I beg to move,
That this House has considered the steel sector deal.
It is a pleasure to serve under your chairmanship, Sir Henry, and I thank the House for granting the debate.
Hon. Members will recall that there was a period of time when we had debates about the future of the British steel industry almost weekly. Since then, the media circus has moved on, and with it the Government’s apparent concern, focus and attention. Let us be clear: Government engagement with steel evaporated once the crisis had dropped off the front page of the newspapers. Back then, the Prime Minister was a guy called David Cameron. As we know, he was first and foremost a PR man, so when the steel crisis hit his PR instincts went into overdrive. He needed to manage the story and get it off the front page as quickly as possible. Did he ever have any intention of tackling the underlying causes of the crisis—his Government’s abject failure to push through the policy reforms so desperately needed to create a level playing field for the steel industry? No, he did not. As the debate will show, David Cameron’s successor has simply picked up where he left off.
Just over two years ago, the closure of the Redcar steelworks had a truly devastating impact on the town and community; 3,000 people were put out of work, and of those who have since found work almost two thirds have had to take a pay cut. Many other businesses in the area have struggled, because every UK steel job supports at least three more elsewhere in the economy. Three months after the closure of Redcar, Tata Steel announced more than 1,000 job losses across Wales, three quarters of them at the Port Talbot steelworks in my constituency. About a month later came the devastating news that Tata Steel planned to close or sell its entire UK business. While the then Business Secretary, now the Secretary of State for Communities and Local Government, the right hon. Member for Bromsgrove (Sajid Javid), was enjoying a nice little Easter recess jolly to Australia, I was out in Mumbai with Community Union to present the turnaround plan to the board of the Tata group.
I congratulate my hon. Friend on obtaining the debate. Does he remember—he has missed it out of his chronology so far—the national steel summit held in Rotherham? It was not just the steel towns and their MPs that felt let down, but the leaders of Britain’s major steel companies and steel trade unions who were round the table that day as well. The promises of serious attention and action to follow, which were made two years ago at the national steel summit, have not been followed through.
My right hon. Friend is right. That was an important milestone, but there have been so many false dawns, and warm words matched by frozen actions.
I congratulate my hon. Friend on securing the debate and on the great work that he has done over a significant period to stand up for the steel industry. On the subject of broken promises, does he agree that investment in research and development is another big issue? Across the UK generally it remains stubbornly below the OECD average. The whole sector is now asking for increased R and D investment in steel, and the Government should deliver that.
My hon. Friend makes an important point. I think that in the minds of some Ministers, and others in the House, steel is seen as metal bashing and an almost primitive industry, but in fact it is at the cutting edge of many innovations that we desperately need to drive our economy forward. If we are serious about getting a broad-based manufacturing renaissance, it must start with investment in the steel industry.
It was clear that Tata’s initial preference was to close the business down rather than sell it, but thankfully we managed to persuade the company to shift its position from closure to sale. Thanks to the magnificent professionalism and dedication of the workforce and steel unions, the turnaround plan began to kick in. The performance of the business dramatically improved, and from a fire sale we got the slow burn that eventually morphed into Tata’s decision to remain. However, that happened only after the workforce, facing the prospect of either the closure of the Port Talbot works or the closure of their pension scheme, voted for pension restructuring. They put the future of their industry, livelihoods and communities before all else. Steelworkers and steel communities are like no others. If my hon. Friend the Member for Redcar (Anna Turley) were well enough to be here today, she would have told us of the incredible strength and resilience of her community, which has stood firm, united and resilient, just as she has fought tooth and nail for it since the closure of the works.
There have been many ups and downs in the British steel industry in the past few years, but three things remain constant. The first is the relentless passion and commitment of steelworkers and their communities, exemplified by the delivery of the turnaround plan and the vote on the restructuring of their pension scheme. The second is the Government’s indifferent and incompetent attitude, and the third is the key policy asks of the industry—business and workforce—which have remained fundamentally unchanged for well over two years. We have discussed those policy asks many times, but it would be remiss not to take the Minister through them, as this is her first time attending such a debate.
To take trade defence first, we asked the Government to stop blocking reform of the lesser duty rule, which means tariffs that we can impose on illegally dumped steel are capped at 16%, while the Americans can impose far higher duties. The Trade Bill is set to transfer the lesser duty rule to UK legislation after Brexit. We asked for meaningful action against illegal Chinese dumping, with proper trade defence instruments. However, as steelworkers were being shown the back door, No. 10 was rolling out the red carpet for Beijing. What was the result? We can now add the challenge of illegally dumped Russian and Turkish steel to that of Chinese steel.
Secondly, on business rates, there have been five Budgets in the past two years, and not one has acknowledged the industry’s concerns about the way business rates inhibit investment and hold us back from investing in plant and machinery; so of course no remedy has been proposed.
Thirdly, on the question of procurement, which I have been working on extensively with my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), the Government have utterly failed to translate their rhetoric into reality. The public interest test that they introduced proved inadequate. Our calls for a longer lead-in time for central Government contracts have fallen on deaf ears. The Government have resisted transparency, dumping the idea of mandatory reporting and refusing even to gather and hold the relevant data, let alone provide it to us whenever we have asked. Foreign steel has continued to be used on iconic projects such as the repair of Big Ben, the new Firth of Forth bridge, the new Type 26 frigates and all sorts of smaller refurbishment and development projects around the country.
On the most vital of issues, energy prices, there has been some tinkering at the edges but no attempt at all to tackle the root causes of our ludicrously uncompetitive energy costs. The Government found a chaotic resolution to the EU emissions trading threat—something that would have cost the steel companies tens of millions of pounds, owing to the mishandling of Brexit—but they have singularly failed to clear changes to the feed-in tariff and renewables obligation opt-out. On the central issue of energy pricing, which means that UK producers’ energy costs are more than 50% higher than those of our European competitors, nothing has been done, and it appears nothing will be done.
That brings me to the very matter that we are here to discuss: the sector deal for steel, which hinges on the issue of energy pricing. After publishing the industrial strategy White Paper, the Government asked all industries to present their sector deals—comprehensive packages about how their industry would work within a national industrial strategy. The steel industry did just that, by presenting a sector deal to Ministers that met all the requisite criteria back on 7 September.
That deal would see a 50% increase in investment, from £200 million to £300 million per year—an additional £1.5 billion of investment over the next five years. It would increase production capacity by 40%, from 10 million tonnes to 14 million tonnes a year. It would create 2,000 jobs, and would see 200 more apprentices trained every year. It would develop a low-carbon roadmap, and help to deliver a more efficient electrical system, almost doubling the industry’s demand-side response. It would see the industry pump an extra £30 million investment a year into R and D, which is an area, as my hon. Friend the Member for Torfaen (Nick Thomas-Symonds) pointed out, in which the UK is traditionally weaker than our rivals.
In return for all that value, all the steel industry asks is that the Government match the R and D funding, helping to establish the future steel challenge fund, which would bring together the steel value chain, from automotive to aerospace and from renewables to construction, to work in partnership towards a cohesive industrial strategy and a new kind of growth, unlocking exciting innovation and new opportunities. The deal asks for Government help in facilitating investment by providing access to commercially competitive loans, providing capital investment grants or innovative tax discounts linked to investment. Essentially, that would help the industry to unlock the monopoly on investment held by property speculators and quash the myth that investing in industry is risky.
Crucially, the linchpin on which all this untapped potential rests is energy prices. Our steel producers have to pay 55% more than their German competitors and 51% more than the French, which adds up to an additional cost of almost £50 million a year. As the sector deal makes clear, if the steel industry gets the help it needs, it will put every penny and more of that £50 million back into the industry, creating jobs, increasing capacity, innovating and creating new opportunities and value.
