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Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
I thank you, Mr Davies, for the opportunity to begin this important and timely debate on Thamesteel and the future of UK steel production. I am grateful to hon. Members for attending the debate. Their presence illustrates not only the high importance with which hon. Members regard our country’s steel industry, but the sympathy that we all share for the 400 steelworkers at Thamesteel who are undergoing the most difficult circumstances. Unfortunately, those circumstances, which all steelworkers, if not all workers, are experiencing now, have not been seen since the 1980s.
I and many parliamentary colleagues wanted to secure this debate to highlight the dire way in which steelworkers at Thamesteel have been treated. Any steel site that is lost is a loss not just to the immediate area, but to British steel production and UK manufacturing.
Many steelworkers have been here before; it is a familiar tale for those in the steel industry. Thamesteel, which is based in Sheerness, employed about 400 workers and had a production capacity of 840,000 metric tonnes of billet and 600,000 tonnes of bar rod. The site itself began operations in January 1972, and production started at the UK’s first mini integrated works on the site of the historic Sheerness naval hospital. The site uses recycled steel to produce steel for the construction industry. Surviving the turmoil of MacGregor in the ’80s and a number of trade union derecognition plots by the management in the ’90s, this community and its men and women have seen it all.
In July 2002, when the site was owned by Allied Steel and Wire, ASW went into receivership and the employees lost their accrued pensions, but Community trade union fought a five-and-a-half-year campaign to secure a £12 billion financial assistance scheme, which secured the pensions of 90% of the affected workers, via a European Court of Justice ruling. In my former life, I was a Community trade union officer and lay official branch secretary and knew some of the people who were involved, and they stood by the Teesside Cast Products site and its steelworkers in their hour of need.
Securing this debate for the Sheerness steelworkers is the very least I can do to ensure that their case is heard at the highest possible level. UK steel producer Thamesteel, which was, until recently, owned by Saudi-based Al-Tuwairqi Group, went into administration after failing to secure an investor to rescue it from financial difficulties. That information was made public not by the company, but by Community trade union. Thamesteel became the second steelmaker that day to make an announcement that could result in job losses. Tata Steel Ltd, Europe’s second-largest steelmaker, also announced plans to overhaul its European tube steel business amid weak demand for its products. It said that the move could result in 200 job losses, predominantly at Corby.
Michael Leahy, the general secretary of Community, said that Thamesteel had informed the union’s local representatives that the accountancy firm Mazars had been appointed as administrators after a deal with a Swiss group to secure the plant’s future fell apart at the last minute. Michael Leahy said at the time that it was devastating news for everyone who worked at Thamesteel and for the wider community in Sheerness. Importantly for me, for MPs present today and for the work force, Michael said:
“Sheerness steelmaking can have a future and we will be doing all we can to save our steel in the coming weeks and months.”
It is of primary importance that that is reiterated, and that the site is not talked about in the past tense.
At the time, there were reports that Thamesteel had been in talks with Trafigura to secure a deal for the long-term future of the plant that would have resolved Thamesteel’s financial difficulties. However, Trafigura has so far declined to comment on speculation. We are all aware that the backdrop is one of a European steel industry struggling to cope with protracted weak demand in certain corners of the steel market, particularly in the long product construction sector. We are also all aware that the European sovereign debt crisis has made the situation worse by denting consumer confidence, as fears grow that Europe is set for lacklustre economic growth prospects this year.
David Simpson (Upper Bann) (DUP)
I congratulate the hon. Gentleman on obtaining the debate. Although some 40% of the steel from the United Kingdom is exported to the continent, competitiveness has always been an issue. Last year, the Government gave something like £250 million to the steel industry to help towards rising energy costs. Does he agree that for all industry—not just the steel industry—to continue, we need to see some more benefit coming from the Budget today, to help the future of business in the United Kingdom?
Tom Blenkinsop
I agree with the hon. Gentleman, who makes a valid point. The steel industry and other energy-intensive industries are worried about their future. The Government, I think, are willing to listen. We hope that the Budget will take more steps to help and assist industry. We need to consider other measures, but I will come on to them later in my speech.
Across Europe, steelmakers have been restructuring their operations in the light of weaker steel demand. Aside from Tata Steel and Thamesteel, ArcelorMittal—Europe’s largest steelmaker—began mothballing furnaces in recent months as part of an optimisation plan aimed at shifting more of its production to low-cost facilities. Recently, it also announced plans to shut indefinitely an electric arc furnace in Madrid due to weak demand. The move will affect around 270 jobs. It is also considering cutting 630 jobs at its Czech plant, to boost competitiveness.
Everyone here, whether MPs or people in the Gallery, is seriously concerned about what the UK Government are doing about UK manufacturing generally, and UK metal process industries in particular. What are the Government doing in Corby, Scunthorpe and Rio Tinto Alcan, to name but a few? There has been a lot of noise from the Government about the manufacturing sector, but little actual help. With 300 companies involved in the local manufacturing supply chain in north Kent, this issue is crucial. The sequence of events that led to the need for this debate on Thamesteel and the wider UK steel industry illustrate that clearly. I have taken some notes from my former Community union officer colleague, Ryan Slaughter, who has been dealing with the Thamesteel situation alongside local reps at Sheerness.
In late 2002, Saudi Arabia-based Al-Tuwairqi Group bought the Sheerness steel mill and formed Thamesteel Ltd. Al-Tuwairqi aimed to invest in the works and produce grade steel bar and billet for the middle east market. Much of the steel bar and billet produced by Thamesteel workers was used in large-scale construction projects across the middle east.
In April 2009, Thamesteel and Van Merksteijn acquired an equal controlling interest in Kierbeck Ltd—a reinforcing steel fabrication business—of 51%, which was held through the holding company TVM Ltd. In May 2010, Mazars administrators were appointed as joint liquidators of Kierbeck Ltd and the business and assets were sold to Kierbeck Thames Ltd, a sister company to Thamesteel, on 2 June 2010.
In the summer of 2010, a working capital agreement was reached with Stemcor UK Ltd, taking out a charge on various companies within the Thamesteel Holdings Group. In September 2011, Thamesteel stock holding was reduced to clear the balance with Stemcor until the full balance was cleared. Production at the rolling mill was also stopped temporarily, owing to a lack of working capital.
In November 2011, the melt shop stopped production. On 15 December, senior management sent an e-mail to management staff indicating that payment of salaries would be delayed—that was on the day when staff were supposed to be paid. On 17 December, HAT Holdings BSC—an Al-Tuwairqi Group company—agreed to invest £170,000 in Thamesteel after installing a debenture to secure future investment.
On 23 December 2011, employees received their last pay to date. On 24 January 2012, HSBC placed a freeze on all company bank accounts. On 25 January, Rod Weston and Guy Hollander from Mazars were appointed as administrators. Union officials were the first production employees to be informed that the company was in administration.
At 11 am on 26 January, Rod Weston addressed all employees at a mass general meeting, announcing 394 potential redundancies. Mazars told employees that, if they did not receive a call by the end of the day, they were redundant. Community union officials addressed employees and began the Save Our Steel campaign. On 28 and 29 January, 341 redundant employees received notices and RPl forms.
On 30 January, my hon. Friend the Member for Harrow West (Mr Thomas) submitted early-day motion 2663 on the Thamesteel redundancies. On 31 January, Community union jointly organised with Mazars a workers’ support day. The majority of workers received help filling in RPl forms and advice from local colleges, Citizens Advice, Jobcentre Plus, Communitas, the Community trade union information advice and guidance training arm and Her Majesty’s Revenue and Customs.
