Skip to main content

Update on the UK Steel Industry

Volume 771: debated on Monday 11 April 2016


My Lords, with your Lordships’ permission, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Business, Innovation and Skills.

“All of us are by now familiar with the perfect storm of factors that led to the global price of steel collapsing during 2015. But for all the economic challenges we face, the real tragedy is a human one. Over the past 11 months I have visited steel-making communities right across the UK. They are very different plants in very different places, but one thing unites them: the pride and dedication of the highly skilled people I meet. All they want is to be able to carry on doing what they do so well, and I am doing everything I can to help them do just that.

I will talk first about Port Talbot. Since becoming Secretary of State for Business, I have been in frequent contact with the senior management of Tata. This includes several meetings with the group’s chairman last year and this. Several weeks ago Tata told me, in confidence, that it was seriously considering an immediate closure of Port Talbot—not a sale, a closure. That would have meant that thousands of hard-working men and women could already be out of a job. Thousands more would be facing a bleak future. I was not prepared to let that happen.

In the days that followed, I worked relentlessly to convince Tata that it was in everyone’s interests to keep the plant open and to find a new buyer. I also made it very clear that the Government are totally committed to supporting and facilitating that process. This work paid off.

Last month, Tata announced its intention to sell the plant and its wider UK assets rather than close it. Since then, I have continued to meet its executives here and in Mumbai. I have been joined in this by my right honourable friend the Secretary of State for Wales. We have secured assurances that Tata will be a responsible seller and will allow appropriate time to find a buyer. The formal sale process begins today. I have been in contact with potential buyers, making it clear that the Government stand ready to help. This includes looking at the possibility of co-investing with a buyer on commercial terms, and we have appointed E&Y to act as financial advisers on behalf of the Government. Commercial confidentiality means that I cannot go into detail about ongoing discussions. However, I will update the House as soon as it is appropriate. And let me just thank the First Minister of Wales for all his work so far. His support in these talks has been invaluable.

I turn now to Tata’s long products division. I am sure that all members will join me in welcoming today’s news of a conditional agreement between Tata and Greybull. It is an agreement that protects jobs and minimises the cost to taxpayers. We have been closely involved in the sale process from day one, including making a commercial offer on financing if required, and we will continue to work with them to get the deal done.

Moving on to Scotland, on Friday we saw Liberty House receiving the keys to two Tata mills in Motherwell and Cambuslang. It is a great result for the people of Scotland, and the Scottish Government deserve thanks for helping to secure it.

Finally, since January the global price of steel has started to recover, although it is still a long way from its pre-crisis peak. So there has been some positive news for Britain’s steel makers, but our support for the industry and its supply chain continues. The Steel Council, which met for the first time early last month, is bringing together government and industry to find solutions. We have been working closely with the unions, and I take this opportunity to thank Community, in particular, for its positive and constructive approach.

We have taken action on power. Some £76 million has already been paid to steel makers to compensate for high energy bills and we expect to pay more than £100 million this year alone. We have taken action on procurement. New rules make it easier for the public sector to buy British. And we are leading calls for EU action against unfair trading practices. We voted in favour of anti-dumping measures on wire rod and on steel pipes in July and October last year. And we voted in favour of measures on rebar and cold-rolled products in February this year. These measures are having a real effect, with rebar imports from China down 99%. However, we are still looking at ways of improving the EU tariff mechanism so that we can help the steel industry without harming other sectors. I am happy to hear suggestions that honourable Members have on that front. Let me make one thing very clear: we have repeatedly demanded and voted for tariffs on unfairly traded Chinese steel, and we will continue to do so.

Mr Speaker, I would love to stand here today and declare the crisis over. To say that not one more job will be lost in Britain’s steel industry is not a promise that I or anyone in this Chamber can make. But I can promise this: the Government have consistently done all they can to support Britain’s steel industry, and that will continue.