Does my hon. Friend agree that there is wide support for the sector deal right across the steel sector? It makes sensible and innovative proposals. Why do the Government not simply adopt it?
I agree with my hon. Friend. The sector deal has been submitted under the umbrella of UK Steel and EEF, but with the full participation and support of Tata Steel, British Steel, Liberty Steel, Celsa Steel and a number of other key players in the sector. The steel industry really speaks with one voice on this.
Without a cost-competitive energy environment, steel companies cannot invest in the future, and the industry can survive only when it has the potential to thrive. Steel is too important a product for our economy, our security, our communities and our standing as a nation for us to have to rely on others for it.
The fact that the UK produced some 8 million tonnes of steel in 2016, while China produced 808 million tonnes shows a vast difference. Does the hon. Gentleman agree—I think he is basically saying this—that it may now be time for the Government to enter into negotiations with the companies and also the unions to ensure that we have a manufacturing base for steel in future? We will not have one unless the Government act. It is time that they did.
I absolutely agree with the hon. Gentleman. As I will come on to explain, the sector proposal is the litmus test for the Government. We have had years and years of warm words, but this really is the moment to see whether the Government are serious about providing the support they say they want to provide.
Steel enables transport, construction, manufacturing, energy and consumer goods—you name it, Sir Henry, and if steel is not in it, it was almost certainly used to make, process or transport it. Steel is truly a foundation industry, and demand is growing. The report published last week, “Future Capacities and Capabilities of the UK Steel Industry”, showed that, by 2030, domestic demand for finished steel products will have grown by almost 2 million tonnes. That leaves almost 7 million tonnes of domestic demand to be met by the UK steel industry, which equates to a £3.8 billion opportunity per year.
That value is even greater if we consider all that steel goes into. Almost half the content of all cars built in the UK is British steel. In researching the “Steel 2020” report by the all-party parliamentary group on steel and metal related industries last year—I have a copy with me; I am sure the Minister has already read it, but I would be happy to hand it over—we heard from leading figures in the car industry that the presence of a successful domestic steel industry is a key determinant of where steel is sourced.
Steel is vital to the future of UK car manufacturing and innovation. Take the much-vaunted electric and self-driving cars, which were championed by the Chancellor in last month’s Budget. Along with the normal steel content of any car, what do hon. Members think their batteries are cased in? Steel. If we are to invest billions in that new technology, why on earth would we not invest in the capacity to monetise those innovations? If we do not have the capacity to manufacture, or the capacity to produce the steel for the batteries and the machines that manufacture them, we will lose out. The steel will be Chinese. The manufacturing and machinery will be German, and we will have spent billions on an idea that sees profit not in Port Talbot, Sheffield or Redcar, but in IJmuiden, Tangshan or Duisburg.
Despite investment in R and D falling by 90% over the past 25 years, the UK steel industry is still at the cutting edge. More than two thirds of steel produced in the UK today did not even exist a decade ago, so we should not let anybody tell us that steel is a sunset industry. It is an industry that is building a Britain for the future, which is why a go-ahead for the sector deal is vital. It is also important because steel is the ultimate economic and social multiplier. For every £1 of public investment in steel R and D, the return averages between £6 and £16. That means the £60 million transformation fund in the sector deal could add up to £960 million for the UK economy. I do not know about you, Sir Henry, but investing £60 million for almost a £1 billion return feels like a pretty good investment to me.
On average, steel jobs pay 40% higher than the average in the steel heartlands of Wales and Yorkshire and the Humber. Every steel job supports at least three further jobs in the local community and the national economy. Losing the steel industry would devastate towns such as Port Talbot, but the knock-on effects would be equally catastrophic. If the Port Talbot steelworks were to close, it would cost 40,000 jobs across Wales and the UK, costing the Government a total of £4.6 billion in benefits and lost tax revenue and reducing household spending in the economy by £3 billion over 10 years.
If we were to reshape the energy market, as the steel sector deal calls for, the most it would cost would be the equivalent of 57p per household per year. That is 57p a year against almost £8 billion in lost spending, tax and benefit payments if things were to go wrong. Once again, Sir Henry, that looks like a pretty good return on investment to me. There is a golden opportunity, with huge potential for growth. We should all applaud the Government for crossing the Rubicon and accepting the need for an industrial strategy, but the fact of the matter is that, if the Government fail to support the sector deal, that strategy will not be worth the paper it is written on.
Speed is of the essence. Steel companies only have so much capital to invest. That capital is spread across their global businesses, and if they cannot invest it here and now, it will go elsewhere. That is the nature of the beast. We have already seen Liberty spend almost £1 billion in Australia, and there are reports that British Steel—formerly Tata Long Products—is looking at an Italian plant. The clock is ticking and time is running out.
With the uncertainties of Brexit, the Government should be biting the hand off of anyone willing to invest at this time. Instead, steel companies have been fobbed off with all sorts of excuses. They submitted the sector deal on 7 September, but were only granted a meeting with the Minister at the very end of November—hardly the behaviour of a Government serious about supporting this foundational domestic industry. The fact is that the Government’s failure to engage on the steel asks set the tone. The sad reality is that trust between the Government and the steel industry has been shot to pieces. Warm words are no good to anyone if they are matched only by frozen actions.
I must correct the hon. Gentleman on a factual point: one of my very first acts as Minister was to visit the steelworks in his constituency and close by. I met the council formally to discuss the shape of the sector deal and subsequently three times after the presentation of the sector deal, and I have met and spoken to the companies on numerous occasions. He really must correct the record, because it is simply not true to say I only engaged with the sector after the sector deal was submitted.
I thank the Minister for her intervention. Conversations, visits and meetings are excellent, but the fact remains that the sector deal was submitted on 7 September, and a meeting was not granted with the steel industry until the very end of November. As the clock is ticking, the decisions about investment next year are drying up. It would be great to see rhetoric matched with reality.
An industrial strategy is not built on good will. A business cannot be built on Whitehall bluster, and communities cannot be sustained on platitudes. We all understand that an industrial strategy cannot do everything for everyone, but if the Government are serious about rebalancing our dangerously skewed economy, they must surely start by investing in the steel industry. With the steel sector deal, all that is being asked for is a small amount of help to unlock tremendous potential, create thousands of jobs and add hundreds of millions of value to the economy. Instead, the Government seem to be more interested in investing in robotics, medicine, life sciences and driverless vehicles. I am sure that those emerging industries are vital, but they are all concentrated in the south-east of England. Is that really going to support the broad-based manufacturing renaissance that our country so desperately needs?
Steel workers the length and breadth of Britain have shown that they will make every sacrifice, and the industry has dug deep too. It is the Government who have been found sorely wanting. Steel communities are a hardy bunch, forged in the white heat of our industry and from parts of the country that are well used to being forgotten, neglected and ignored by successive Tory Governments. They know how to take bad news on the chin, and they certainly prefer to be treated like adults, with honesty and clarity as opposed to the obfuscation that has become the hallmark of this Government.
I urge the Minister to stop taking us for a ride. All the indications are that the Government really could not care less about the future of the British steel industry. If that is the case, they should just say so. Please stop stringing us along, and stop promising to do something about energy prices, dumping, procurement and business rates while in reality having no intention whatsoever to act. Please level with us today on the sector deal. Just tell us here and now whether or not the Government are minded to support it. If they are not, it is clearly better to know that now, so that no more of our time and energy is wasted. We know that the previous Prime Minister and Business Secretary only got involved when they realised they had a brewing PR disaster on their hands. We hoped that this Prime Minister and this Business Secretary would be different, but the sad reality is that the Government lost interest once the media circus moved on, so we are back to square one.
