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UK Steel Industry

Volume 598: debated on Wednesday 15 July 2015

I beg to move,

That this House has considered the future of the UK steel industry.

I am grateful for the opportunity to introduce this important debate, and I am grateful to hon. Members for attending. I welcome the Minister to her new role. She has already surpassed her predecessor, the right hon. Member for West Suffolk (Matthew Hancock), by attending this debate. She should not worry because I will be positive and compliment her, and hopefully she will compliment the all-party group on steel and metal-related industries by providing good answers to our questions.

The steel industry is a vital strategic foundation for the UK. Steel is fundamental to strategic sectors such as automotive, construction and energy. Being infinitely recyclable, steel is perfectly suited to sustainability. Like those of many hon. Members here, my constituency has a great and proud history rooted in the production of steel and associated products, and I hope that steel will play a strong role in the future of my area and my country.

The manufacturing of steel products makes a significant contribution to the British economy. Exports of British steel were worth £4.9 billion in 2013 and contributed £2.4 billion to the UK’s balance of trade. The sector’s overall contribution to the UK economy is worth some £9.5 billion a year. It underpins many other economic activities and will continue to do so for the foreseeable future. The industry provides jobs for thousands of people and supports domestic businesses and employment in the supply chain, with associated knock-on benefits for the national economy generated by tax revenues.

During the previous Parliament, the Government said that they would take swift and robust action by introducing compensation payments in relation to the EU emissions trading scheme in 2013, carbon price support in 2014 and making a commitment to commence payments in relation to renewables levies later this year and next year, but the industry faces a number of urgent and critical challenges today if it is to succeed tomorrow. The need for major ongoing investment will continue, and a meaningful partnership between the industry and the Government is required to overcome those challenges.

The changing nature of the economy means that the UK now imports more of the steel it consumes, largely in the shape of finished goods. In 1970, 90% of the steel consumed in the UK came from domestic production; that share is now less than 20%, with consumption broadly the same. That has compelled the UK metals sector to become increasingly export focused, which exposes us to shifting wider demand patterns and movement in exchange risks, as we have seen recently. Meanwhile, the UK remains open to imported steel material from as far away as China.

The UK steel sector continues to suffer an ongoing economic crisis. The service sector-led economic recovery has left steel-consuming sectors, such as construction, between 5% and 10% below 2007 levels; and recovering activity in such sectors has been less steel-intensive. UK steel demand in 2015 is forecast to be 75% of pre-recession levels, compared with 94% in Germany and 180% in China. Such demand levels are a real problem for a capital-intensive business such as steel.

High levels of steel imports are another challenge faced by the industry. Members of the APPG, of which I am chair, are increasingly concerned about the dramatic increase in UK steel imports, most notably from China. Steel imports from China have doubled in the first four months of 2015 compared with the same period last year.

Does my hon. Friend agree that the Government should adopt the charter for sustainable British steel and bring that standard into their procurement practices? That would help to tackle some of the import problems that he outlines.

My hon. Friend makes an excellent point, which both the APPG and EEF, the manufacturers’ organisation, have been making for some time. I hope the Minister will respond on that.

Compared with the same period last year, some products are registering truly staggering increases in imports of between 1,000% and 3,000%. The primary cause of those increases is the slowdown in Chinese construction activity, which has prompted certain Chinese producers to seek new markets in which to dump excess production. Those producers have come to the UK because they are already accredited under the British accreditation scheme to sell in far eastern markets such as Hong Kong and Singapore, which use the same accreditation scheme.

The APPG is committed to free trade, but what we are currently experiencing with some steel products cannot be considered free trade. The Government need to take a more proactive approach in such cases—some would say that they need to adopt industrial activism—and I welcome the news that, in last week’s European Commission anti-dumping committee, the Government voted in favour of maintaining anti-dumping duties on wire rod. The Minister heard my colleagues on that issue and took action. In a short period of time, she has been an infinitely better Minister than her predecessor. I will keep praising her in the hope that we get even better answers as the debate continues.

Loss of sales of the magnitude we are seeing now is unsustainable in the longer term for the one remaining British producer of rebar, Celsa, which is based in the constituency of my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). The argument is not about creating barriers but about ensuring a level playing field not only in this case but in future anti-dumping cases, such as those on reinforcing steel bar, grain-oriented electrical steels and cold-rolled steels, which are all at various stages of investigation by the European Commission anti-dumping committee.