We know there are no easy answers. The challenges facing the industry are vast. Too many jobs have already been lost. Where that has happened, we have worked to ensure that nobody is left behind. For example, we have committed up to £80 million to help those affected by the closure in Redcar and we stand ready to support any steel community facing redundancies. But that is something that I am doing everything in my power to prevent.

Britain’s steel industry is a vital part of our economy. I want to secure its long-term future. I want to see “Made in Britain” stamped on steel used around the world. And I want to protect the jobs of the skilled men and women who work in the industry. The people of Port Talbot, of Scunthorpe and of steel-making communities across the UK deserve nothing less. I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I am grateful to the Minister for repeating the Statement made earlier in another place.

Steel is the foundation of many of the UK’s most important manufacturing sectors, including aerospace, defence, automotive and construction, and the threats facing it show no sign of abating. Countries such as China are engaging in ruthlessly uncompetitive practices which are destroying our steel industry. Central to ensuring that our steel industry survives and thrives is the urgent need for an industrial strategy, which has not yet been apparent.

The Chancellor has declared that Britain will be,

“carried aloft by the march of the makers”,—[Official Report, Commons, 22/3/11; col. 966.]

but manufacturing exports have slumped and manufacturing output is still below its level of seven years ago, before the crash. Since this House rose for the Easter Recess, the problems in the UK steel industry have turned into a full-blown existential crisis.

I welcome the long overdue admission from this Government that it is their duty to help find a future for UK steel making. I also welcome the Secretary of State’s warm comments about the role played by the unions, in particular by Community—which, of course, points up the absurdity of the Government’s proposals in the current Trade Union Bill. I also note the reference in the Statement to the invaluable work being done by the First Minister of Wales, which we echo.

Our thoughts need to be focused on the uncertainty and distress now being felt in Port Talbot and, despite the welcome news of a conditional agreement between Tata and Greybull, in other steel plants in the UK and the host of small and medium-sized businesses which depend on them. The Secretary of State mentioned his respect for the hard-working men and women of this vital industry who need help. I hope that what is now happening and prompting this response by the Government today is not too little, too late.

I have some questions for the Minister. Given that the Scunthorpe deal took nine months to reach, and in light of the reference in the Statement to Tata as “a responsible seller”, can the Minister tell us how long Tata is willing to keep the Port Talbot plant operational while a buyer is found? Will she confirm that it is the Government’s intention to ensure that any sale is of the integrated operations there? Will she also confirm that the pension arrangements, both current and future, entered into by Tata with its staff will be part of the sale? This is important for those affected.

Can the Minister confirm that the Secretary of State will contact all the present customer base and reassure them that these plants have a viable future and will remain open for business so that they can be confident enough to continue placing orders? In that respect, can she confirm that the IP held by Tata will be part of the deal?

On procurement, will the Government finally accept that future public sector procurement arrangements, from defence to construction, need to do more to support the British steel industry? It should not just be “easier” to buy British; it should be mandatory.

My Lords, six months ago—I was slightly surprised that it was six months ago—these Benches advocated the Government setting up a Minister-led steering group to look at the whole range of problems of steel and develop a strategy to save what we could of this great industry. All the impression of the past few weeks is that the Government have been running around like a rabbit in the headlights, with the local MP knowing that Tata was going to make a key decision on Port Talbot but the Minister responsible not knowing so. Have the Government used the past six months to develop a strategy for steel and, if not, why not? What is the Government’s industrial strategy towards steel?

My Lords, I welcome the comments made by the party opposite, particularly in relation to the role of the unions, the staff and the First Minister of Wales.

To answer the point made by the noble Lord, Lord Stoneham, we have been doing a great deal. Some of the things that have been said today are a travesty of the truth. The Secretary of State and the Business Minister have been working day and night on the steel issue for many months. Without our intervention, we believe that Tata would have moved to shut Port Talbot. Now it is up for sale on a basis that gives us the prospect of success.

On the attitude of Tata, we have been in discussion with it over many months and it has made it clear that it will be a responsible seller. We are working with it to find a sustainable solution.