The toxic combination of complacency, indifference and incompetence is back with a vengeance. Eleven months ago, the steel APPG produced “Steel 2020”, which provides a road map for the industry’s future. Eleven months on, we are still waiting for the Secretary of State to give us a date for a meeting to discuss it. Over recent weeks, we have seen unscrupulous financial advisers swooping in like vultures to exploit steelworkers while the Government stand by and do nothing. Now we see a comprehensive, exciting offer from the steel industry, backed by the trade unions, sitting on the shelf and ignored for three months. I would say that that is shameful, but I wonder whether the Government are capable of feeling that emotion.
I implore the Minister again to level with us. If she will not help, she should just say so, and the Government should stop wasting our time and giving us false hope. Let us get on and fix what we can ourselves, because right now, the Government are only holding us back. I desperately hope that the Minister will stand up and prove all my suspicions wrong. In fact, I am praying for it, because it is my constituents’ lives and livelihoods that are at stake. I will finish by saying to the Government that they have a choice: they can either be part of the solution, or they can continue being part of the problem. Now is the time to choose, and this sector deal is the litmus test.
Order. Before I call the next speaker, it might be of interest to Members to know that I will call the Front-Bench spokespeople at 10.30 am sharp. By my calculation, that gives each person seven minutes if everyone is going to make a reasonable contribution. I call Mr Simon Clarke.
It is a pleasure to serve under your chairmanship, Sir Henry. I was pleased to support the debate application from the hon. Member for Aberavon (Stephen Kinnock), with whom I serve on the all-party group on steel and metal related industries. He is a great advocate of the steel industry and was absolutely right to call for this debate. I am grateful to the Backbench Business Committee for granting it.
Steel is part of the DNA of Teesside, and I represent the hugely impressive British Steel special profiles business at Skinningrove in my constituency. I visited the plant in my first month as an MP to meet managing director Peter Gate and see the operations for myself. It transformed whatever preconceptions I held about what a modern steelworks looks like. Simultaneously combining vast power with infinite precision, the special profiles unit has the machining capability required to manufacture special profiles. Those include unique reserved profiles that have been designed for individual customer needs and open roll profiles, which are available to all customers. Key products include bulb flats, track shoe profiles, crane rail profiles and mining components. Perhaps the most significant profiles made by British Steel at Skinningrove are those produced for the manufacture of forklift trucks, which include mast profiles, carriage bar profiles and flats for manufacturing the fork arms themselves.
The special profiles unit is co-located on the same site as Caterpillar, which is its largest single customer and is also a major employer in my constituency. These companies are great sources of not just jobs, but skilled jobs, and jobs that pay well above the median salary for people on Teesside. They are valued highly in East Cleveland, and we should celebrate that achievement.
In 2016, Caterpillar at Skinningrove passed the amazing milestone of 20 million track shoes produced at its plant, all made using profiles made by British Steel. British Steel special profiles also supplies Caterpillar operations in Brazil, the United States and China. It is a great example of how the UK steel industry remains such an asset to our economy and to our country’s standing as an industrial power.
Since my election, I have pledged my support for whatever can be done to help with what is perhaps British Steel’s foremost challenge: the cost of energy. British Steel special profiles is seeking redesignation from a high-voltage status business to extra-high-voltage status, which it calculates would reduce its energy costs by some £265,000 a year, and I have held talks with Ofgem about how that might be secured. The problem is not so much the cost of redesignation, which is estimated to be around £1 million, but the fact that British Steel would likely have to take on responsibility for the ongoing upkeep of what is already considered an unreliable electricity connection and for maintaining the easements and wayleaves across properties owned by some potentially difficult third parties. Whatever support the Department for Business, Energy and Industrial Strategy can offer British Steel on that issue would be invaluable, and I hope the Minister and her officials will follow up on that.
The purpose of this debate is to discuss the wider outlook for the steel sector. I know that the Minister, with whom I am in regular contact regarding such diverse issues as carbon capture and storage and the case for onshore wind, is absolutely committed to making a success of our industrial strategy. We have a friend in her as we seek to deliver a framework within which UK steel can thrive.
This is a critical issue for Teesside. I want to emphasise that UK Steel, the body that represents the industry, wants to convey the positivity and the optimism that also characterises this moment. This is as much about future opportunities as it is about the consolidation of existing strengths. The Government’s study on the future of the industry projects a £3.8 billion opportunity in steel demand by 2030, as the hon. Member for Aberavon said, which will need to be met by imports if we do not get this opportunity right.
With the right strategy, UK Steel estimates that the gross value added of the industry can increase from £1.2 billion today to £3 billion. That goes to the heart of the issue. Steel is an enabling technology, underpinning so many other parts of our economy. The sector places a premium upon innovation, which is what will be required if we are to continue to offer high-end products that our rivals in the world cannot easily match. That means investing not only in physical facilities but in R and D and training and skills, particularly of the next generation.
I often hear from my local employers that a big challenge on Teesside is how we address the age profile of our skilled workers, many of whom were trained in the ’70s and ’80s by the big industrial conglomerates that have predominated and contracted throughout the course of my lifetime. Those workers are now approaching retirement age. It is vital that we ensure that our education and apprenticeship models are fit for purpose, to supply young people with the skills and inspiration they need to grasp the opportunities that we all hope will be created for them. Contrary to what the hon. Gentleman said, the SSI Task Force in Redcar has had considerable success. I praise also the huge potential of the South Tees mayoral development corporation. We all know the consequences that were felt in Redcar and that obviously had massive impacts also in Middlesbrough South and East Cleveland, but real, constructive action, money and hope are now flowing into our area. It is very important that we get that part of the equation on the record as well.
The key elements of the deal are clear. As the hon. Gentleman set out, that includes investment, boosting production capability, creating more jobs, employing and training more apprentices and working with the Government to create a future steel challenge fund, drawing together partners from the automotive, construction and renewables sectors. It is also vital that the Government play their part in ensuring that UK steel has the best possible chance to compete in relation to procurement options. I have already spoken to Defence Ministers about giving maximum notice when it comes to contracts for warships.
If the vision is to be realised, we need to ensure that maximum support is given regarding the cost of energy. We all know that the UK’s energy mix is undergoing a profound revolution. It is right that that is happening, so that we can not only future-proof our security of supply, but meet our carbon commitments. The market-led “test and learn” electricity strategy, set in motion under the coalition Government, has yielded startling and exciting advances in terms of moving renewable energy closer and closer to the point at which it will become competitive on a subsidy-free basis. That is great news, but our forward thinking on this issue has left the industry exposed to a competitiveness challenge. The simple fact is that it is difficult for our industry to compete when its energy costs are 55% higher than those of Germany and 51% higher than those of France. We are looking for bridging solutions that lower costs in the short to medium term while we wait for longer-term solutions to take effect. That is in effect the same principle as the Government have already accepted vis-à-vis renewable energy, so I hope that the Minister can consider it seriously, while acknowledging that this is in no way easy or straightforward.
I want to touch on the other levers within the Government’s grasp. They include supporting the proposed future challenges fund, looking at whether new plant and machinery can be exempted from business rates and ensuring that we get our post-Brexit trade framework spot on, because getting the right framework for trade remedies will be critical if we are to deal with the outrageous dumping of steel by the Chinese that has taken place recently. I urge every hon. Member present to join me after the Christmas recess in the debates on the Taxation (Cross-border Trade) Bill, which will be the vehicle for getting that right.
I thank the Minister for her time today and thank the hon. Member for Aberavon for calling the debate. Let us move forward together, as one, with a positive mindset towards delivering the right deal for our steel sector.