On 1 February, Michael Leahy wrote to the Secretary of State for Business, Innovation and Skills asking him to meet Community union Thamesteel workers. On 7 February 2012, the first meeting of the Kent county council taskforce was attended by Ryan Slaughter, from the Community union; Ken Pugh, a county councillor; Kevin Lynes, the chair of the meeting and another county councillor; John Burke, who is the constituency manager for the hon. Member for Sittingbourne and Sheppey (Gordon Henderson); Jobcentre Plus; MidKent college; a representative of the Department for Business, Innovation and Skills; Peel Ports; and Citizens Advice. The aim of the taskforce was to provide immediate support and to plan a long-term economic strategy for Sheerness.
Also on 7 February 2012, Michael Leahy, the general secretary of the Community union, Roy Rickhuss and two Thamesteel workers, Pat Wiggins and Tom Butler, met the shadow Minister for Business, Innovation and Skills, my hon. Friend the Member for Hartlepool (Mr Wright). On 13 February 2012, the Secretary of State for Business, Innovation and Skills wrote to Michael Leahy and declined to meet Thamesteel workers who are Community union members.
On 10 February 2012, the first Thamesteel RP1 forms were received by the local redundancy payments office and a further nine employees made redundant. On 14 and 15 February 2012, a second tranche of RP1 forms were received by the redundancy payments office.
Angela Smith (Penistone and Stocksbridge) (Lab)
Does my hon. Friend agree that the contrast between the behaviour of the current Secretary of State for Business, Innovation and Skills and that of the previous Secretary of State for Business, Innovation and Skills, Lord Mandelson, is not to be believed, given that Lord Mandelson worked very hard when the steelworks in my constituency was under pressure and about to go under, and he worked really hard to ensure that it had a future?
Tom Blenkinsop
I support my hon. Friend’s comments and will return to them, as she makes an important point. It is all about how we define industrial activism and whether we have an industrially active policy, where Ministers are willing to roll up their sleeves and get their hands dirty.
On 17 February 2012, the Community union Sheerness works branch met and voted to lobby Parliament. On 21 February 2012, the all-party group on the steel and metal-related industry, which I chair, met and heard representations from two Thamesteel workers, Pat Wiggins and Tom Butler. On 22 February 2012, the second meeting of the Kent county council taskforce took place. On 24 February 2012, the redundancy payments office received a third tranche of RP1 forms. From 27 February 2012, 240 RP1 submissions were paid to Thamesteel workers in a week.
On 8 March 2012, Community union Thamesteel workers held a lobby of Parliament. On 13 March 2012, Michael Leahy, the general secretary of the Community union, wrote a further letter to the Secretary of State for Business, Innovation and Skills, asking for assistance and a meeting with workers. On 16 March 2012, the deadline that Mazars had proposed as a cut-off date for bidders was passed. On 21 March 2012—today—a Westminster Hall debate to raise the concerns of the Thamesteel workers is being held. On 28 March 2012, creditors of Thamesteel will meet at Priestfield stadium in Gillingham.
Throughout this time, it is safe to say that the presence of the Government has been fairly non-existent and those of us who are here today, and the workforce, would like to know why. Why has the Department for Business, Innovation and Skills ignored requests to meet the democratically elected representatives of the workplace that is affected? Why have the Government so far waited for an invisible hand, instead of lending their helping hand? Why has the Secretary of State ignored a trade union that he knows can deliver results in saving steelworks, as was seen at Redcar’s Teesside Cast Products?
If the Secretary of State or the Minister agreed to meet the union, they could have heard directly from men such as Ian Crosby, Paul Davies, Michael John Terry, Aby Abraham, Gary Lewis and Barry Coulthard, who are all workers at Thamesteel who have written down accounts of their plight. Unfortunately, I do not have enough time to read out all their accounts, but if you will indulge me, Mr Davies, I will read out two of them.
Ian Crosby writes:
“I am a 29 year old man that has worked for Thamesteel for the last six years. I applied for the job when my then fiancée fell pregnant with our first child. The salary at Thamesteel was quite a jump from the job I had previously been in, as well-paid jobs to enable supporting a family are few and far between on the island. We are now married and have three sons, aged five, three and five months old. My wife is currently on maternity leave from her part-time job, so it is now more crucial than ever that I can support my family.
When the steel mill went into administration in January, it was absolutely devastating for my family. The fact that we were also not paid for our last month of service was awful for us. I literally had £6 left in my bank on the 25th of January. As you can imagine, with three young children and a house to maintain it is very rare to ever have any money left at the end of the paid month, but with it being the month after Christmas we were even more desperate for payday to come. My wife and I were questioning how we were going to afford nappies or milk for our youngest children, which is something that you should never have to question. My wife was very down about the whole situation and after just having a new baby it hit her even harder. It took almost four weeks before any money was made available to our family. As I had been in employment since I was 16, I am only entitled to contributions-based jobseekers allowance for the time being. This means my children are not entitled to school meals or milk tokens and I am not entitled to free prescriptions, dental care, etc. I find this unbelievable as I have never claimed benefits before and paid my taxes for over a decade, yet it appears you get penalised for that.
I have been applying for every job I can, and my wife has had to return to her part-time job months before her maternity leave was due to end. This is really affecting her as she is missing out on those crucial months with her new son that she was able to have with the other two. She is questioning herself and her parental qualities, but she really has no choice. There are no available jobs on the island and I have been unsuccessful with every application I have made.
I loved my job, and am finding it very hard to try and imagine what I am going to do now. The island has lost its main employer for men, and this is affecting many other areas of business. My only hope now is that a buyer is found to start producing steel in Sheerness once more. I think if this does not happen, then the situation will hit me a lot harder as I am still clinging on to that hope.”
Similarly, Gary Lewis writes:
“First of all, a thank you to all who are doing what they can to try and salvage what was Thamesteel. My story...
I was lucky enough to secure a position there in the autumn of 2006, lucky in that with a well-paid job, my now wife and I could plan our family together. Jen, my wife, has two children from her previous marriage and we also wanted our own. Jen was able to give up work and over the next few years we had two beautiful children, coincidentally both born on 25th June, in the same delivery room at Medway hospital, but three years apart. As people always do, we lived to our means, and managed to stay credit-free. We were able to meet all our outgoings and not build up any arrears. We were never well off, but we were not broke. The occasional night out was still possible, as was the odd short holiday.
We live in a modest three-bed semi in Queenborough, and feel we are part of the local community. My stepdaughter, who lives with us, was tutored at the Isle of Sheppey academy, our daughter Ruby attends Queenborough First School, as will Peter when he is old enough. My wife and I were married locally in January 2009 at the local Methodist church, where my wife’s uncle is a Methodist minister. He…travelled to conduct our ceremony. In the last six months, it’s been clear to all that something was going very wrong at Thamesteel. Bar mill production ceased in August last year, and melt shop production was sporadic to say the least. The message from the senior management was always positive, right up until 23rd January 2012, when it first became apparent that we might not get our pay in two days’ time. With the best will in the world, nobody could ever plan for that. In the build-up to Christmas, all we got was positive vibes, and spent up for Christmas as you always do. Everyone wants the best for their kids, so let them have it, our ‘jobs are safe’.
For the very first time in my life, I found myself on the phone to claim jobseeker’s allowance on 26th January 2012. I spent three whole days on the phone explaining to all my creditors—mortgage, energy, etc.—what was happening. The world was falling in and I couldn’t think straight. I tried to be strong for my family, and did the best I could, but the pressure was—and still is—immense. It’s made a hell of a difference to my life. I’ve applied for loads of jobs in my field of knowledge, in all parts of Kent. So far, I’ve had two replies, both of which have been negative. My JSA is now being paid, £210 a fortnight to cover all my bills. I’ve applied for help with the mortgage, but that only starts after 13 weeks. I’ve made an arrangement to pay reduced amounts for gas and water, and have applied to the Energy Trust for help with arrears on my electric bill. I still have to insure my property, keep a car on the road, and put food on the table. AND IT’S ALL GETTING HARDER BY THE DAY.