The pension arrangements are extremely important and we have made it clear that they are part of the discussions we are having. Both the UK and the Welsh Governments—because they are working together in relation to Port Talbot—stand ready to engage with commercial investors to help provide a package of support on commercial terms to help ensure the long-term future of our steel industry. We will consider support in the area of pensions but also of plant and power supply, and any other areas for which potential buyers believe the Governments can provide support. We need a solution on pensions not only to help any buyer but to help the steel workers.

The noble Lord, Lord Stevenson, asked about intellectual property. Certainly, since that is an area for which I have ministerial responsibility, I will think further about that. Procurement is one of a number of areas where this Government have tried to change the situation fundamentally. We have moved to change the future procurement rules so that it will be much easier to buy British. We have a splendid supply chain of possible steel projects: not only HS2 but we are now finishing the Elizabeth line; there is the Intercity Express Hitachi factory in Newton Aycliffe; and 98% of the steel used by Network Rail is from the UK. Then, obviously, there is defence and aircraft carriers. The noble Lord rightly drew attention to the success of our industries, which brings me on to the question of industrial strategy.

The key point about industrial strategy is to promote growth and innovation and to get the country back on its feet. The Government have done that. Car production has flourished, up 60% since 2010; manufacturing is up 18.7%; and we are now working well with the supply chain. We have a Steel Council, which is bringing together all the different stakeholders involved and keeping in contact with customers. As the noble Lord said, we need to give the supply base confidence for the future, as I know from being in business.

My Lords, the Statement repeated by my noble friend said that we have taken action on power—and, indeed, the Government have taken action on power. To boast that they are leading the world in the battle against climate change, they have deliberately introduced an energy policy designed to push up the price of electricity in this country so that it is far higher than in any of our major competitors. This is a major reason for the difficulties of the British steel industry today. The Statement also says that the Government have paid some compensation to the steel industry partially to offset their own policies, which have pushed energy and electricity prices up so high. Might it not be more sensible to abandon that energy policy and to cease pushing up energy prices deliberately as an active policy? We have seen, with the problems of the steel industry, precisely what the result of that is.

I have some sympathy with the points made by my noble friend but we are where we are. Of course, the majority of the measures were taken when the party opposite was in power. The steel industry has found it very difficult, which is why we have made the substantial compensation payments to which my noble friend referred, including £50 million to Tata since 2013, £9 million of it in the past three months, with tens of millions more in the pipeline. More importantly, however, the Chancellor announced in the Autumn Statement that we will exempt energy-intensive industries from renewable policy costs, saving them an estimated £400 million up to 2020. This is a difficult area and we have sought to find a way through.

My Lords, the Minister referred to the close working that she has had with the Government of Wales. She also emphasised, quite rightly, the importance of keeping steel making going in Port Talbot until a buyer can be found. Can she confirm that the Government will at least match the £60 million put forward by the Welsh Government—proportionately more, we hope—to ensure that? Can she clarify what she said about the United Kingdom not opposing putting tariffs on steel from China? There are reports that the European Commission had been considering this and that the UK was one of a dozen countries that blocked it.

On the question of money, I am glad to clarify that we are open to discussions on the level of support. I articulated earlier what we have been telling investors today. I am also glad to have the opportunity to set out what we have been doing about anti-dumping in Brussels. Thirty-seven anti-dumping measures have been taken—15 against China—and another nine areas are being looked at. As a result, as I said in the Statement, rebar imports from China have gone down by 99 percent, wire rod by 90 per cent and there has been a similar effect in other areas. The noble Lord is talking about tariff policy more broadly—the so-called lesser duty rule. In general—I have dealt with trade pretty well all my life—that rule gives the right balance between industry, industry users and, ultimately, consumers. There is a wish in some protectionist member states to use the opportunity to change that fundamental principle which ensures that users and consumers benefit as well industry. However, changing that rule could have ramifications in other areas, from candles to screws to shoes—there has been a lot of debate on anti-dumping of shoes. We need good anti-dumping measures. We are working with the Commission on those and trying to improve the logistics so that we can have more success with anti-dumping. Above all, we need to move with speed.