I, too, congratulate my hon. Friend the Member for Aberavon (Stephen Kinnock) on securing the debate. I fully support the excellent case that he made for a steel sector deal. He rightly reiterated the policy asks and the fact that speed is of the essence. I wholeheartedly agree with that. My constituency is just down the M4 from his, and the social importance of steel is crucial to communities in my constituency too. Hundreds of people rely directly or indirectly—there are three or more jobs in the local economy for every steel job—on the steel industry. These are good jobs—skilled and relatively well paid jobs—in parts of the country, such as Wales, where that is not always the case. There is huge pride in producing steel. In areas such as mine, there is a real passion for and commitment to the steel industry, which is why all of us in the Chamber have spoken in many debates over the past few years calling on the UK Government to take more action to save our industry. However, on issues such as energy costs, those calls, as my hon. Friend said, have sadly gone unheeded up to now.
During these very hard times for steel, we should recognise, as my hon. Friend said, that the workforce, with their unions, have made huge sacrifices and done all they can to help our industry—most recently, through the painful changes to pensions. Let me also mention, as a Welsh Member of Parliament, the Welsh Government, who have done all they can with the powers and tools that they have in Wales to help. That includes the active work of Ministers such as Ken Skates, the Welsh Assembly Government’s Cabinet Secretary for Economy and Transport, who has supported the industry through Welsh public sector infrastructure and construction projects.
However, we do need more UK Government action, and faster. It is true that we have had warm words, but we need more action. The steel sector deal proposal has been put together by the existing six steel companies in the UK, coming together with the unions to look at ways of addressing the challenges collectively. Those individual companies have made specific commitments on jobs, investment, expanded capacity and an increase in innovation activity within the sector.
Some of the companies are in my constituency. There are Tata’s plants at Llanwern and Orb and the relatively new entrant Liberty, which is expanding fast. Those two companies were among the six involved in drawing up the steel sector deal proposal. With Tata’s Llanwern Zodiac plant in Newport East, the investment by the company in the auto-finishing line, and Orb’s electrical steel capabilities, there is a real opportunity for the UK to establish itself as one of the foremost suppliers of steel to the automotive industry, especially for electric cars. We therefore welcome the Government’s automotive sector deal conversations and their ambition to increase domestic content to 50% in British-made vehicles, but we in Newport are acutely aware that we need a thriving, competitive steel industry to do that, which is why a sector deal for steel is needed.
The GFG Alliance, which owns Liberty Steel, which also has a base in Newport East, has announced plans to create a total of 5 million tonnes of low-carbon steelmaking capacity during the next five years as part of a drive to develop a green and competitive future for manufacturing in the UK. That would equate to half the steel made in Britain at present. Currently, the UK exports more of its scrap for processing abroad than any other developed country, so Liberty’s aim is to recycle a large proportion of the 7.2 million tonnes a year of scrap steel here in the UK. That low-carbon secondary steel production would displace much of the 7 million tonnes a year of raw steel currently imported and is a huge opportunity for the country to drive clean growth by making low-carbon steel at home.
There is great ambition in the steel industry in my constituency, despite all the difficulties faced by the steel sector in recent years. However, although demand for steel is up, production has fallen and many of the underlying causes of the recent crisis are still there. Tata and Liberty in my constituency show what ambition is out there, but we need Government interventions to ensure that our innovation can keep pace with our international competitors. That is why we repeat and repeat the policy asks. That means Government action on energy prices—the most important intervention that the Government could make. As my hon. Friend said, UK plants currently pay more than 50% more than their German and French counterparts. It means action on the business rate regime. These companies are investing and want to invest more. They want to work with the Government to unlock further investment. For the steel industry to flourish, they need a route to market that includes things such as UK steel for infrastructure projects, help with access to finance and a future steel challenge fund. Addressing the barriers through a sector deal will help to unlock investment. I mentioned this a moment ago, but we also need to continue to see more commitment on procurement, including in subsidised energy projects. As a south Walian Member, I point out that we are still awaiting a decision on the Swansea Bay tidal lagoon.
On that point, does my hon. Friend agree that, given that the Hendry review was completed almost a year ago, it is almost impossible to understand why we are still waiting for the Government’s answer on the recommendations in that review, which are vital to the south Wales economy, not least the steel industry?
My hon. Friend is right to make that point. The project has huge potential, not only for Swansea bay but for other areas of Wales—there is the potential for tidal lagoons in places such as Newport—so we must keep pressing the Government. We do not understand why the decision has not been made yet.
There has obviously been disappointment in the steel sector that its own proposal for a sector deal was not among those being talked about, especially given that, as my right hon. Friend the Member for Wentworth and Dearne (John Healey) said, discussions have been ongoing since the crisis in 2015-16, when the Secretary of State invited the sector to work with him to come up with a vision for a modern, sustainable steel sector. We look forward to hearing from the Minister today about what she can do to work with the industry and all of us to ensure a sustainable future for steel.
I congratulate my hon. Friend the Member for Aberavon (Stephen Kinnock) on securing this well-timed debate on the steel sector deal. It was good to hear the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) contributing so knowledgeably to the debate. He fills really big shoes on steel. Our former colleague, Tom Blenkinsop, was a tower of strength and had a real passion for this industry; I know that he continues to fight for it from outside this House and we all wish him well.
Two years ago local steelworkers and their families were worrying about their futures as Christmas approached. The same was true in steel communities across the UK. Horizons were short, confidence was low and, despite the marches, speeches and protests, Government seemed deaf to calls from the sector to level the playing field and stand up for steel. Jobs and livelihoods were at risk.
A lot has happened since the height of the steel crisis in October 2015, when the Government held the steel summit, which I had first called for in Prime Minister’s questions, in Rotherham on a day that saw yet more announcements of steel job losses nationwide, which were added to the nearly 2,000 in Redcar. The steel landscape now looks very different, with Tata no longer the dominant steelmaker in the market. Instead we have three major players: British Steel and Liberty, both with strong presences in Scunthorpe and elsewhere, and Tata with its main presence in south Wales. This change in ownership has brought new energy to the industry. Building on its proud heritage and today’s strong footprint, the foundation industry of steel is now well placed to become a strong strategic, innovative, entrepreneurial industry of the future. But to realise that ambition it needs to be allowed to compete on a level playing field, and that is where Government have a key role.
British Steel is an old name enjoying a new start. Headquartered in Scunthorpe, it celebrated its first year of successful trading in June. It is a leading European producer, making around 2.8 million tonnes per annum. The business faced challenging operational issues in the summer, including a blast furnace chill that impacted on results, but it expects to have a strong second half-year performance. The conclusion of a 4% pay deal with the workforce is both a strong vote of confidence in the fantastic men and women that make the business happen and an indication of growing business confidence. As well as achieving a significant turnaround of the business, British Steel continues to invest in future skills including, this year, the new starts of 70 apprentices, 43 graduates and 72 trainees. Next door, Liberty is breathing new life and new purpose into Caparo Merchant Bar. It is good news that the Scunthorpe site has been longlisted as a possible Heathrow logistics hub. That is a good example of proactive procurement by a major customer that others might learn from.
Indeed, while everything has changed in steel, nothing has changed, and the four asks of Government at the height of the crisis remain significant asks today. Procurement is a key ask. The Government need to do more to ensure that their December 2016 steel procurement guidelines are being actively pursued by all Departments, including the Ministry of Defence. When I asked for an update on delivering their ambition the Cabinet Office reply was: “We do not hold data currently on the quantity of UK steel procured.” Frankly, that is not good enough. While I very much welcome that published pipeline for future steel, it still begs the question of how the Government will ensure that their guidelines are delivered across all Departments. Perhaps the Minister—who I believe in, actually—will enlighten us in her reply.