The steel industry is not all doom and gloom. An industry that remains innovative in which people continue to invest will create direct jobs, skills and broader regional economic growth. The steel industry has the potential to enjoy a long, sustainable, innovative and productive future. Earlier this month, for example, BOC, the biggest industrial gas company in the UK, signed a 15-year agreement to supply industrial gases to Sahaviriya Steel Industries UK, a major integrated iron and steel manufacturing facility based on Teesside in the constituency of my hon. Friend the Member for Redcar (Anna Turley) at the Teesside Cast Products site. The agreement is one of the largest gas contracts ever awarded in the UK. There has since been a turnaround, and the agreement represents a huge vote of confidence in the long-term sustainability of steelmaking on Teesside and the wider UK.

Another example, again from Teesside, is the cluster of energy-intensive industries in the Tees valley that recently set out a bold plan for the UK to lead the world in combining a growing industrial base with substantial reductions in carbon emissions. What is planned will be Europe’s first industrial carbon capture and storage network. CCS is a group of proven technologies that can capture, transport and permanently store up to 90% of carbon dioxide emissions produced by burning fossil fuels, thereby preventing them from entering the atmosphere. To date, the focus in the UK has been on commercialising CCS for electricity generation. Teesside Collective is an important departure; its premise is that a range of industries will be able to capture their emissions, plug them into a shared pipeline network and send them for permanent storage under the North sea. CCS is significant for the steel industry, as an energy-intensive industry, because the EU emissions trading system is likely to remain the primary driver of reducing industrial emissions up to 2030. Following the agreement of a new EU climate change package in 2014, sectors within the EU ETS will collectively need to reduce emissions by 43% between 2005 and 2030. Such reductions may be hard to achieve for sectors such a steel, but that type of programme offers a high-tech solution.

Projects such as the Teesside Collective may be crucial for the long-term future of the steel industry, and I welcome the support that the project has received from the Department of Energy and Climate Change. It is vital that the Government are proactive in supporting the steel industry. Such support does not have to consist of intervention similar to that in Italy, where the largest steelworks is in the process of being nationalised—incidentally, it is one of the worst-polluting steelworks in the EU. Government support could take the form of policies such as competitive energy prices and business rates. Following the review that ended in June, a swift, positive response is now required.

My hon. Friend has talked a lot about energy prices, which are a problem. If energy costs move against a plant, it does not matter how efficient the plant is; it will be difficult for it to compete against foreign competition.

My hon. Friend mentioned business rates. As we know, the lack of investment in machinery and technology is a major reason for the United Kingdom’s productivity crisis. The steelworks at Port Talbot in my constituency invested £185 million in a new blast furnace, which led to a £400,000 increase in business rates. Does he agree that we need to have a business rates holiday until the review is completed at the end of 2015? It is urgent that we increase competitiveness and productivity.

I thank my hon. Friend for that question. He makes an excellent point. To encourage further investment, which we have seen in Port Talbot and across the steel industry in certain areas, we need a response from Government about business rates, so that there is no deterrent to further plant and infrastructure investment by the private sector.

Further integration into industrial policy and essential long-term national infrastructure subjects that are actually followed through would give companies the green light to invest. At present, too many infrastructure projects fail to incorporate British-made products into their design. Government can promote procurement strategies that support domestic manufacturers, encouraging innovation and job creation by signing up to the UK Steel charter for sustainable British steel.

My final points relate to the people involved in the UK steel industry. At the end of May, we stood on the brink of the first national strike in the steel industry for over 30 years. That action, which included a 24-hour stoppage, was threatened after Tata Steel decided to axe the final salary benefits of the British Steel pension scheme. It was only avoided following an 11th-hour deal between unions and Tata Steel after Government advisers and the Advisory, Conciliation and Arbitration Service were called in. Under the modified scheme, steelworkers who are given approval to retire at 60 instead of 65 years of age will receive new ex-gratia payments from October 2020. Today, the ballot of union members over whether to accept changes to their pension scheme closed, and employees at the Tata Steel works in Scunthorpe and other places are expected to deliver a massive vote of confidence for the proposed changes to the British Steel pension scheme. That demonstrates how constructive and positive industrial relations can be. We want to maintain that and we have maintained it for over three decades. I hope the Minister takes that point back to her ministerial colleagues, especially in light of today’s news.