We have been lucky, in that the freezer was full when all this happened. We’ve been lucky enough to collect three food parcels from the Seashells centre in Sheerness, a scheme set up to help the steelworkers. I can’t thank those involved enough, as these have been a godsend. It’s a shame that I can only claim one more, but we’ll have to make do.
So what now with the works? Everyone waits with bated breath to see what offers have been made. Even if the mill starts up again, there’s no guarantee we’ll get our old jobs back. And there’s no other viable employer on the island. Nothing. Not for a skilled man with a family to support. Sheerness needs this steel mill, and why aren’t the government helping? Peacocks retail have been helped. Why not us? If there’s a continuation of no investment, either by the government or by the private sector, then Sheerness will be dead in its tracks. A town needs a large employer to survive. 350 of my mates are in the same boat. Then there’s the supply chain. I dread to think how many of us there are. Just a thought, has anyone been to Corby recently?
I can’t see us staying unless there’s a major change. All joking aside, we’re considering properties in Slovakia, northern Germany and northern Scotland. Please, help us.
Gary & Jen Lewis, Sammie, Ruby, and Peter, three chickens, two hamsters and a rabbit.”
During the mothballing of Teesside Cast Products, amid much criticism from the Tories and Liberal Democrats, the previous Government did get involved. Alongside One North East, Ministers were active in brokering potential deals with many potential buyers in the summer of 2009: Marcegaglia; Dongkuk Steel; and obviously SSI. We knew but we could not publicly say that SSI wanted to buy TCP at that time. The previous Government gave £60 million in aid for retraining, specifically for the Teesside area, including for workers at risk in Dow Chemical. That money has since been cut by a third. However, the overarching point is that the previous Government were involved directly. They rolled up their sleeves and got their hands dirty in lobbying and negotiating. I know that to be the case, as I was there in the area and living through the process every day for more than two years. The departure of Kirby Adams paved the way for a sale. It was not a lack of Government intervention that was to blame; there was a deliberate policy by Mr Adams to undermine a Save Our Steel campaign on Teesside. Thankfully, we won, and I wonder whether the Prime Minister would be bold enough to consider Mr Adams such a close political ally now.
I say this again: this debate is timely. How could TCP’s future be saved and Thamesteel be allowed to founder? Why were unions embraced as an integral part of the former’s success, yet ignored, leading to negative outcomes, in the case of the latter? Saying that European markets are in the doldrums is not good enough, because both TCP and Thamesteel have a history of selling to non-European Union markets—Asia in TCP’s case, and the middle east Gulf states in Thamesteel’s. This debate is timely because of the imminent relighting of the now SSI-owned Teesside Cast Products blast furnace. I was part of the Save Our Steel campaign on Teesside, which was supported by our local community, trade unions, the media and the men and women of Thamesteel.
I have a few suggestions for the Minister. Could we use the regional growth fund to attract any potential buyers that he might be aware of to the site? Could we talk to HMRC about holding off a little longer, to allow other buyers to come forward? Can we please at least have the Secretary of State directly involved, meeting with the work force, who are desperate to talk to him?
I will close with the words of the late Geoff Waterfield, the Community union chair of Teesside’s multi-union committee, who led the campaign locally. Sadly, he died at the age of 43 in August 2011 from undiagnosed leukaemia. He said:
“When I see a blast furnace, I see a thing of beauty... I see something that has given thousands and thousands of people a way of life, a good, honest wage, the ability to pay their mortgages, go on holidays and bring up their families. That to me is fabulous, that is a beautiful thing. When you come to Middlesbrough and see that skyline... That blast furnace is the heart of Teesside. As long as it pumps, there is life in Teesside.”
That is not just a Teessider’s fairy tale; the men and women from Kent have the same view of their steelworks. It is a story for all steelworkers in Britain. There is a way to save the site, and UK steel, if the Government do something to facilitate the process and lend their support. So the question for the Minister is: “What are you going to do?”
Philip Davies (in the Chair)
Order. About eight Members want to catch my eye, and I intend to call the shadow Minister at 10.40 am. I want to get everyone in, but that will depend on everyone being accommodating and brief and helping everyone else out.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
I congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate in his capacity as chairman of the all-party group on the steel and metal-related industry, of which I am a member. What a passionate and emotional speech it was. I also congratulate members of the Thamesteel taskforce, which he mentioned. The taskforce was a brilliant example of how different, and sometimes conflicting, interests can work together for the greater good. I also put on record my thanks to Members on both sides of the House—although I have to say mainly on the Opposition side—who have supported the Thamesteel workers in their battle for justice.
Before talking about that battle, I want to explain a little about the events that led up to Thamesteel going into administration, many of which the hon. Gentleman touched on. Steel making first took place in Sheerness in 1972, and the plant was operated by a number of companies until it was taken over by Allied Steel and Wire in 1999. A couple of years later, ASW went into administration, and the plant was eventually bought by the Al-Tuwairqi Group, otherwise known as ATG—keep that name in mind. Since taking ownership of what became Thamesteel, ATG has imposed on the site a succession of disastrous management teams, which have run the company into the ground to such an extent that in the last three years Thamesteel lost £91 million.
It came as no surprise, therefore, that Thamesteel eventually went into administration, but what was surprising was the revelation that the work force were told at the end of December that all was well with the company and they should have no fear for their jobs, despite the December wage bill being paid only because of an injection of £170,000 from an ATG subsidiary company, HAT Holdings BSC. The plant stayed open during January, despite Thamesteel having 350 creditors to which it owed a total of £147 million. It has emerged in the past week that at least two creditors issued winding-up notices, one at the end of December 2011 that would have been issued as far back as October except for a technicality. The order would have become effective on 30 January 2012, but on 25 January Thamesteel applied to the High Court to enter into administration, appointing Mazars as administrator. One wonders whether the dates were coincidental.
It has transpired that Mazars met with senior Thamesteel managers as far back as October 2011 to provide directors with a summary of the insolvency scenarios available to them, and a report was sent to shareholders in November. Thamesteel directors clearly knew during November and December that they faced a mounting financial crisis, so why on earth did they not share the information with their work force, rather than spring it on them on 25 January when the administrator made 341 workers redundant?
Those workers had not been paid since the end of December, and it was left to the Government’s Insolvency Service to step in and pay some of the wages, but only up to a maximum of £400 per week. The Government also funded redundancy payments due to workers, and when we talk about the Government we should not forget that it is the taxpayer who has had to stump up the money. As is the way when dealing with public money, there was an inevitable delay in workers receiving anything from the Government, but I must pay tribute to the Insolvency Service, which ensured that the vast majority of the claims were processed within 12 days of receiving the necessary documentation from the administrator. I also add that the administrator went out of its way to work with the Community union and other agencies, including Jobcentre Plus, to get the appropriate redundancy payment—RP1—forms filled in as soon as was practicable after the administration was announced. Nevertheless, there are questions to ask about why it then took 15 days for the forms to be sent by the administrator to the Insolvency Service.
Due to the delay in paying workers, many of them were in dire straits and it was necessary to set up a local food bank to ensure that families did not starve. It is a national scandal that in the 21st century, in one of the richest countries in the world, redundant workers should have to rely on food parcels to survive, and we must ensure that that never happens again. We have to change the benefits system to ensure that redundant workers receive in a more timely fashion the help to which they are entitled. Perhaps the Government will consider providing an immediate interim payment, which could be adjusted as soon as the paperwork was processed.
For now, however, we must move on and address a more pressing question: what is the future for Thamesteel? My big fear is that the rolling mill will be stripped out and shipped to Pakistan. Why Pakistan? Because most of the senior Thamesteel managers are Pakistani nationals and ATG has an agreement with the Pakistani Government to set up a steelworks in that country. I have only recently learned something that feeds my suspicion. It is unattributable information that although the bids for taking over Thamesteel closed on Friday, an offer was received on Monday of this week, which possibly came from Al-Ittefaq Steel Products Company. ISPC is 60% owned by Dr Hilal al-Tuwairqi, who also owns ATG.