Further to the question posed by my noble friend Lord Lawson, is it still the case that German steel-making electricity costs are 40% below those in the United Kingdom? If that is the case, and if it arises from differences in climate change and carbon reduction policies, are we not obliged under Section 2(2) and (4) and Section 6(2) of the Climate Change Act to take account of that? In failing to make the necessary amendments to the Climate Change Act, are we not in breach of that Act? Should not action be taken to correct the situation urgently?

My noble friend is a great expert in this area and I hesitate to make assertions. It is clear that we have been moving latterly to change our approach to make sure that our climate change obligations are met and that we help the energy-intensive industries, especially steel, which is such a strategic industry, at the same time. I shall certainly look into the points that he has raised and perhaps talk to him further.

My Lords, I do not question the diligence or sincerity of the noble Baroness. However, I must report to her bluntly a view that I share after talking to voters from Neath, Port Talbot, Swansea and Llanelli these past few days. They treat with absolute derision her statement that the Government have done everything they could. Five years ago, as the Member of Parliament for Neath, I wrote to the Government informing them that the chief executive of Tata Steel Europe, Karl Köhler, had said that unless energy costs were massively cut for Tata Steel and procurement was actively pursued by the Government to get British steel into capital investment contracts, Tata Steel would close its Port Talbot plant. He said that five years ago. I wrote to the Secretary of State but nothing was done. Why can Sweden, Spain, Germany, France and the Netherlands have successful steel industries and we cannot? It is because the Government do not have an industrial strategy.

I cannot agree with that. We have done a lot to change the rules on procurement and on emissions, as we have already discussed. The last Labour Government did nothing other than reduce the number of jobs in the steel industry under their stewardship. There are deep-seated forces at work here. Chinese surplus capacity is several times EU output at 35% of global production. Of course the points mentioned by the noble Lord matter, but so do these big global factors. That is why we are trying to do all we can for Port Talbot, day and night.

My Lords, two plants in South Yorkshire have not been mentioned—one in Rotherham and one north of Sheffield in Stocksbridge. What interventions are the Government making in those plants and what is the latest status? Those communities have been waiting but have heard nothing yet from the Government about their Tata steel plants.

My Lords, perhaps the noble Lord can help me on this but I think the conditional agreement between Tata and Greybull that was announced on Friday also covered the Tata Rotherham mills, and we have offered government-backed commercial funding if it is needed. Perhaps I may follow up on this and write to the noble Lord on the other points. I would make the general point that we now have the Steel Council, where the industry, the unions and other stakeholders have come together to examine all of these issues, and that is very important. Further, Tata has today put up for sale pretty well the whole of its operations. I will look at that further and write to the noble Lord.

Is it not encouraging that the workforce and the management say that they have a turnaround plan and require only medium-term financing? That is not dissimilar to what happened at Rolls-Royce. Against that background, in Canada and Holland there are large mutual organisations capable of turning around and running steel organisations. Should we not think along those lines as well?

I thank my noble friend for his question and for writing to me about the role of the mutual, which I have passed on to the Ministers and officials responsible for this challenging area. We should be looking not only at opportunities for support but at the supply chain, and into the uses for steel at the higher end as well as the more-volume end of production.

My Lords, I am sure the Minister would like to amplify something I believe would be of interest to many noble Lords; namely, the possibility of co-investing with a buyer—I think that that was the term used. As I recall, some 10 days to two weeks ago, taking steel temporarily into state ownership was totally rejected. Can she amplify what co-investing would be?

As I said in repeating the Statement, we are ready to look at pretty much all the options. I think that the Secretary of State has made clear that he sees nationalisation as problematic, not least because all the most successful, leading steel operations across Europe are not nationalised. But we are keen to find a way through this so co-investment with an element of government support for a period, and indeed the sort of arrangement that we had in Scotland, where there has been some sort of interim cover, can be advantageous.