To reinforce the point that my hon. Friend makes extremely well about the history of pragmatism in the industry, is it not symbolic that we were on the verge of the first national steel strike since 1980 and the one before that was about half a century earlier? The industry has a good history of positive industrial relations that can be continued into the future.

My hon. Friend is correct. The employees in the industry know that things could be shifted at any moment. In a globalised economy where capital can move in seconds, there is an understanding and a traditional trade union ability to get round the table and negotiate. Michael Leahy, the former general secretary of Community, always said that we believe in the force of argument not the argument of force. However, when an employer, or indeed a Government, tries to deny the democratic rights of employees in the workplace, it has to be taken into account. I hope the Minister will take that point back to her ministerial colleagues.

I mention pensions because when we are debating issues such as energy prices, productivity, emissions targets and so on, it is easy to forget that many of the communities we represent have been built from the hard work of steelworkers over generations. In the previous Parliament, I, alongside hon. Members here, pledged to stand up for steel, and that includes defending its workers, who have contributed a huge amount of their lives and expect a decent pension at the end. I do not think that is too much to ask.

The APPG members here have asked to meet the Secretary of State for Business, Innovation and Skills, and I believe that the vice-chair of the group, the hon. Member for Corby (Tom Pursglove), repeated that request in Business, Innovation and Skills questions. We would love to meet the Minister, if an audience with the APPG would be acceptable to her. We have also written to the Select Committees on Business, Innovation and Skills, which my hon. Friend the Member for Hartlepool (Mr Wright) chairs, and on Energy and Climate Change, as well as the Treasury Select Committee, asking them to investigate matters.

I thank my hon. Friend, the chair of the APPG, for sending the Select Committee that letter. The Committee has not discussed it yet, but may I say on the record that I believe that the steel industry is vital to the future of manufacturing and the prosperity of this country? We must do all we can to ensure that it is innovative, competitive and viable for the long term. I will certainly push that point in the Committee.

I thank my hon. Friend for that response.

We know that companies in the steel industry have already put in place future budgets for the compensation mechanism that will come through as a result of the Chancellor of the Exchequer’s previous commitments to a compensation mechanism. We need clarity and evidence to show that the Government are acting upon it. We also need the Select Committees to look into business rates, EU ETS decarbonisation, and the future of the industry in relation to skills. We have a workforce who are predominantly in their late 40s and early 50s. The issue might not be the lack of capital; it might be the age profile of the workforce. We need to take that on board and be serious about it.

We also need to look at the time it takes to train someone, whether in the processing or on the craft side. For example, I recently talked to Roy Rickhuss, the general secretary of Community, which is my trade union, and he said that it takes nearly three years to train a waterman who works in a blast furnace. That is probably the most important job in the plant: he is the guy who keeps the molten iron away from the water. Anyone who has ever witnessed a breakout, which is an unfortunate and serious event, knows how dangerous it can be. That job takes two to three years to train for. We need industrial activism, which does not just go to companies as urgent investment and does not just have public funding that supports that investment, but that looks at how we ensure that there is a succession plan for skills in the industry.

It is a pleasure to serve under your chairmanship, Mr Chope. I congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate. If there was a criticism to make, it would be that it is unfortunate that it is only a 30-minute debate. If anyone is interested in my views on this, I think it ought to be a 90-minute debate, and I would have it in the main Chamber.

It is important that we discuss the problems and difficulties that face our steel industry. I am particularly interested in looking at solutions. I want people to come forward with ideas about how we solve the many problems that we know our steel industry faces. There is no debate; we absolutely agree about the value of having a good, strong British steel industry for all the reasons the hon. Gentleman identifies.

It is right to say that we agree on the problems. We know that we have huge overproduction across the world and that that has been a real challenge for the British steel industry. We also know that there has been a marked reduction in demand. We can discuss and debate why that might be, but the harsh reality is that that reduction has taken place. I am confident, given the economic success that we have had, that demand will rise in this country. Unfortunately our economic success has not been reflected across the globe, but there will be an upturn, which is why it is important to keep steady. It will come good, even though we have overproduction, because demand will rise.

We also agree that we have a problem with the cost of energy. The steel industry is a very high consumer of electricity. We have overly high electricity prices for our industries, particularly the electricity-intensive industries, that are so heavily reliant. We call them EIIs in the Department for Business, Innovation and Skills, and the hon. Gentleman and others will be familiar with them. The cost of electricity is a serious problem for our steel industry. We must look at that, but when we do so we must understand that someone would have to pick up the bill if we were to make a move on costs to EIIs, and that may not be an attractive proposition. However, I completely understand the burden the current electricity pricing system places on EIIs—I get it.