Let us be clear: stripping out the rolling mill from the Thamesteel plant would be the kiss of death for steelmaking on Sheppey, but it need not be that way. The Sheerness steelworks, under all its previous owners, was a profitable plant with a skilled, dedicated and loyal work force. Its financial plight has nothing whatever to do with that work force and everything to do with senior managers who had no real interest in or understanding of the British steel industry. To the current owners, Thamesteel was just a vehicle for producing cheap, semi-finished steel billets that could be shipped to Saudi Arabia to be rolled in the company’s Saudi mills. Thamesteel was a steel cow that could be milked, and it was.
I urge the Government to recognise the Sheerness steelworks for what it is: an important industrial asset. Thamesteel, or whatever name the company ends up with, has the capacity to be profitable again. The plant has the capacity to turn over an estimated £500 million annually and employ 800 people. We need that capacity. Britain generates 1 million tonnes of ferrous scrap annually, of which 40% is recycled here, while the other 60% is exported. At the same time, perversely, Britain imports almost 50% of its steel reinforcing products. Surely it makes sense to convert more of the UK’s ferrous scrap into steel in this country. The gap between imports and exports will only get worse if Thamesteel is lost.
I understand that the administrator has received several bids and is in the process of analysing them. I hope that one of those offers, or more, is from a company that is interested in making steel. If a realistic offer is made, I urge the administrator, the creditors and the Government to accept it without hesitation. However, if the worst comes to the worst and the only offers are from companies that want to close down the site and strip its assets, I urge the Government to intervene immediately to save this important national industrial asset until, as the hon. Member for Middlesbrough South and East Cleveland said, somebody can be found who wants to produce steel on Sheppey.
I think that, given the right help, there are people willing to take on the plant, but the biggest problem is the working capital that would be needed to get steel rolling again until sales income was received. Working capital at full capacity would be a minimum of £25 million, but offering that sum as a loan guarantee would be a small price for the Government to pay to keep open the last remaining steelworks in the south-east.
I suspect that Ministers will advance at least two reasons why they cannot intervene. The first is that, under EU rules, they cannot offer subsidies to the steel industry, but if they are honest with themselves and us, they will admit that our European partners find creative ways to help their own industries. In Germany, for instance, the Government have tilted the tax system to help to reduce the high cost of energy in its steel industry. That is a subsidy in all but name. The second argument will be that in the current economic climate, Britain simply cannot afford to help Thamesteel. That will be met with disbelief by many people, including me. I can think of any number of Government budgets from which the money could be lifted.
For instance, over the next four years, Britain will provide £1 billion in aid to India, a country with a thriving steel industry. Now there is an irony. Even more ironically, Britain will give £240 million this year to Pakistan, the country in which ATG is building a Pakistani-subsidised steelworks to which it might well ship the Thamesteel rolling mill. It would be outrageous if British aid were used, albeit indirectly, to help to build a steelworks to employ Pakistani steelworkers while British steelworkers were losing their jobs in my constituency simply because the British Government refused to intervene. Of course, I might be wrong. The Minister might commit to helping to save the Sheerness steelworks and the 400 jobs that go with it. I assure him that if he does, he will make me and my constituents happy.
Before I conclude, I will briefly mention the administration of Thamesteel, as it is important. In my opinion, Mazars has acted professionally and with the utmost propriety, in accordance with the objectives and rules of administration, but I would like to raise a concern about those rules. Is it right that an accountancy firm consulted about insolvency options should then be appointed administrator? Is it in order for the administrator to make workers redundant without paying them the wages and other payments to which they are entitled when the company still has funds in its bank account?
While on the subject of Thamesteel workers, although they can claim back the wages owed for January and those claims will be classed as preferential, claims will be capped at £800 per employee and the balance traded as an unsecured claim. The company has 350 creditors, including employees and connected creditors—people with connections to the owners. For instance, HAT Holdings BSC holds a fixed and floating debenture on the company for £170,000, which will be paid first. Of the £143 million owed to creditors, £137 million is owed to connected parties. I would like the Government to consider changing the rules of administration to ensure that all money owed to ex-employees becomes preferential claims, and that the claims of non-connected creditors take precedence over those of connected creditors.
A final aspect of administration with which I am unhappy is the fact that although the administrator has a duty to investigate the conduct of the directors in the period leading up to administration, and those findings are then reported to the Insolvency Service, the report is confidential, meaning that nobody can question the thoroughness of the investigation or its conclusions. I would like the rules to be changed to allow a representative of the work force access to the report and the ability to object to its content and its conclusions.
Thank you for your forbearance, Mr Davies, in allowing me to make such a lengthy contribution. As you will realise, the issues involved in Thamesteel’s administration and the plant’s future are complex. I could say much more about the events leading up to administration, and there are many more questions that I want to ask, but at this time I want to say nothing that might jeopardise the possibility of Thamesteel being rescued and will save my ammunition for another day.
Philip Davies (in the Chair)
Order. I reiterate that I will call the Front-Bench spokesmen from 10.40, so speeches will have to be considerably shorter.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I, too, congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate, which coincides with this afternoon’s Budget statement. If press reports are true, the statement’s main concern will be the tax affairs of people earning more than £150,000 a year. Our concern is different: it involves the hundreds of jobs lost as a result of the closure of Thamesteel and, more generally, manufacturing and steelmaking and their importance to our economy.
It is likely that we will hear a lot this afternoon about rebalancing the economy between finance and industry—indeed, the Chancellor ended his first Budget with a call for a “march of the makers”—but at Thamesteel, the makers have lost their jobs and, as my hon. Friend said, we as a nation have lost the product. I have some experience of that in my constituency, where the huge Bilston steelworks closed many years ago. I hope that that does not happen to the constituency of the hon. Member for Sittingbourne and Sheppey (Gordon Henderson), but most of my constituents would say that the area has never fully recovered from the loss of such a major employer.
I do not want to do what often happens in such debates by going over the history of the decline of manufacturing in the UK. Too many of this House’s debates on the subject are characterised by looking in the rear-view mirror. Perhaps we focus too little on globalisation’s impact on our manufacturing industries and on the possibilities for the future, which is what I hope we can concentrate on.
Manufacturing and steelmaking are still very important to the UK, even if we do less than we did many years ago. There are things that Governments can do—they are not powerless—to support those activities. I have referred to the Chancellor’s Budgets, and his autumn statement gave a relatively small rebate on energy and environmental costs to energy-intensive producers. The scale of that rebate was a fraction of those available in Germany, but at least it represented recognition that the Government have a role to play in trying to ensure that energy-intensive industries remain in the UK.
Jessica Morden (Newport East) (Lab)
The hot strip mill in Llanwern in my constituency was mothballed last year because of the fall in demand for steel. Does my right hon. Friend agree that what its former workers need is help now? Tata’s £20 million investment in the Port Talbot mill will help Llanwern in the long run, but Government action is needed now, not in 2013, when the measures for energy-intensive industries will be implemented.
Mr McFadden
My hon. Friend makes a good point. I mentioned the rebate to give an example of what the Government can do. They are not powerless when companies have a global choice about where to locate and produce.
Before I ask the Minister some specific questions, let me say that I do not believe that any Government, of whatever political colour, can prevent the closure of every factory. That is not my stance. I was a Business, Innovation and Skills Minister before the election and the Department was not always able to prevent every closure. The Government cannot do that, nor can they magic buyers out of the air if they do not exist, but there are things that the Government, the Minister’s Department, and he and his Secretary of State can do, aided by the good officials who have accompanied the Minister to the debate.