Alongside better, fairer procurement, the other key asks were action on energy costs, business taxes and tackling steel dumping from China and elsewhere. Add to that the need to invest in research and development and workforce skills, and that is the context in which the sector deal is being wrought. We need a sector deal for steel sooner rather than later. I have been heartened by the consistently warm words of the Secretary of State and Minister responsible in response to these calls. They eventually managed to do a good job of putting something together on the EU emissions trading system, but things like that need to be done quickly and effectively so that confidence is not knocked. We need to learn from that so that things can be done well in the future, because the time for warm words will soon be over, and the time for action is nigh.
The Government recognise the value of the steel industry. Their recent study, “Future Capacities and Capabilities of the UK Steel Industry”, demonstrates the size of the prize in capturing more of our domestic steel market. UK Steel estimates that there is potential to boost sector GVA from £1.2 billion to over £3 billion. The study identifies the key role that supply chain engagement and R and D can play in enabling that boost to happen. Three core actions will unlock the sector’s potential: action to level the playing field on energy costs, investment in new research and development through a future steel challenge fund, and incentives to facilitate capital investment. The key commitments that the sector will make are outlined in the document. There are significant commitments from the sector, and the asks of Government are significant to match. The sector and the Government need to work together to deliver that.
To conclude, two years ago we felt as though we might be close to closing the book on steelmaking in the UK, but thanks to the wonderful men and women who work in the industry and the leadership shown by Community, Unite and the other steel unions, alongside steel communities and steelmakers, in the last two years this industry has navigated a difficult chapter, restructuring and repositioning itself. It is now time for Government to act with the industry to create the strong, innovative business that is needed to help to build Britain’s future as we move into a world outside the EU. The steel sector deal bid from the industry shows the necessary commitment to deliver for the future. The Government have welcomed this. Both sides must now forge a future together. All I want for Christmas is a steel sector deal!
It is a real pleasure to serve under your chairmanship, Sir Henry, but it is somewhat dispiriting to find myself rising to speak yet again about the importance of Government getting behind our steel industry.
I am grateful to my hon. Friend the Member for Aberavon (Stephen Kinnock) for calling this debate. Time and again I, and many of my hon. Friends here today, have explained the importance of British steel and offered clear advice on practical measures the Government could take to champion this crucial strategic industry. Many of those requests remain unfulfilled. The Government respond with warm words but, to be honest, little practical support.
I am pleased, however, that despite this lack of commitment from Government, the future looks a little brighter for British steel, as my hon. Friends have said. In my own constituency, the takeover of Tata’s speciality steels division by Liberty House has been completed. Speciality Steels is a world-leading business with a global reputation, and its products are found in everything from airliners to Formula 1 cars. Far from the relic of caricature, this is a dynamic and growing business of which Britain should be rightly proud. Liberty has recognised this huge potential and we have received the welcome news that not only have existing jobs been secured, but investment will lead to a further 300 new jobs, the first of which are already being recruited. Liberty should be commended for its commitment to sustaining and growing British steel.
While the investment from Liberty is hugely positive, Tata’s main UK research and development centre, Swinden House in my constituency of Rotherham, faces uncertainty. Staff there have an uncertain future, with the facility scheduled to relocate to Warwick. Tata must make every effort to allow those who wish to relocate to do so, and to support those who do not.
The existential crisis that the industry has faced in recent years may have begun to subside, but many of the long-term issues that led the industry to the precipice remain. The steel sector’s proposals to the Government have their roots in that crisis, and discussions between the sector and Government have been ongoing for some time. With the huge uncertainty of Brexit looming, the Government must act now to safeguard steel’s long-term future. It was therefore hugely disappointing that the steel sector’s proposals to renew and support the industry have not been included in the group of frontrunners for individual sector deals.
That failure is just the latest in a long line of Government failures to safeguard the industry’s future. In particular, the continued lack of action on high energy costs leaves the steel industry with one hand tied behind its back. Despite British steel’s wealth of experience, skill and expertise, it simply cannot compete while it continues to face energy costs far in excess of those faced by its European and international competitors. British producers pay, on average, £17 more per megawatt-hour than competitors in France and Germany do. Over the course of a year, that means a massive £50 million. This colossal burden leaves British producers struggling to compete. We are not talking about handouts; all we want is a level playing field, which the Government have consistently failed to provide.
Energy intensive industries compensation was a start, but until the Government address and commit to reducing the vast burden on our industry these problems will continue to hold British steel back. The Government have claimed that state aid rules prevent them from taking action, yet they refuse to introduce measures already in place in the likes of France and Germany, such as allowing exemption from renewables costs up to the value of a company’s gross value added. Now is the time to take such steps and to support British steel’s recovery and growth as the cornerstone to a sector deal.
Business rates also continue to punish steel producers and penalise their investment in new facilities. Removing new plant and machinery from calculations would encourage much-needed inward investment. That problem, too, has been raised with the Government repeatedly, but they have consistently failed to act.
Requests to favour British steel in Government procurement continue to receive, at best, a lukewarm response from the Government. UK steel has the skills and capacity to deliver on large-scale infrastructure projects such as High Speed 2. Although it is welcome that the Government have stated that they expect 95% of HS2 to utilise British steel, they have stopped short of absolutely guaranteeing that figure. That commitment must be much clearer and stronger.
Britain’s exit from the European Union also leaves the industry vulnerable to further dumping of cheap Chinese-produced steel. The British Government have consistently opposed the introduction of stronger tariffs within the European Union. With the removal of that opposition post-Brexit, it is likely that the EU will pursue far stronger tariffs and domestic protections. The chief executive of UK Steel has expressed concern about the seemingly complacent attitude displayed by Government officials who have refused to commit to strengthening Britain’s own protections in line with those of our neighbours. Should the UK find itself bordering a European Union with far stronger protections than our own, the impact upon our industry could be catastrophic.
Furthermore, the Government’s failure to properly consider the impact of Brexit on the industry risks plunging steel into a new crisis. Not releasing an impact study on the effect of Brexit on steel was frustrating, but the revelation that they may not even have conducted an industry-specific study is simply staggering. It is the Government’s duty to ensure that the industry is as prepared as it can be to weather the inevitable turmoil that Brexit will bring, but they seem to be asleep at the wheel.
Although we must do everything that we can to secure the steel industry’s long-term future, we must also recognise that changes to the British Steel pension scheme have left many scheme members facing financial uncertainty and difficult choices. Disappointingly, my constituents tell me that they have not received sufficient advice and support. There are reports that in the absence of detailed, clear advice, scheme members have been targeted by unscrupulous advisers and might have been mis-sold unsuitable financial products. It is vital that we protect scheme members, provide appropriate guidance and support and ensure that they are not left behind as casualties of the crisis faced by the industry.
The UK steel industry can and should be central to a resurgence in British industry, but progress towards a comprehensive resolution to these problems has been painfully slow. The failure to progress towards an individual sector deal for steel is just the latest example of the Government offering warm words and little else. The industry’s proposals are clear and practical, and would lead to significant and sustained investment in British steel, with £1.5 billion invested over five years and a huge increase in production capacity from 10 million to more than 14 million tonnes. What the industry wants in return is for the Government to match its commitment and work with it to address the structural problems preventing UK steel from reaching its potential.
This is an opportunity for the Government to offer more than talk. They must engage positively with the industry and do everything they can to ensure that British steel once again leads the world.
It is a pleasure to serve under your chairmanship, Sir Henry. I congratulate my hon. Friend the Member for Aberavon (Stephen Kinnock) on securing this debate and on all the work that he has done on behalf of the industry. It is a superb demonstration of how effective a Back Bencher can be in shaping Government policy in key areas.