My Lords, will the Minister acknowledge the huge contribution made in north-east Wales by Shotton steelworks, which is still highly profitable, very high-tech and a centre of excellence in steel making? Perhaps I may remind her that in 1980 Shotton steelworks was an integrated plant employing 13,000 people. It lost overnight, in Europe’s biggest single redundancy exercise in living memory, some 8,000 steelworkers’ jobs. It is fair to say that the Shotton steelworks has made its sacrifices already. Further, does the Minister understand the impact of mass unemployment? It affects many families, schools and satellite steel townships? Communities remain scarred and now, when they are in a profitable state, do not wish to suffer further redundancies or closures.

My last point is this. If our nation is to have any idea of national greatness for the future, how can we survive without the seedcorn industry that is steel? It is a folly to consider sending atomic-powered submarines armed with nuclear-tipped missiles abroad if we do not have the industry that enables any nation to make war—which is steel. We must retain our steel industry.

I applaud the work of the noble Lord both as a Member of Parliament in that area and indeed as shadow Secretary of State, and of course I acknowledge the sacrifices that have been made by steelworkers and their families in Wales and more generally across the UK. These things are very difficult. Indeed, that is one of the reasons we are taking the measures that we have set out today. We have said that we are willing to provide a much broader degree of support for Port Talbot and that in the future, procurement rules will allow a greater degree of buying British than has been possible in the past. The noble Lord is right to say that steel is a core industry for any country.

My Lords, could my noble friend remind the House which party was in power when the Climate Change Act 2008 that was referred to by my noble friend Lord Howell and which was responsible for the high energy costs mentioned by the noble Lord, Lord Hain, was passed?

As my noble friend knows well, the legislation was passed largely under a Labour Government. As I have already set out in reply to my noble friend Lord Lawson, we see things differently. It has had quite a serious impact and there are a number of things that we are doing, most importantly the change announced in the Autumn Statement that we will exempt energy-intensive industries from renewables policy costs. These are difficult issues and arguably the balance has not been quite right, but we are moving to change it.

My Lords, the Secretary of State said in his Statement that he stands ready to help and to support steel-making communities. I appreciate that on behalf of my former constituents in Newport East making steel at the Llanwern steelworks, working in many businesses associated with the steel industry and working in the economy of south-east and south Wales, which is so crucially dependent on the fortunes of the steel industry. As the Government analyse the costs and benefits of alternative possible policies, including co-investment and perhaps temporary nationalisation, will they fully factor in the costs to society and to the communities in question of allowing any steelworks to demise? The social trauma as well as the economic trauma will not just be for the near term or for a year or two; it will be for generations. It is hard to quantify what the costs would be to the public purse, but they will be very high indeed and they need to be weighed up and taken fully into account as against any short-term budgetary pressures about which the Government may be nervous.

The noble Lord is right. We always need to look at the wider costs, especially in such difficult areas of public policy. That is one of the reasons we have said that we will look at things like co-investment and further support. Of course, if people are out of work the benefits costs and the broader social costs to families in not having a working member and the consequent effect on their children and so on can be devastating. That is why a succession of Governments—I do not think that this is a party point—have sought to do really good work where there are closures. That has happened right across the UK, most recently in places like Redcar where the task forces have been working really well in very difficult circumstances.

My Lords, what are we to make of what is going on when for the second Forth crossing, which is a £1 billion project, some 95% of the steel had to be imported from China, or when Germany is a major exporter to the UK? Is not the truth of the matter that the European Union’s rules on state aid and its rules on trade have shackled the hands of whichever Government are in power and that no Government will be able to deal with this matter while still in membership of the European Union?

I have already explained that we changed the procurement rules with the approval of the EU and I think that should help us to get a better result on something like the Forth Bridge. I agree with the noble Lord that that is not a happy state of affairs. We made it clear that we plan to do what is necessary in the current crisis and ensure that the state aid rules are complied with but which need not stop us doing the right thing. I have a different conclusion from the noble Lord. On trading and anti-dumping, working together with 27 other member states can be helpful because our production of steel is now quite small in global terms on a percentage basis.