What is the situation with potential buyers? How many have declared an interest? What kinds of bid are on the table? There is a world of difference between someone who simply takes the equipment and the plant and ships them abroad, and someone who is willing to continue production in the area.
My hon. Friend the Member for Middlesbrough South and East Cleveland mentioned the experience of Teesside, which is instructive. When the closure of that plant was announced, many people would have given up on it and thought that nothing could be done and that the situation was hopeless, but that was not the case. The plant might not have had the backing and the belief of the management, but the potential buyers believed differently.
The complaint at the time was not that the Government were doing nothing, but that we were interfering too much. I am prepared to accept that complaint, because, as I had to explain to the management, it may have owned the plant, but it did not have ownership of the overall situation. The Government had a legitimate stake in it, given the jobs that were at stake and the impact on the regional economy and on manufacturing in the UK. I am delighted that a new buyer has come in that has faith in the plant, the product and the workers, and that production has begun again. That shows that it is sometimes possible to find new buyers and that Government can play a role, as an honest broker, in bringing people together.
What role is the Department playing to try to act as a broker and to send out signals to potential purchasers that the UK believes in manufacturing? Is there, as my hon. Friend has asked, any potential for purchasers to apply to the regional growth fund for funding? Are there funds available for training? Such funds have been discussed in similar circumstances in the past and they may make the situation more attractive to potential buyers. There are things that the Government can do.
At a more basic and prosaic level, will the Minister clarify the situation in relation to redundancy and notice payments? The Government have a role to play. My hon. Friend read out letters and spoke movingly about the human effect on families with young children who are waiting desperately for redundancy payments and relying on food banks. This is a desperate situation, particularly for those families with young children. Some payments have been made, but will the Minister assure us that he will use his good offices to ensure that any outstanding moneys, which are the responsibility of the Insolvency Service and the redundancy payments offices, are paid as soon as possible? Families are desperately stretched, so I hope he will do that.
The previous Secretary of State, Lord Mandelson, has been mentioned, but if the Minister does not like that reference, I urge him to consider a different inspiration—namely, a previous Conservative Secretary of State who said that he would be happy to intervene before breakfast, lunch and dinner. I am sure that all Opposition Members would be happy if the Minister took that person as his inspiration.
I hope the Minister will assure us that the practice of not meeting the work force will end—I see no sense in not meeting them when they are desperate to meet—and that he and his Secretary of State will do everything they can to attract a buyer. I also hope that potential purchasers will be made aware of any available funding. Although the Minister cannot prevent every factory closure, he can play an active role in trying to secure a future buyer to continue steelmaking on the site under discussion. That is the commitment that every Member from every party wants to hear.
Philip Davies (in the Chair)
Order. Six more Members have indicated that they want to speak and I will call the Front-Bench representatives in 23 minutes. I am sure that Members can do the maths for themselves.
Ian Swales (Redcar) (LD)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate, and the right hon. Member for Wolverhampton South East (Mr McFadden) and my hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson) on their encyclopaedic exposition of the situation at Thamesteel. I intend not to repeat the comments that have already been made, but to talk more generally about the steel industry.
The Teesside Cast Products plant is in my constituency of Redcar and we are still celebrating the fact that Sahaviriya Steel Industries took over the site a year last Monday. The fact that the plant has not yet made steel is testament to SSI’s investment in and refurbishment work on the site and its long-term commitment to steelmaking in the UK. The plant will soon start—within days—to make steel and it will be a world-class site again.
I commend the work force for their constructive attitude towards SSI’s proposed new culture at the site. We have had only one black spot—namely, a dispute between Balfour Beatty and others over certain trades. I am not taking sides in that disagreement, but 20,000 working hours have been lost and I hope that it will be resolved as soon as possible. Our Thai friends are surprised that that has affected them in an area in which jobs are so badly needed and that has such a passion for steelmaking.
Overall, this has been a great story, with 700 jobs protected, more than 1,000 people recruited and at least another 1,000 in related jobs. The local community is right behind it and the effects are already being felt: there is a spring in people’s step and Mary Portas’s recent report to the Prime Minister even singled out Redcar high street as bucking the national trend. That is the effect that such developments can have on local communities.
As well as SSI, I have Tata’s heavy beam mill in my constituency. It makes beams of outstanding quality—nine of the 10 tallest buildings in the world use them—but the mill has been affected by the construction downturn. The Government are doing many welcome things, such as support for manufacturing and apprenticeships, and the regional growth fund, from which SSI benefited to help with training.
The Government also want to invest in infrastructure, in which we have a great tradition on Teesside. In fact, I have a picture on my wall of Lambeth bridge lying in pieces in Middlesbrough before being shipped down here. There have also been announcements on green technology. However, we need a lot more drive on such issues. In particular, we need to ensure that public procurement represents best value for the UK, not just best price. In relation to how we deal with green technology, that includes where transactions might seem to be company to company, but there are actually huge underlying public subsidies in some projects.
Finally, I want to mention energy costs. I and a few other MPs, some of whom are here today, started the all-party group on energy-intensive industries in early 2011. We have had great support from at least 10 industries, but the No. 1 affected sector is, of course, steel. Tata says that its sites in the UK pay 25% to 50% more for their electricity than its sites elsewhere in Europe. In the autumn statement, the Government acknowledged the threat to competitiveness that that poses for UK industries such as steel. The £250 million mitigation measures announced in the autumn statement are welcome, but the mechanisms are still unclear and address only the additional future changes without dealing with the cost gap that already exists between the UK and Europe.
The delay and uncertainty surrounding that are deeply unhelpful. Companies cannot adequately plan for the future in a business where long-term planning is the norm. Uncompetitive business rates also have the potential to drive steel making out of the UK. Again, Tata compared rates payable at two of its sites—one in the Netherlands and one in the UK—and found a gap of approximately £10 million a year. That differential needs to be closed. Those costs are significantly out of line with those in the rest of Europe and are a threat to the ability of companies to invest and be competitive. At a time when the Government are trying to revitalise UK manufacturing industry, we should be doing all we can to support industries such as steel making by creating a level playing field on which it can compete.
I hope that the Minister will say more about the plans to support energy-intensive industries, especially steel. The UK still has a steel industry that is vital for our future security and prosperity, and I hope that the Government will do everything they can to back it.
Nic Dakin (Scunthorpe) (Lab)
I am pleased to have been called to speak in the debate. We have already heard from my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who gave an excellent speech, and other hon. Members how important it is for the Government to act. Where the Government have acted in places such as Stocksbridge, Teesside and, indeed, my constituency of Scunthorpe, there have been better responses for local people. Indeed, the role of trade unions working together with management is significant in getting better outcomes for local communities.
I shall focus briefly on three things. First, I want to consider the need for demand now for steel and the need to introduce real infrastructure projects that create such demand. We know that there will be demand with High Speed 2, renewables and nuclear, but that is further away—towards the end of the decade. We need demand now. We do not need announcements about small things happening; we need real things to happen, with real action on infrastructure now. Today’s Budget gives the Government the opportunity to do that.
Secondly, as we have already heard in relation to energy supply and cost, the UK is far more expensive than its European neighbours. It is therefore difficult for us to be competitive in relation to decisions being taken in places such as Mumbai, because we look potentially uncompetitive compared with the other European options available to investors. On the package in the autumn statement, a consultation was announced in March that will report in March 2013. That continues the uncertainty. Even in March 2013, we will not know what that package of support looks like for energy-intensive industries. In the meantime, there is a policy vacuum and uncertainty, in which there is danger for UK steel. That needs addressing now.
The third element is the issue surrounding supply chain development and procurement, particularly in new industries such as renewables. We need action to ensure that we are in a position to deliver and procure steelmaking for our products that are being bought now. There has been the recent example of TAG Energy Solutions in the north-east, which is a case study of what should not happen. UK investment and UK steel are available, but the procurement process means that steel from elsewhere will be used to fund that development. That is not good enough. There is also the case of the Forth road bridge in Scotland, which will proudly be built with Chinese steel when UK steel in Scunthorpe and Dalzell is available. We need clear action on procurement and supply chain development.
