important to know what is devolved and what is not. Responding to changes in employment is a devolved matter, but support for the tax situation around energy-intensive industries is a reserved matter, so we have to make sure that each Government play their appropriate part.

Does my hon. Friend not agree that by lowering corporate taxes, ensuring that energy-intensive industries have preferential rates on energy prices, and creating a well-skilled work force and record numbers of apprenticeships, this Government are creating the potential for people to invest in industry in this country in the future?

It is not by accident that there has been an increase in steel production in the UK in the past four years. It has been achieved by active involvement, not only through the national infrastructure plan and getting procurement right, but through making the tax environment better and ensuring that people can invest in this country with confidence for the long-term future. It has also been achieved by the personal effort of Members of both coalition parties to support steel in the UK.

The Minister talks about the tone adopted by my colleagues and he is correct about that, but the tone from him and some of the comments from Government Members seem to be of an absolute acceptance that there will be job losses. I would be a little more impressed if, rather than the complacency we see from the Minister, the focus was on the preservation of the industry. If Gary Klesch did so well in Italy, then we should hear from Reuters, which says he has a record of swooping on ailing businesses in the United States—otherwise described as vulture capitalism, which I think is described as asset stripping in this country. What steps do the Government intend to take to ensure that that does not happen? There are 700 jobs at risk in our constituencies.

We are absolutely clear that the potential of the future for steel making in the UK is bright. We have taken action to remove some of the barriers that were put in place by the previous Government. I therefore reject the overly partisan tone that has been taken at times, not least because of the amount of work that has been put in to make sure that we have a strong and bright potential future. That involves, for instance, not just the changes to the takeover code, but the substance of ensuring that it is more competitive to make steel in the UK.

I am extremely concerned about this situation. Steel is absolutely vital for manufacturing businesses in my county of Staffordshire, such as JCB, Alstom, Jaguar Land Rover and many others. It is critical that this core capacity is retained. What work is the Department for Business, Innovation and Skills doing to encourage British businesses to invest in the steel industry, given that the UK has one of the world’s premier centres of capital-raising in the City of London?

In the question lies part of the answer. We have great capacity for production in the UK of products that require steel. There is, therefore, a strong market. Through our industrial strategies, we make sure that we are taking a broad approach to bringing together suppliers in different industries and making sure that all of those opportunities are available. I return to the answer I gave to the hon. Member for Scunthorpe (Nic Dakin). We cannot close the borders, but what we can do is make sure that UK companies are in a good position to bid for those contracts.

This year has seen a dramatic increase in imports of steel products that are in direct competition with some of those made in the factories that are being transferred to Klesch. Will the Minister tell us what he is doing in response to the evidence we have that the quality and traceability of some of those products is not up to standard? What is he doing to support the work of the Certification Authority for Reinforcing Steels to ensure a level playing field for UK producers and to ensure safety in the construction industry?

We have introduced an industrial strategy that allows us to take account of all these issues. In particular, the metals sector is developing a strategy that I am sure can consider all the points the hon. Lady makes.

I am sure my constituents will be heartened to hear that both steel output and employment in steel manufacturing are higher than in 2010. Does the Minister assess the future for the UK steel industry as lying in specialised, high-valued-added steel products, in volume, lower-value-added production or in a combination of the two?

Our job is to support the industry in whatever commercial decisions it makes. Arguably, the UK is better placed for the high-end, high-quality, specialised steel making, but let us remember that Redcar brought back high-volume steel making to the UK, so I do not want to cut off any of these options; I want to support the development of all.

Those working in the steel industry in the north-east and elsewhere, and their families, will be increasingly worried by the pathetic laissez-faire attitude of the Minister. They want to know what he will do to support and protect the steel industry and the livelihoods it sustains in this country. In particular, on the point raised by my hon. Friend the Member for Middlesbrough (Andy McDonald), what protection will he give those families to ensure, for example, that their pension funds will not be raided by vulture capitalists?

When Labour was in office, there was no industrial strategy, but there is now, and clear action is being taken to support businesses, as demonstrated by the increase in outputs. In 1997, steel production was 18 million tonnes; it fell by almost a half to 10 million tonnes, but is now up to 12 million tonnes, which shows that we are determined to support the UK steel industry.

The Minister will be aware that many of the concerns about Tata apply to other steel manufacturers in the UK, including Celsa in my constituency. Does he agree that we have a significant problem, in certain markets, with dumping from countries outside the EU, particularly Turkey and China, which is causing huge challenges for those companies, as well as creating the energy problems we have heard about? Will he and the Welsh Secretary meet me, Celsa and others to discuss the challenges and to consider what urgent action can be taken to deal with them?

Of course, I would be delighted to meet the hon. Gentleman to consider what more we can do. As he knows, the Government’s record in supporting the steel industry is strong, and if we can strengthen it further, following his suggestions, I am absolutely up for that.

One thousand of my constituents are employed either directly in the steel industry or in related activities, so they are also very anxious about this matter. My constituency neighbour, my hon. Friend the Member for Middlesbrough (Andy McDonald), has talked about the asset-stripping record of the potential buyers of the site. How can I assure the workers that the Government will act to protect their jobs and not allow yet another international company to move Teesside jobs elsewhere?

We can support the steel industry, as we have been doing, and ensure that, if there is a transition, we support those affected. The central point, however, is that the best way to secure the jobs that are increasingly available in Stockton and elsewhere in the country—[Interruption.] Unemployment has fallen by almost 30% in Stockton; the hon. Gentleman should look at our economic record in Stockton, because there and elsewhere, there are more jobs available, while, nationally, unemployment is falling at a record rate. [Interruption.] Opposition Members might want to close their minds to the success of the Government’s economic record, but their voters who have jobs and who can therefore provide for their families do not close their minds to it; their livelihoods are enhanced by the support we have given.

I hope the Minister will return to the issue at hand, because the Clydebridge plant in my constituency has a proud industrial heritage, and could have—and should have—a great future as well. I want to take him back to the point that my hon. Friend the Member for Scunthorpe (Nic Dakin) made about procurement. The Minister said that he would not rest, so may I suggest one direction in which his activities could take him to ensure a proper, co-ordinated approach to procurement? The nationalists are not here, but recently we had the announcement of a Forth bridge crossing in Scotland, and initially it was announced that steel from China, not Scotland, would be used. Will his Department and the devolved Administration, where they are responsible, ensure that as far as possible UK steel is used for UK products?

That is an absolutely clear and direct statement that we can support. Where possible—a qualifier that I notice the hon. Gentleman used—we should ensure that we support the use of UK products. Of course, transport is a devolved matter, so I cannot take personal responsibility for decisions about bridges in Scotland. Nevertheless, making sure that we support the UK steel industry is, as I have demonstrated, a matter we take extremely seriously. I would be keen to work with the hon. Gentleman on ensuring that we have a bright long-term future for UK steel and support all those involved in the steel industry, as we have to date.