I rise as the representative of a constituency that is not a primary producer of steel but heavily dependent on steel. West Bromwich West has more foundries than any other constituency in the country, and those foundries depend heavily on supplying parts to the motor industry. It is interesting that each and every speaker who has contributed to this debate represents a steel-related industry that is vital to the core economy of some of the most deprived areas of the country. For that reason the issue should be considered, due to its impact on the wider regional policies of this Government.
Equally, we must consider the national contribution to the economy. Our £72 billion motor industry is recognised as a world leader, is vital to our exports and has a productivity level three times the national average at a time when the country is desperately seeking to improve its productivity. Any industry forming part of a chain that delivers that is worthy of special consideration, respect and a commitment that has hitherto not been afforded to the steel industry.
Other stated objectives in the Government’s industrial strategy, which I welcome, include a deal on autonomous and electric vehicles and construction, all of which are strategically dependent on a successful steel industry. The fact that an industry on which so many Government objectives and policies depend seems to have been neglected is a matter for concern and needs an urgent remedy.
In the short time available, I want to make two or three other points. First, the motor industry in my area and nationally has adopted a policy of reshoring. It makes sense, because it is cheaper to do so, it provides security of supply for the most part and, of course, it accords with low-carbon and energy-saving targets. Locally, Jaguar Land Rover has led the drive. I believe that there is a national target to improve the number of British-built cars for which British steel is sourced from 35% to 50%, and Jaguar Land Rover in particular is well on schedule to do so. However, the policy could be compromised without security of supply and an adequate supply of steel at a competitive price.
Secondly, I point out the Government’s objectives on electric vehicles, which we are currently world leaders in developing. We produce more than any other country with the exception of the US, which of course is a lot bigger. As my hon. Friend the Member for Aberavon pointed out, all those electric vehicles are just as dependent on British steel components as our historic petrol and diesel-driven vehicles. The Government’s objectives could be blunted if we do not preserve the steel industry.
My last point, which I will not labour because my hon. Friend the Member for Newport East (Jessica Morden) made it very well, is that we export more scrap than any other country, yet import raw steel. That seems crazy. Again, I join others in pointing out that Liberty Steel, which has a substantial presence in Oldbury in my constituency, is a potential game-changer. Liberty, seeing the implications of the current energy situation, has bought up renewable energy generators in Scotland and other parts of the country, with a view to getting a perfect combination and integrated supply of low-carbon energy to melt scrap cars and metal and reshape them into castings and hot stamping for the industry.
Steel is a core industry for so many of this Government’s wider economic and social objectives. It has come up with a series of solutions that would embed it in those policies and deliver on their objectives, and that are worthy of special consideration for adoption by the Government.
It is a pleasure to speak on behalf of the Scottish National party in this debate. It is also a pleasure to see you in the Chair, Sir Henry, and to follow the hon. Member for West Bromwich West (Mr Bailey), who made a very good speech.
I congratulate the hon. Member for Aberavon (Stephen Kinnock) on securing the debate via the Backbench Business Committee and on his speech. He has been determined for quite some time to see a sector deal for steel; his advocacy on behalf of the steel industry is to be noted and congratulated, and he continued that campaign with his usual fervour today. I hope that his efforts have brought the issue back to the attention of the media, and that we will get some answers from the Minister about what the Government will do for the industry.
The hon. Gentleman asked the Government to address matters such as steel dumping by Chinese, Russian and Turkish producers. He also spoke about procurement opportunities. However, I must correct one aspect of his speech, because what he said about the new Forth crossing, the Queensferry crossing, was not quite right. Of the £540 million of orders, 45% came from Scottish companies, and steel from the Dalzell plant is in the girders at either end of the bridge. Sadly, no bidder came forward from Scotland for the main contract, because the capacity to produce the required level of steel has been lost since Thatcher closed the Ravenscraig plant. Of course, we want to do more; we want that capacity to increase, which is why we are all here today. The hon. Gentleman also discussed energy issues, which I will address later in my speech.
The hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) made a very good speech. He was absolutely right to say that with the right opportunities and support, we can increase the GVA of the steel industry from £1.2 billion to £3 billion. We need to get this right. He also said, rightly, that the steel industry is an enabler for other sectors to grow. His speech was constructive but probing, and I hope the Minister was listening.
The hon. Member for Newport East (Jessica Morden) mentioned the importance of steel to other industries and Liberty’s exciting low-carbon proposals on green steel, which should reduce the need for imports and cut the industry’s carbon footprint. The hon. Member for Scunthorpe (Nic Dakin) was absolutely right to pay tribute to Tom Blenkinsop, the former Member for Middlesbrough South and East Cleveland. In all the debates I have attended, the hon. Member for Scunthorpe has been a stout defender of the industry, and he was very good again today. He was also right to pay tribute to the workforce, who have been incredibly resilient, particularly in recent years.
The hon. Member for Rotherham (Sarah Champion) rightly raised the potential Brexit challenges that the sector faces. We are particularly concerned about the impact on the industry of leaving the single market. It is essential that we see UK Government action now. As I said, the hon. Member for West Bromwich West made a very good speech; he focused on the needs of the foundries in his area and highlighted the supply chain that the steel industry feeds, including the £72 billion motor industry.
As the Minister will be aware, Liberty Steel operates at the Dalzell works in the constituency of my hon. Friend the Member for Motherwell and Wishaw (Marion Fellows), which adjoins mine, and many of my constituents are employed there. It would be remiss of me not to pay tribute to the efforts of the Scottish Government, the trade unions and the Scottish steel taskforce, which secured the future of the Dalzell and Clydebridge plants, the former Tata sites in Scotland. The SNP is clear that we would welcome a sector deal for the steel industry: we encourage the UK Government to get it done and we note with concern its absence from the industrial strategy. I have been in contact with Liberty’s management about developments and about the priorities that they and others have for future intervention and support from the UK Government.
Let me be clear. The steel industry is not some “nice to have” aspect of the manufacturing sector. It is crucial to all aspects of infrastructure projects in these isles: it supports huge numbers of jobs and feeds a supply chain that contributes even more to employment and economic prosperity. Further support for the sector could open significantly more opportunities for employment and growth, as the hon. Member for Middlesbrough South and East Cleveland said.
What support could this Government offer? It has been well trailed by all hon. Members in this debate that help with energy prices would address the clear disparity with competitors in other countries, including France and Germany—a disparity that is estimated to cost UK steel producers an additional £43 million a year. The UK Government could look at helping to attract additional investment to the UK in a number of ways, such as by providing access to commercially competitive loans, a capital investment grant or innovative tax breaks or discounts linked to investment. They could also consider the proposal to establish a new innovation fund to boost research and development of steel products.
The executive chair of Liberty House, Sanjeev Gupta, said that he was “very impressed” with the efforts of the Scottish Government and the Scottish steel taskforce to save and support the industry in Scotland. It is now time for the UK Government to match the ambitions of the Government up the road and get on with the sector deal, delivering tangible support on energy, procurement and all the other asks from industry and from hon. Members across the House today. Let us hope that we will hear of such action from the Minister today.
It is a pleasure to serve under your chairpersonship today, Sir Henry. I congratulate my hon. Friend the Member for Aberavon (Stephen Kinnock) on securing this timely debate and on his continued commitment and passion in advocating for the steel industry. I also pay tribute to my hon. Friend the Member for Redcar (Anna Turley), whose passion and commitment would definitely have given her a lot to say in the debate, but who cannot be with us today.
The steel industry has gone through a tumultuous few years, but the sector has successfully managed to navigate its way back to a more stable position as it heads into 2018, although it is by no means out of the woods. I join other hon. Members in highlighting the industry’s positive economic and social impact. The sector provides well-paid, skilled jobs in areas such as south Yorkshire, where the average steelworker is paid 40% more than the local average wage. As my hon. Friend the Member for Newport East (Jessica Morden) set out, it is crucial to the social fabric of communities such as those in Wales or south Yorkshire. Indeed, the case for supporting and backing our steel sector in particular and manufacturing more broadly is more acute today than ever. A post-Brexit Britain will require rebalancing the economy, both by sector and by geography, if we are to embrace the opportunities of the future.