We need action now on those three things to secure the UK steel industry. As the hon. Member for Redcar (Ian Swales) said, it is a crucial part of the security of this nation to secure UK steel. We need action on demand now, not tomorrow, and to bring infrastructure projects forward. We need action on energy security now, not in 2013. We need security for energy-intensive industries now and a package to sort that out now, not one that takes all the time in the world. We also need action on procurement and supply chain development now. If the Government take those actions, I am sure that Labour Members will fully support and embrace that, because it is in the interests of UK plc and of workers, such as the workers we see here today who are rightly concerned about their living. Thank you, Mr Davies, I have said my piece.
David Mowat (Warrington South) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies, and I congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on his remarks. I associate myself with his comment on blast furnaces. The first time I saw a blast furnace in Port Talbot was a formative experience for me. Every hon. Member would benefit from spending some time in front of a blast furnace.
I want to talk about one aspect of the issues facing energy-intensive industries such as steel, aluminium, ceramics and cement—that of energy prices. I shall focus on one of the drivers that we can do something about while still meeting our carbon reduction commitments.
Today, business in the UK is paying around €10 a unit for electricity. If a business were located in France, that figure would be €7 a unit, which is the business rate. That is a difference of about 40%, and a very significant margin. That factor is important in the decisions being made. It is not true that our energy prices are more than those across Europe generally—our gas prices are cheaper than nearly everywhere in Europe—but electricity is expensive and continuing to get more expensive. It is hard for a Government to drive an industrial strategy that involves rebalancing the economy when energy prices are on an upward track relative to our major competitors. That is the issue.
About 18 months ago, I received a written answer from the Department of Energy and Climate Change stating that 18% of business energy costs were caused by our green—or our renewables—policies, which is a large chunk. That figure is set to rise to 30% by 2020. What matters is what that means relative to our competitors. It is not possible for gross domestic product to grow if energy is expensive. As we move from a service-based GDP to what I hope is a more manufacturing-based GDP, costs will be more in terms of energy per unit of GDP developed.
This is not about climate change. There are two aspects to what we are trying to do with our energy commitments: reduce carbon and go for renewables. The Climate Change Act 2008, which was rightly passed by the previous Government, committed us to an 80% carbon reduction by 2050. That is about the hardest thing I can imagine doing while we continue to grow the economy. A year later, the same Government signed up to an EU directive that said that, as well as an 80% reduction, we would produce 30% of our electricity from renewables by 2020. That is a contradictory objective. There is nothing in the first objective that says we have to go for renewables at the pace and scale we did. We could have gone much more quickly for nuclear power, or for carbon capture and storage—even more quickly than we are doing now, and I concede that the Government are moving in that direction.
There is a serious consequence here. We have two deltas in energy costs for companies such as Tata, Alcan and others: the delta of increased energy costs due to the need to meet our carbon commitments, which I accept as we have to do our bit, and the additional delta, over and above that, to meet a large component of that carbon commitment through renewables—a larger component than if we had just tried to minimise carbon at the lowest cost possible, which would have created the most jobs. I have sat through many debates, hearing about job losses related to the solar tariff. I remind hon. Members that the tariff was 43p a unit of electricity—the feed-in tariff that the Government belatedly cut. In France, electricity is being generated at 6p a unit. That is not sustainable: it has to be paid for by somebody and the buck is stopping at companies such as Tata.
The Government are continuing to do a lot in their industrial policy, and with the growth fund, which is far more focused towards the north of the country than the regional development agencies were—apprenticeships and all that goes with them. Energy prices are critical, and unless we get them right that will all be for nothing. The £250 million is welcome and is directed at the energy-intensive industries, but that is an error in focus, too, because all manufacturing requires energy. It is a continuum. There are not just a few companies at the top using a lot of energy; all manufacturing companies use energy. If they are paying 18% or 20% more than their competitors as a result of the Government pursuing policies that we do not need so as to meet our carbon commitments, the penalty will be job losses. Unfortunately, the jobs that have been lost are marginal jobs. They tend not to be seen in the same way, perhaps, as jobs in a solar company or a wind farm company, which are very high profile and all that goes with that. The Government need to focus on that and get it right.
Philip Davies (in the Chair)
Order. Three hon. Members still want to speak. There are eight minutes to go before I call the shadow Minister. I call Nia Griffith.
Nia Griffith (Llanelli) (Lab)
I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate and on putting the case very clearly for active Government intervention to secure the future of Thamesteel and to provide optimum conditions for steel manufacturers to invest in the UK in the long term. My sincere sympathies, and those of my constituents, go out to the workers and families of Thamesteel. We know exactly what they are going through and the knock-on effect in the local community. We need to get the conditions right not just for them, but for the whole of our steel industry in the UK.
I have attended two starkly contrasting meetings recently: a very gloomy meeting with steel manufacturers, and a more upbeat meeting with motor manufacturers. The motor manufacturers said that there is investment in the UK. They have high-quality products—high-quality engines and so on—and they asked: what has happened to the supply chain? So much of the supply chain now is not in the UK. We have to get the steel part right, as well as the rest of the supply chain. We have to get the conditions right for manufacturers to want to invest in the UK in the long term.
In my constituency, Trostre does an exciting job of turning around very quickly whatever anyone wants in terms of a tin, to make exactly the right type of can with a two-week lead time. However, it cannot do that if it cannot get the raw materials—not if we end up having to import steel. We therefore welcome the investment in Port Talbot, but we must provide the right conditions for manufacturers to invest long term in steel.
Why on earth are we going down the road of the mad carbon floor price? We must work together with other countries on any form of combating emissions. We know there were faults with the emissions trading scheme. It was not perfect, but at least it was fair—it was a level playing field for everyone across Europe. We are absolutely mad to impose an additional tax on our steel industry that does not apply to any of our competitors across Europe. We have to get energy prices right. We have also got to encourage long-term investment in energy generation.
The mitigation packages, supposedly put in to help because of the carbon floor price going so high, are piecemeal, coming in too late and not giving the long-term stability we need. Furthermore, we need proper, sensible policies on taxation. We need more flexibility in capital allowances. We need money not only for research and development, but for demonstration and deployment. Unless the Government pursue an active industrial strategy, not only Thamesteel but many more steel plants will fail. I therefore hope that the Minister is listening.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
I will not go through all the arguments that have been made in relation to Thamesteel, but the Government need to prove that they are listening to hon. Members and to the workers of Thamesteel.
Steelworkers are part of an industry that is like no other—it can be dangerous and it can be temperamental. It is dusty. It can involve heavy lifting. As I remember only too well, it can be fatal on occasion. Most steelworkers in the modern 21st century do not have university degrees. What we say is that they are graduates of the university of life—the life of a steelworks. Being a steelworker means having a skill like no other, whether working in an ore blending plant, a sinter plant, the coke ovens, the heat of a blast furnace, the basic oxygen steelwork, a degassing unit or a continuous casting mill of strip, slab and plate. Those skills are not learnt by reading a book; they are learnt at the chalk face. The men in this room who are watching the debate should remain part of that chalk face.
In Scotland, there are currently two plants: Dalzell steel plant in my constituency, and Clydebridge in Cambuslang. Those companies have just put in a bid to rebuild the new Forth road bridge—35,000 tonnes of steel. What did they get? Not an ounce. Not one ounce. Some 90% of the old bridge was built by Scottish steel. Not an ounce of UK steel. Not an ounce made in Scunthorpe. Not an ounce rolled in Clydebridge or Dalzell. Nearly 30,000 tonnes of steel will be shipped 12,600 miles from Shanghai, instead of being driven 34 miles along the M8 from Motherwell to the Forth. What a disgrace! What a way to treat a modern industry!