The other matter, which was raised by the hon. Member for Aberavon (Stephen Kinnock), is business rates. I know that concerns the hon. Member for Hartlepool (Mr Wright) as well, because he was nodding with great vigour from a sedentary position, and rightly so. It is a problem. It is hugely ironic, as the hon. Member for Aberavon said, that in Port Talbot people invest huge amounts of money and bizarrely get clobbered for doing the right thing by the huge rise in business rates on the other side. Sheffield Forgemasters International in Sheffield is paying £1 million a year in business rates.

As we all know, the difficulty is that if we were to do something about business rates for our steel industry, people would ask: why not do so for all the other industries? They would all be queuing up. We are reviewing business rates. We want to listen to everyone, which is why I am happy to work with the new Chair of the Select Committee on Business, Innovation and Skills—I congratulate the hon. Member for Hartlepool on his election. We know we must do something about business rates. I want us to take a radical approach.

Those who were Members of the last Parliament will know that the new Minister is a breath of fresh air when it comes to passion for and commitment to the steel industry. In the last Parliament, the Government were working with industry to publish a UK metals strategy. Can she update the House on that work? Is the strategy ready for publication and consideration by the House?

I have some words on that. I have abandoned my speech, which will get me into terrible trouble with my officials, but I will read the next bit out rather than ad lib, because then I know it will be right.

I am pleased that the metals sector, including the steel industry, is developing a new national metals strategy. That has been facilitated through the Metals Forum, a grouping of 12 trade associations, including UK Steel, with which BIS has regular dialogue. The publication of the strategy will bring metals into line with other important foundation sectors, such as electronics and chemicals, which have led and developed their own strategies. We have been pleased to be able to fund some of the work, both for the strategy itself and for the initial scoping study, and we have seen some of the output that has emerged, which is of high quality. The public document is nearing completion and is likely to be published in early autumn. We expect it to provide a framework for our work with this sector in the future.

Hopefully that answers the hon. Gentleman’s question. It may not give the detail, but that document will be published in early autumn. I will just put on the record that I am, of course, more than happy to meet the groups that have been established to discuss how we can help our steel industry.

Mr Chope, how long have I got? Am I to go to 11.30 am, or are other Members able to make speeches? I think the answer is no. I am thinking of the hon. Member for Llanelli (Nia Griffith), who is on the Opposition Front Bench. Does she get a speech?

I am sorry about that. I will happily take interventions, but the hon. Member for Middlesbrough South and East Cleveland will want to sum up in any event.

I do not know whether the Minister intends to cover this point, but I will ask her now: should the UK Government follow the lead of the Welsh Assembly by endorsing the charter for sustainable steel?

The short answer is that I need to make more inquiries about that issue, and of course I will write to the hon. Gentleman about it.

Yesterday I met Karl Köhler, the chief executive officer of Tata Steel. It is absolutely clear that his company will face huge challenges in the future; he has been very up front about that, and I understand that. My attitude—which hopefully was demonstrated last week, as has already been identified—is that this Government will and must do all we can to help the sustainability of the steel industry.

That is why I was so keen that we vote as we did about the threat of certain Chinese imports of certain steel products where there is good evidence that—unfortunately —China has been dumping. It is right that the EU should take the measures we are taking. I was so keen that we vote in favour of those measures that when the vote from the UK delegate was cast in favour of what many will say is a protectionist measure, although I do not have a problem with it, apparently it was necessary to go back to make sure, because it was the first time that it had happened and people were so shocked by it. I hope that the message goes out to all involved in the steel industry that I take this matter incredibly seriously.

The steel industry is a very important part of our manufacturing sector, it is important to our country and we have to do everything we can for it. However, the challenges are enormous and we should be under no illusions about that, and of course it is not only Tata but all the other steel companies that face real difficulties.

I will return to my speech—in fact, I will start it, or rather jump into the middle of it. The best way that the Government can support UK steel companies is through a successful economy and successful steel-using industries. That is why I take the view that we should stick with the plan that we started under the last Government. We will continue with it. Our ambition is to create the right business environment for free enterprise and to remove barriers to productivity and growth within sectors, including by deregulation, promoting fair competition and simplifying the business landscape. The Government work closely with the steel industry on a large number of issues, and that will continue.

