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Tata Steel

Volume 756: debated on Thursday 16 October 2014


My Lords, with permission, I wish to repeat an Answer to an Urgent Question made in the other place by my honourable friend the Minister of State for Business and Enterprise and Minister of State for Energy, Matthew Hancock.

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

Over the last four years, we have seen a restart of steel production in Redcar, we have introduced support for energy-intensive industries and steel production in the UK is higher than in 2010. The steel industry has an important role to play in generating future economic growth. It underpins a number of key advanced manufacturing sectors and sustains the livelihoods of many local communities. Steel is a critical part of the supply chain for high-technology industries like aerospace, automotive and construction. These all require high-value, continually improving steel products in order to remain competitive.

Decisions on company ownership are of course commercial matters for the companies concerned. Nevertheless, we are working with the metals sector, including our steel-makers, to develop further our metals industrial strategy. On this side of the House, we believe there is a sustainable long-term future for the steel industry in the UK.

Already we have taken action. We are in contact with both companies to work to secure the future of the business. My right honourable friend the Business Secretary met the global head of Tata in India this week, who personally reaffirmed his company’s commitment to the British steel industry. The national infrastructure plan identifies a pipeline of over 500 projects costing around £250 billion to 2015, almost all of which will need steel. The pipeline includes more than £1.4 billion in railway infrastructure and commuter links; 95% of the steel for the UK’s rail network will come from Tata Steel for the next five and possibly 10 years. We have reduced energy costs on energy-intensive industries, including a £7 billion package of measures to address energy costs, with £3 billion to compensate energy-intensive businesses for the impact of policy costs in their electricity bills.

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

My Lords, that concludes the Statement.

My Lords, I thank the Minister for repeating the Statement made in the other place. I am sure that everyone in the country will appreciate the uncertainty and anxiety that yesterday’s announcement by Tata Steel will have caused for thousands of steel-workers, their families, affected communities and firms in the metals supply chain. I hope that the Minister will join me in expressing that to those people.

As the noble Baroness said, steel is a vital foundation for much of the UK’s manufacturing supply chains. The UK is a leading global player in sectors such as aerospace, automotives, construction and energy infrastructure, and the production of steel here in the UK underpins much of that competitiveness. However, we now know that Britain’s largest steel manufacturer is preparing to sell half of its capacity. What contingencies will the Government put in place to maintain and enhance the skills and capability of that industry to ensure that they are not lost to the UK?

Secondly, what commitments have the Government obtained from the potential new owner regarding the maintenance of existing sites and industrial capability, the safeguarding of jobs and additional investment? How binding are these commitments likely to be, or are we in danger of repeating the mistakes we encountered during the Cadbury takeover? Is the Minister concerned that we have learned that the unions have not been involved in any consultation or communication with the potential new owners?

Thirdly, this matter affects England and Scotland. What discussions have the Government had with their counterparts in Scotland to ensure a co-ordinated and united response for the good of the steel industry across the United Kingdom?

Finally, do the Government have a plan for what happens if negotiations for the sale break down? It is clear that Tata wishes to divest itself of its Long Products division, so what active role are the Government taking about maintaining that capacity in the United Kingdom? Should an effective industrial strategy not consider and mitigate these risks?

My Lords, we share the concern about the uncertainty for the communities, as I made clear in the Statement. Fortunately, we have done a great deal of work on skills, including providing a stronger steel industry, which makes the prospects of a good outcome much more likely. I understand that the unions were warned about the announcement, but clearly there were constraints relating to inside information. I emphasise that no closures have been announced; this is the beginning of a possible sale. I reassure the noble Lord that we are actively engaging in discussions with both the Tata Group, the existing owner of the asset, and the Klesch Group, with which we will discuss its intentions. The Scottish angle will be attended to and is very much in our minds.

My Lords, I thank the Minister for the Statement. Does she share with me the real concern that there is among the workforce? They went through a terrible time in 2009 before Tata took over in 2010. I know that they and the unions were very constructive in encouraging and enabling Tata to go into the Teesside site. This is devastating for Teesside and threatening for the economy of the north-east, where we build cars better than anywhere else and where we are going to build trains, as from next year, probably better than anywhere else. Yet we are not confident and the Government are not giving us confidence about the future of the steel industry in that area. Will she recognise that internationally there has been significant dumping of steel product and steel outside of the EU? That is threatening the British steel industry. We need more clarity and action from the Government. The north-east still has the highest unemployment rate in the country. The Government need to recognise that and come to our aid.

I note and share the concerns that the noble Baroness articulated. As I have already said, we are trying to move forward in a situation where no closure has been announced—this is a change of ownership. I also agree with what she said about the great steps forward we have made in building cars and expanding our rail industry and rail networks, and their supporting supply chain.

The steel industry has become much stronger under this Government. In the period 1997 to 2010, steel production fell by more than 8 million tonnes; since 2010 production has risen by 2 million tonnes. There has been an improvement. The work of the labour force has obviously been an important contribution to that.

My Lords, Tata is also the owner of Jaguar Cars. Has there been any assurance that this decision will not impact on the production of Jaguar cars in Coventry and elsewhere in the UK?

My Lords, this announcement by Tata, which the Secretary of State in the other place has discussed, and on which we have had discussions with officials, relates entirely to the Long Products division in Scunthorpe and other areas.

To what extent does my noble friend feel that this whole saga is related to the very high energy costs here and throughout the rest of Europe, which are clearly driving some industries away despite the Government having made efforts to meter the costs of a very energy-intensive industry? What ideas should the Government be developing to prevent this situation occurring again and again?

My noble friend is right to mention that background but there is some good news in this area. As I said, we are introducing a £7 billion package, part of which is already paying out compensation for additional costs in the energy-intensive industries, including steel.

I should also respond to the point that was made about cheap imports and dumping. That is something that we discuss with our EU counterparts. Obviously, it is mainly a matter for the EU but we are well aware of the importance of keeping an eye on it.

My Lords, will the Minister confirm—or otherwise—that the Government recognise that working with the unions and the workforce is the way most likely to achieve a favourable result?

Decisions on company ownership are of course commercial matters for the companies concerned. As a businessperson, I know that important rules on consultation exist in this country. I emphasise again that, at this stage, we are not talking about closures or job losses but about discussions about a possible change of ownership. As I have said, the workers and the unions that represent them have an important part to play in industry, its success and our recovery from the difficulties of the recession.

My Lords, does my noble friend understand that Lincolnshire is not a highly industrialised county and that the impact of closure, if it came to that, on Scunthorpe would be significant? Will she please assure me that every possible advice and assistance will be given to all those involved, who will necessarily be fearing for their livelihoods? The impact of a closure on the whole county would be very significant, were it to come to pass.

I thank my noble friend for making that point. Of course, if there are job losses and adjustments to be made, we will all share the concerns of the local communities concerned.

Since this Government took office, the claimant count has fallen by 27%. In Scunthorpe, the long-term count has fallen by 22% in just the past year, so there are signs that the economy is recovering. However, I emphasise the point that I have been making all along: we are not talking about closures; we are talking about a possible change of ownership and we will actively engage on that. Fortunately, because of the changes that have been made in recent years, the steel industry is stronger and more competitive. We need to press forward to ensure that that continues.