Steel has a very proud history, but it has a very bright future. It is a material that will be used in the future. It will be used for wind farms and offshore farms—all that will be made from steel. Unfortunately, unless the steel industry is helped and unless the Government listen, an awful lot of that steel will come from abroad.
Finally, I started by talking about Thamesteel; I would now like to talk about my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who gave a passionate speech. Quite frankly, as someone who was a steelworker for 15 years, I could not have put it any better, and I congratulate my hon. Friend. I wish the workers of Thamesteel well. I hope that the Government are listening to their argument.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
I will follow on briefly from my hon. Friend the Member for Motherwell and Wishaw (Mr Roy). I represent the Clydebridge steelworks—the other steelworks in Scotland that has been affected by the decision in Scotland. In the short time available, I will build on the comments made by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) about Government intervention. There are opportunities for Government intervention by using the procurement process properly. What we have seen in the example of the Forth road bridge debacle is an absolute and catastrophic failure of Government policy. Worse, in Scotland in the past few weeks, we have also heard a catalogue of excuses—commercial confidentiality, no Scottish firm bid, the procurement rules prevent Scottish steel to be used for the Forth road bridge—all of which have been proven to be demonstrably untrue.
I remind hon. Members that there is no one from the Scottish National party here to defend its decision. That is typical of how the SNP has behaved and is a wider point and a wake-up call, not just to the devolved Administrations, but to the UK Government, because we should support our manufacturing industry. Procurement rules do not prevent that and imaginative use of those rules can enhance it. It happens in France and Germany, and other places, and we should be meeting that challenge and doing the same thing for the sake of the people here in the Gallery today and the people whom we all represent.
Mr Iain Wright (Hartlepool) (Lab)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate. It was evident, during his passionate and emotional contribution, that he has steel—Teesside steel—coursing through his veins. He is a massive champion of the UK steel industry.
I shall concentrate on two broad things, and I hope that the Minister responds positively to both. First, I am keen for the Minister to set out the role that he anticipates the steel industry will play in the modern British economy. It is evident that we Opposition Members believe that a productive, thriving and competitive steel industry is an essential part of a modern, prosperous British economy. Steel is a vital component of the industrial sectors in which Britain currently has a competitive advantage and through which we hope to lead the world in future, such as oil and gas exploration, chemicals, aerospace, offshore wind technology and automotives.
It would be unsatisfactory to believe that we in the UK could rely wholly on imported steel from overseas because, somehow, it can be sourced at much cheaper cost. Such reliance would make us vulnerable to supply difficulties, quality concerns and price shocks and in the long run would undermine British competitiveness. In addition, the UK would miss out on valuable research and development opportunities. Tata’s Teesside technology centre at Grangetown, for example, focuses on long product research, which helps our nation retain our valuable manufacturing expertise. Similarly, Tata’s automotive engineering group, again, based in the UK, is essential for developing new generation steel for the automotive industry.
It is strategically important that we in Britain make steel. I hope that the Minister agrees and states what I hope is his strong belief, which we in the Opposition would support, that a thriving steel industry in the UK is a necessary part of a balanced economy based on manufacturing. As we have heard in this debate, we would also expect him to ensure that, as part of active and intelligent government, the Government provide an effective industrial strategy in partnership with business. That is not to pick winners, not to protect lame duck companies and not to embrace protectionism, but to recognise the vital role that British-made steel plays in our economy and to use the power of Government to help support that.
We have heard that the steel industry is notoriously cyclical and subject to difficulties. Cost pressures, especially in raw materials, are increasing. Demand for the product is falling, especially in Europe, and even in China in the last quarter, and steel manufacturers around the world are running down inventories rather than boosting output, and Thamesteel has been an obvious victim. I understand that this is a global matter, but the Government have real power here. What has the Minister done to ensure that he can intervene to stimulate demand to provide support for our steel industry?
We have heard time and again in today’s debate how measures such as the carbon floor price are impacting on energy intensive industries such as steel. It is estimated that British industry and British producers are paying up to 50% more in energy costs than their counterparts in France, the Netherlands or Germany. I anticipate, or at least hope, that the Chancellor will say something about this matter in his statement this afternoon.
Mr Wright
I hope the hon. Gentleman will forgive me if I do not. I have a lot to get through in only seven minutes.
What active role are the Minister and other Department for Business, Innovation and Skills Ministers taking to mitigate some of these additional costs for industry, as is happening on the continent, where the French and German Governments are helping to mitigate such cost pressures?
My hon. Friend the Member for Scunthorpe (Nic Dakin) mentioned the supply chain. What are the Government doing to help establish and nurture a UK supply chain, particularly for the renewable energy sector? We have the biggest market anywhere in the world for offshore wind, and steel is a large part of the manufacturing process. However, the industry estimates that only about 10% of the components going into offshore wind installations are British-made. Tata Steel is investing £9 million in its world-class pipe mills in my constituency to increase the possibility of winning contracts for offshore wind component manufacturing, but the company needs the Government’s active support to ensure not only that there is a level playing field for British steel manufacturers, but that those manufacturers get on the pitch in the first place.
The Teesside offshore wind farm is a good example. It is a major contract that involves 27 turbines off the coast of Redcar, each requiring a monopile using approximately 400 tonnes of steel plate. Tata Steel could have manufactured that plate in the UK at its Scunthorpe plant and used pipe mills in my constituency and elsewhere across the UK to process the plate. However, as we have heard, the contracts have been awarded wholly to Dutch and German steel manufacturers. Why is this allowed to happen? Clearly, the Government are not doing enough to support the creation of a UK supply chain to help steel.
Unless BIS takes a more active role and interest in this matter, the economic benefits in moving to a low-carbon economy will be exported to foreign competition at the expense of British-based jobs. The Minister needs to explain how he will help to create and support the supply chain, which would benefit the likes of Thamesteel and Tata. For example, why do not the licences for such wind farms require a certain proportion of components to be British-made? Why should not at least one British-based manufacturer be invited to bid for every contract? What are BIS Ministers doing to ensure that steel jobs and steel companies based in Britain can benefit from the transition to a low-carbon economy?
Secondly, I want to ensure that Thamesteel and its workers have as positive a future as possible and that the Government are working hard and energetically to support that end. Thamesteel is not a lame duck or an obsolete company whose time has passed. It was regarded as one of the fastest-growing steel manufacturers in the UK. In 2010, which was a difficult year for the construction industry, Thamesteel sales stood at £200 million, and it produced more than 100 tonnes of steel an hour, which was a plant record. There seems to be a strong prospect of a viable business. In that light, will the Minister outline what he, his Department, including other Ministers, and the wider Government are doing to secure a buyer for this business that is not focused on asset stripping? What brokerage is his Department providing, between the administrator and potential buyers, as a means to send out a message to the market that the Government value the steel industry and its component firms, such as Thamesteel? How have Ministers been directing the approach to this matter? Specifically, I should like the Minister to tell us what meetings BIS Ministers have had in this regard.
As my hon. Friend the Member for Middlesbrough South and East Cleveland said, the previous Government rolled up their sleeves and got their hands dirty trying to negotiate a deal, thanks to my right hon. Friend the Member for Wolverhampton South East (Mr McFadden). In respect of the Thamesteel workers, are the Government not only not getting their hands dirty, but merely washing their hands and saying that the company is no longer viable? That would be a tragedy, not just for the 400 workers, but for the local businesses and the supply chain that rely on the firm and for the wider steel industry in this country.
How is the Department linking up with Kent county council, which I understand has set up a taskforce? Is BIS providing a co-ordinating role to ensure that the local authority, good trade unions such as Community, local chambers of commerce, further education institutions such as MidKent college, and local businesses are all co-ordinated and pulling together in the same direction to help Thamesteel be viable? Is there any waiving or deferral of business rates to encourage people who want Thamesteel as a going concern to make that happen? Why do Ministers not have more of a sense of urgency or imagination about this matter?