Yesterday in the main Chamber, I thanked the Minister for her work on the anti-dumping measures. On supply chains for Government projects, we know that it is possible without breaking EU rules to, let us say, make it a bit easier for our supply chains to get the work. What will she do to get the Government to encourage and help the supply chains to make the necessary bids for the expected Government projects?

The hon. Lady makes a very good point and I thank her. I will certainly go back to my officials about that issue and discuss what can be done. Obviously, I would wildly encourage anyone within the supply chains to buy British-made steel; that is incredibly important for all the obvious reasons and because the steel is of such high quality.

In his opening remarks, the hon. Member for Middlesbrough South and East Cleveland talked about the skilled workforce. It may be that we have to revisit that issue, to ensure that apprenticeships are encouraged and that younger people are brought into the industry. However, the workforce in the steel industry are highly skilled.

Of course, there are certain niche sectors of the steel industry where we do particularly well and we rightly have a worldwide reputation. However, I will come back to the hon. Lady. Perhaps I will write to her about what more we can do, because the state aid rules are a real problem for us.

I am obviously very grateful, as are all members of the all-party group, to Ministers for their willingness to talk to us and engage on the issues that we are discussing. However, I would be interested to know a little about the up-to-date thinking on carbon taxation and the support available to businesses that are tackling that big problem.

I think I have made my own views very clear. I am hugely aware of the difficulties that the problem causes, because it is undoubtedly the case that our electricity costs are some of the highest in the whole of Europe, if not the world, so we have to look at them. However, we cannot simply get rid of these things; everything comes with a cost, the burden of which may have to be borne by somebody else somewhere along the line. Nevertheless, we are actively looking at that issue.

I really appreciate the Minister’s openness, her willingness to engage with us on this issue and her positivity towards the UK steel industry, but on the point that my colleague the hon. Member for Corby (Tom Pursglove) raised, one of the most immediate and positive solutions that the Government could adopt, which would send a good message to the steel industry, is to commit to implementing the outstanding parts of the energy-intensive industries compensation scheme. Can the Government confirm when they will deliver that compensation scheme, which has already been promised and announced, and will they consider bringing forward compensation for the renewables obligation?

As I say, we are having a debate between different Departments, as the hon. Lady might imagine. I thank her for her contribution and I hope that we can solve what is undoubtedly a problem, but even if we were to do the right thing with the cost of electricity, that would not solve all the problems for the steel industry; the cost of electricity is just one of the problems. I want people to come forward with solutions to help me in my job, to ensure that we do everything we can to help our steel industry and to grow it in certain areas, because, as I said, we do extremely well in many niche markets.

As I said earlier, yesterday I met Dr Karl Köhler, the chief executive officer of Tata Steel. I am looking forward to meeting Luis Sanz of Celsa, which is obviously another big player in this industry, and last month I had the pleasure of meeting Gareth Stace of UK Steel, who did not hold back in giving his assessment and some parts of his wish-list. As hon. Members know, and as I have already alluded to, EU state aid rules limit the direct help that can be offered to steel companies. Research and development, environmental protection and some training can be supported, but we cannot provide operational aid; I think that we are all aware of that. Nevertheless, we work within those strictures to provide all the support that we can reasonably provide to ensure a competitive future for the UK steel industry.

Mr Chope, we really ought to have 90 minutes to debate this issue. I will reiterate that I am more than happy to meet hon. Members and discuss it further, and I congratulate the hon. Member for Middlesbrough South and East Cleveland on securing this debate today, which he will now sum up, and let us hope that we get a longer debate on this issue next time.

Thank you, Mr Chope. I really appreciate it.

I thank the Minister for her very positive and warm words about the industry. In the short period of time that she has been in situ, she has demonstrated that she is a far better Minister with responsibility for steel than her predecessor. With her support and advocacy within the chambers of Whitehall, we can get even more positive results.

I will end by talking about the compensation mechanism. That was a specific promise given by the Chancellor. We need to see information and evidence about that. I would like to work with the other members of the all-party group and the Minister in any meetings that we are able to have, whether they are with the Secretary of State for Business, Innovation and Skills or indeed with Treasury Ministers, so that we can get past the difficulties between Departments that the right hon. Lady referred to.

Nevertheless, I warmly welcome the Minister’s words today and I hope that we can build a working relationship in the future.

Question put and agreed to.

Sitting suspended.