This is indeed a timely debate. Earlier this year, the Secretary of State issued an open-door challenge to industry to approach the Government with proposals to transform sectors through a series of sector deals. In September, the steel sector met that challenge when six chief executive officers of steel companies and all three relevant unions—Community, Unite and GMB—addressed key issues facing industry with a comprehensive plan and tangible solutions. Each company detailed the specific investment, jobs and research and development commitments that it could make. In turn, the sector made requests of the Government, notably to eliminate the electricity price disparity and establish a future steel fund with match funding of £30 million a year.
Unfortunately, the Government have failed at every opportunity to respond to the sector deal. On Friday, they finally published a report, “Future capacities and capabilities of the UK steel industry”, which revealed that the demand for finished steel products in the UK will increase from 9.4 million to 10.9 million tonnes by 2030, opening up an opportunity of £3.8 billion per annum. That is welcome news.
My hon. Friend the Member for West Bromwich West (Mr Bailey) made it clear that those opportunities can only be harnessed with full Government backing and support, which makes a steel sector deal more necessary than ever. However, for too long the UK steel industry has been neglected by the Government. Their industrial strategy merely paid lip service to the industry while failing to provide any tangible solutions and failing to respond to the steel sector deal proposal at all.
As I have mentioned, the industry is not out of the woods. There are fundamental issues hampering its competitiveness and innovation capability, and it is down to both Government and industry to work together to create a level playing field for steel. The UK steel sector faces excruciatingly high electricity costs compared with its EU counterparts, with an average electricity price disparity between the UK and Germany standing at £18 per megawatt-hour, which translates into a total additional cost for UK steel producers of around £43 million per year. The Helm review was published recently and it made some welcome recommendations, but the steel industry needs urgent action now if it is to be sustainable in the years ahead.
Furthermore, the industry is lagging behind in research and development spending, which is crucial to the growth and innovation of the sector. I am proud that the Advanced Manufacturing Research Centre, which my hon. Friend the Member for Rotherham (Sarah Champion) is very familiar with, is a world-renowned R and D centre. It is located in south Yorkshire, near my constituency. However, despite such pockets of excellence, the number of people employed in R and D in the steel sector in the UK have declined from around 900 to around 95 today—a 90% reduction—with closure or divestment of UK technology centres at Port Talbot, Rotherham and Teesside. The loss of locally based expertise and knowledge limits productivity development and innovation in the UK industry.
If the Government’s rhetoric on productivity is to be believed, why are we in a dire position when it comes to R and D funding? Last month, the Government committed £2.3 billion for R and D in 2021-22, but they failed to respond to a parliamentary question when I asked, “What proportion of the funding will be allocated to the steel sector?” Can I get an answer from the Minister today?
Beyond electricity prices and R and D, it is clear that there needs to be more proactive engagement with the supply chain if the sector is to capture the opportunities I have outlined, particularly in the construction and automotive sectors, where the big opportunities lie. As the report notes, these opportunities can only be captured
“if a comprehensive strategy and policy to reshore supply chains back to the UK is pursued.”
Given the strategic importance of the sector, it is absolutely vital that the Government, the steel industries, the trade unions and the workforce continue to work to resolve some of these key issues. Disappointingly, we have seen very little action to alleviate these issues. First, in the autumn Budget there was no mention of energy prices or an energy efficiency fund for industry. Although there was some money for R and D, as I have pointed out, there has been no detail about whether the steel sector can expect to benefit.
The Government’s recently published industrial strategy set back many hopes of capitalising on the opportunities ahead. It did not include any detail or offer any tangible solutions to the steel sector. What detail there was focused on a handful of elite sectors, in which the UK already has a competitive advantage. It also provided very little to those who do not live in the golden triangle made up by London, Cambridge and Oxford. The absence of the sector is telling. Months after the steel sector deal had been proposed, it appears that the Government have made no effort to ensure that there is progress on it. In essence, the industrial strategy dashed any hope of the Government and industry ever delivering a deal.
In what little mention of the sector there was in the strategy, on page 239 the Government said that they would develop a “commercially sustainable proposition” for the steel sector, but there were no other details. Can the Minister explain what a “commercially sustainable proposition” means? What progress has she made on developing such a proposition, and what is the timetable to achieve that?
I accept that we are short of time today, so I will conclude. It is clear that our steel industry is at the cutting edge of UK manufacturing, producing some of the best-quality products. The future of the industry should see it playing a central role in the transition to a low-carbon economy; continuing to lead the world in quality and innovation; and capturing huge opportunities to the tune of £3.8 billion annually.
However, that is only deliverable if there is a strategic and comprehensive sector deal to deliver on issues such as dealing with electricity price disparities, reviewing business rates, increasing spending on R and D, and ensuring that we have a robust procurement strategy that works for the steel industry. A post-Brexit trade deal and strategy are absolutely essential if the future of the steel industry is to be secure and bright.
As always, Sir Henry, it is a pleasure to serve under your chairmanship.
I congratulate the hon. Members who are present today on securing an absolutely crucial and timely debate. I also echo the good wishes that have been expressed about the hon. Member for Redcar (Anna Turley), who is an amazing champion for activity in this sector, and we all wish her extremely well.
Listening to the speech by the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss), I was reminded of the many debates that I had with her late husband, who, like her, was a doughty champion of the activities of the constituency. I am sure that her constituents are very proud of her and I like to think that her son will get a council seat soon, because it is clear that he has also done an amazing job in representing the communities in that area. Evidently, they are a great political family.
I welcome the comments that have been made today. Everyone here is standing up for a foundation industry, a vital industry and an industry about which we should be incredibly proud, not only for developing the technologies that underpin it but for continuing what has been a highly productive trajectory. Given that we are discussing such an important industry, I hope we might get beyond some of the party polemics and the Nye Bevan rhetoric that we have heard today. I will just point out a couple of facts and then I hope that we can park the politics of this debate.
In 1998, 68,000 people were employed in this vital industry. During the next 16 years, largely under a Labour Government, that number dropped to around 30,000. Since then, we have seen an increase in employment, despite going through some very tough economic times—[Interruption.] These are the facts, I am afraid.
I will also point out that it was a Conservative Prime Minister who called the first steel summit, who set up the steel council, who has paid for the report on the “Future Capacities and Capabilities of the UK Steel Industry” with taxpayers’ money, because we think it is a vital investment, and who has Ministers who are absolutely committed to working with this industry, domestically and internationally. I hope that we can get beyond the party politics, for the sake of the people depending on this industry and for the sake of the thousands of incredibly highly productive jobs in the industry. I think it is time to get to a different place, where we focus on the long-term potential. So can we have a little less politicking and a little more focus on the future of the industry, please?
On my visit this summer to the constituency of the hon. Member for Aberavon (Stephen Kinnock), as I went round the steel plants and talked to the workforce, who have been there for generations, I was struck by the level of skill and pride of the workforce, as well as the impact that those plants have on the constituency and the innovation that they bring. I remember talking to a shift manager in the electric arc furnace nearby, who said, “My dad would never have thought I could do this job, but he’d be really proud of me today”, as he tapped out molten steel.
However, I was also shocked to see the conditions that we still expect people to work in. This is a very tough industry, and I know that people in the steel plants are incredibly proud of what they have done. I join all Members in paying tribute to the steel workforce, who have shown amazing foresight over the last few years. We are very keen to continue to engage with the unions, as we do with the managers and the investors, to drive this sector forward.