The workers have rightly been a key concern for hon. Members. Many workers have not been paid since a couple of days before Christmas and are now, as we have heard, having to resort to receiving food parcels. The hon. Member for Sittingbourne and Sheppey (Gordon Henderson) made the point in BIS questions last Thursday, and he rightly did so again this morning, that when a company goes into administration, the wages owed to its staff should be the top priority. In his response to the hon. Gentleman, the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for North Norfolk (Norman Lamb), said that he agreed
“that the interests of workers should absolutely take priority” —[Official Report, 15 March 2012; Vol. 542, c. 376.]
He resolved to look into the matter.
Given the urgency of the situation, will the Minister update hon. Members about what can be done to ensure that amounts owing to workers are the top priority and that they are paid? What are the Government doing to ensure that workers receive redundancy packages? Will the Minister update us about on the current situation? Three months after many workers were last paid, the need to ensure that redundancy packages are provided immediately is urgent. Can he confirm and reassure me that all Thamesteel workers have now been provided with their redundancy packages?
The Department needs to act with a greater sense of determination for the wider good of the UK steel industry and for the welfare of 400 workers at Thamesteel. The Minister needs to have listened to the debate; he needs to act; and he needs to act now.
The Minister for Universities and Science (Mr David Willetts)
I congratulate you, Mr Davies, on chairing the debate. A lot of Members have been trying catch your eye, which reflects its importance.
I also congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate. I know how important the steel industry is for him, as he showed in his powerful and emotional speech. I congratulate, too, my hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson), who has been working energetically on the Thamesteel issue. His words show his commitment to that industry in his constituency.
I had some involvement with Allied Steel and Wire workers when I was shadow Secretary of State with responsibility for pensions; they faced such pension problems as the hon. Member for Middlesbrough South and East Cleveland referred to, and I was impressed by their dignity and commitment. At that time, I was pleased with the shared, cross-party view on the importance of ensuring that pension obligations were properly met. This morning, we have also heard important contributions from the hon. Members for Redcar (Ian Swales) and for Scunthorpe (Nic Dakin) and my hon. Friend the Member for Warrington South (David Mowat). I followed with great interest the speeches of the hon. Members for Llanelli (Nia Griffith), for Motherwell and Wishaw (Mr Roy) and for Rutherglen and Hamilton West (Tom Greatrex).
Ironically, I came to the debate straight from the Cabinet, where the Chancellor was reporting on the Budget to his colleagues. I must not breach Budget secrecy, but it is a Budget for enterprise and one that will show further commitment to and support for British business. We recognise, however, that UK steel companies and their overseas competitors have been forced to take some uncomfortable decisions as they weathered the economic storms of the past few years—companies such as Tata Steel, which has had to reduce its work force by 25% and its capacity by more than 20%. Nevertheless, the UK steel industry remains a significant employer, and it is a welcome and important part of our broad manufacturing base. Its intensive research and development is an important contributor to the UK economy. The steel industry underpins many parts of manufacturing and, as we heard this morning, many local communities, in turn tying into crucial high-tech industries such as aerospace, automotive and construction.
Thamesteel, however, found itself at a significant competitive disadvantage on world markets, with competition from countries with lower costs, such as Ukraine and Turkey, so, sadly, it went into administration on 25 January, with the immediate loss of 350 jobs. The Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), who has responsibility for business and enterprise,has been working closely with my hon. Friend the Member for Sittingbourne and Sheppey to ensure that those affected receive all the Government assistance available to get them back into work as soon as possible. My hon. Friends have met to discuss the matter.
Let me tell the House briefly what is involved. Tailored practical support is being provided by Jobcentre Plus through its rapid response service and by the talent retention solution programme, which can help engineers to find jobs in engineering. A Thamesteel taskforce has been set up locally by Kent county council to co-ordinate assistance; it has already met three times and is meeting again soon. The Department for Business, Innovation and Skills has been liaising with the Insolvency Service on redundancy payments and unpaid wages, and I understand that, with the exception of one or two cases, all claims have been processed. We will of course maintain the pressure to ensure that every claim is processed. Yes, BIS can and does speak to Her Majesty’s Revenue and Customs, although we cannot guarantee what the response will be. The sale of the plant is a matter for the administrators, Mazars, but officials in BIS and UK Trade and Investment have kept in close touch with them and have offered assistance to identify potential buyers for the business.
Mr McFadden
Is the Minister willing to invite potential buyers to the Department to talk about the Government’s backing for manufacturing, what help might be available from the regional growth fund and all such issues that they might wish to discuss?
Mr Willetts
There is indeed practical help available, and I will try to cover that.
Mazars advised that it received some 70 initial approaches and that it organised more than 12 visits to the site. It has received a number of bids, which it is considering as part of due diligence. Mazars set a closing date of last Friday, 16 March, but it is willing to consider any credible bid, including a late bid received on Monday. The bids are all commercially confidential, however, and BIS has not been provided with specific details, so I cannot share any further information with the House. Sadly, we recognise that, given the depressed steel market in Europe and other companies’ idling production facilities, sale as a going concern might prove difficult, although we are absolutely committed to supporting manufacturing in Britain as part of our commitment to rebalance the economy.
As part of the autumn statement, therefore, we announced measures worth about £250 million to help energy-intensive industries, including the steel industry, to reduce their energy bills. That package was intended specifically to mitigate the effect of climate change policies and energy policies on energy-intensive industries such as steel. In February, we launched the third round of the regional growth fund, worth £1 billion, to which steel companies can bid as long as they comply with state aid rules. The £125 million advanced manufacturing supply chain initiative is expected to go live before Easter, and that will offer further funding opportunities for building supply chains.
In addition, UKTI has a programme of support for the UK manufacturing sector, including steel, in partnership with numerous stakeholders. The support includes organising UK groups at overseas trade shows, leading targeted trade missions and bringing potential buyers, investors and decision makers to the UK to see our manufacturing capability at first hand. The UKTI high-value opportunities team is continuing to work with plants throughout the UK to access large projects overseas. I too have been on trade missions on which we have been briefed specifically on major infrastructure projects abroad so that we can help to secure export opportunities for British businesses. That UKTI team recently helped Tata Steel to win a contract to supply steel to the Singapore mass transit railway system.
In addition, the national infrastructure plan identifies a pipeline of more than 500 projects, costing about £250 billion, extending to 2015 and beyond and including, for example, more than £1.4 billion in railway infrastructure and commuter links. Those projects should make a significant difference by stimulating demand for steel and, we hope, creating significant supply chain opportunities for UK steel producers.
Procurement is important, too. After episodes such as Bombardier, we recognise the need to manage the procurement and investment processes in the public sector so that we can sustain a competitive supply base that meets the UK’s strategic needs. The growth review, about which we will hear more in a few hours’ time, looked at how the Government can support businesses and ensure that, when businesses compete for work, they do it on an equal footing with their overseas competitors. That is why we announced a series of measures at the strategic supplier summit last November. We recognise that we need a more strategic approach to how we buy public goods, works and services so that we can better develop and manage our supply markets.
Offshore wind power clearly has great potential as a market for British steel, so we understand the disappointment that an EDF offshore wind project contract, in which a UK company won some of the fabrication work, does not involve UK manufactured steel. We have to recognise that, ultimately, such decisions are commercial, but we are working with the Department of Energy and Climate Change to see how we can help to strengthen the supply chain so that UK companies are better placed to compete for such business. Together with the Crown Estate and senior executives from 17 developers, we have therefore established the offshore wind developers forum.
We are committed to rebalancing the economy and we very much hope that, as part of that, we can see a strong manufacturing sector.