Let me just reiterate very quickly what the Government have done, because it is clear that in such a vital strategic industry Government involvement, both in the sector itself and in the other aspects of the demand and supply chain, is very important. Procurement has come up many times today. We are working very hard to ensure that, where possible, British steel is the steel of choice in public procurement. We have new procurement guidelines; we have published the steel pipeline, which looks out over the next five years; and we are setting out how we want to use more than 3 million tonnes of steel on infrastructure projects such as High Speed 2, Hinkley and on the upgrade of the motorway network. That is a pipeline that has been widely welcomed by the sector.
I thank the Minister for the tone that she is adopting, but does she not agree that it is important that the Government monitor performance on procurement? That was the intention when the guidelines came in, in 2016, but since then it appears to have slipped.
I will happily take away the hon. Gentleman’s point. Although we do not want to mandate supply, because we want the sectors to buy the best quality at the best price, we must ensure that, where we can, we pull forward and give certainty to the steel industry. As the hon. Member for Sheffield, Brightside and Hillsborough said, the work we do with other vital sectors, such as auto and construction, has a really important knock-on effect on supply for the steel sector. In the auto sector deal—I will talk about sector deals in more detail—we have set an ambition and the industry has committed to increase the share of UK content in the automotive supply chain to up to 50% by 2022—it has already gone up from 36% a few years ago to 41% now. That has to be important, given the reliance of the sector on our superb British steel industry. Also, through the construction sector deal, we see big improvements in productivity and in demand for British steel.
The point has also rightly been made about trade. We all know what global trading conditions are like. The Prime Minister has called on the G20 forum on steel excess capacity to agree concrete policy principles, and my Secretary of State was in Berlin just a few days ago pushing for agreement on them. The director of UK Steel said:
“The outcome of today’s meeting is enormously welcome, representing a significant step towards delivering concrete action”.
He also felt obliged to congratulate my Secretary of State on his personal efforts, which show that we are committed to solving the underlying challenges the industry faces. It is only a first step, and we must continue to engage, but it is an extremely important one.
On the post-Brexit trade arrangement, we are extremely focused on what that test looks like in a post-Brexit world and on how we can have a suitable trade protection system that enables us to respond based on the geographic impact of certain trading regimes in the UK. That is something on which we are working closely.
Energy prices have, of course, come up. I will say a little more about that, but I want to thank those hon. Members who have acknowledged that we have managed to head off any negative impacts of the so-called Brexit amendment. I laid the legislation before the House last week and I look forward to introducing it. We want there to be absolutely no negative impact. We have reimbursed the steel sector more than £200 million for its energy costs, and from 1 April 2018 we will introduce exemptions rather than compensation mechanisms, so that companies can have their bill reduced by up to 85% of their relevant costs rather than have to muck about submitting a claim. That is very important for cash flow.
The capacity and capabilities report, which the Government asked for and have paid for, with our taxpayers’ money, has really helped the sector, for the first time, to come together to understand what its challenges are. I chair the steel council, and a conversation we always have is about how we have never sat down as a sector and talked about our collective challenges. We have always competed; it has been a zero-sum game. But it is not a zero-sum game. If we want industries and Government to invest in research and development and think about how they might support other vital industries, collective activity is needed. The report has been warmly welcomed by, among others, Roy Rickhuss, who said:
“This will help us all better understand the opportunities and challenges facing the UK steel industries”.
The report points out the skill shortage. The average age of a steel worker is 45, and most of them are gentlemen. The sector has not invested in the skills of the future. Despite the employment losses, it is highly productive; we have asked workers to do more on a daily basis. The sector has invested, but we know we have to get the skills and the investment up.
There are challenges for the sector. The study sets out a welcome point, which is that there is a market opportunity of up to £4 billion by 2030 for our UK steel companies if they and the Government can align themselves for it. To capture that opportunity, the sector requires the kind of transformative investment that some of the companies have made in other parts of their European portfolio. On customer demand, the capability and capacities study shows that only 18% of that opportunity will be available if there is no investment, particularly investment in higher-grade and more speciality products, upgrades and additional facilities, and increases in research and investment. In fact, the industry itself acknowledges that it has not focused on customers. Many steel consumers in the UK continue to import because different product sources exist and sometimes, frankly, customer service is better. That is a problem that the Government and the sector must work on together.
Some countries such as Germany choose to up consumers’ energy bills and subsidise those of heavy industry. In this country, we have tried to hold down energy costs across the board, as we invest in the transition to cleaner energy, so we have some of the lowest consumer energy bills in Europe. However, as hon. Members have pointed out, although our gas bills are competitive for industry our electricity bills are among the highest in Europe. We have clearly set out the ambition to have the lowest electricity costs in Europe. We commissioned the review by Dieter Helm, which pulled no punches, the recommendations of which we are considering carefully. It is a welcome backdrop that renewables are getting to the point of subsidy-free generation, so the long-term investments we have made in that transition are starting to bear fruit. I am, however, very aware of the asks on energy costs and will continue to review them.
I want to turn finally to the sector deal. I reassure Members that the first draft of the industrial strategy had four sector deals in it, out of the 52 or so that had been submitted. That does not mean that they were the superior, priority or target ones. They were the deals that were closest to the line because they represented a joint industry and Government focus on driving up productivity in the industries in which we know we have to be successful to compete in the future. The steel sector deal, on which we have worked very closely with the sector, is one of the other deals we are actively engaging with and working on.
I will just try to get through this point and then I will be happy to take an intervention.
I have every intention and every expectation of bringing forward an attractive sector deal. We have held many meetings, and when the deal is in a good enough place and we have commitments on both sides to drive the transformation, we will do that. The deals are not, “Give us some money”, they are, “What can we do together, Government and industry, unions, apprenticeships, education institutions and our brilliant academic institutions, to create the industry of the future, to capture those opportunities and drive them forward?”
What the Minister is detailing about the sector deals is incredibly positive. Can she confirm how the UK Government will work with the Scottish Government on the deals?
We are working very closely with the devolved Administrations. In fact, the Administrations of Scotland and Wales have signed up to the industrial strategy and we are working cross-border with them because the industry is a vital national one.
To conclude, it is time to reject some of the tired political arguments we have had on the issue. There are hon. Members on both sides of the House who represent steel-producing areas and many more who represent areas where the steel supply chain is absolutely vital. We will continue to work on the sector deal. We understand the ask of the industry and the strategic challenges it faces. If I could have one Christmas wish, it would be for an end to the outdated party politics around this vital foundation industry for the UK, that we build a cross-party partnership and that we work with the industry, which is being transformed, to protect and grow it, not for the next 12 months or two years but for the generations to come.
I congratulate all hon. Members present on an excellent debate. We should remind ourselves of the purpose of the industrial strategy. It is about rebalancing the British economy, from services to manufacturing, from consumption to production, from debt to surplus. None of those aims will be achieved unless we have a thriving and productive steel industry, and for that to happen we need a radical remodelling of the energy sector, and to develop a post-Brexit trade policy and deliver on the sector deal.
Since I entered Parliament in 2015, Labour MPs have raised the issue of steel almost 300 times, and every time we have heard the same set of platitudes in response: “We’re continuing to review”; “We’re having meetings”; “We’re going on visits”; “We’re having roundtables”. Nothing ever seems to change. I hope, therefore, that we can be forgiven for allowing our concern and frustration about the future of our communities to bubble to the surface. That has nothing to do with party politics. It has to do with the future of an industry that will enable the industrial strategy. We hope, therefore, that in 2018 we can turn the page and move from rhetoric to reality.
Question put and agreed to.
That this House has considered the steel sector deal.