UK Steel Manufacturing

Thursday 5th September 2024 Commons Chamber

10:40

[Martin Vickers (Brigg and Immingham) (Con)]

(Urgent Question): To ask the Secretary of State for Business and Trade to make a statement on the future of steel manufacturing in the UK.

[The Minister for Industry (Sarah Jones)]

The inheritance the Government received from the Conservative party was nothing short of a disgrace on steel: over a decade of lurching from crisis to crisis, with no clear plan to safeguard the future of a competitive domestic steel industry. This Government are determined to change that. We have been working hard over the summer to set a clear forward direction on steel and resolve a number of complex issues that were only made worse by the indifference of the last Government.

Steel has been one of my Department’s priorities since our first day in office. We are standing by our commitment to spend £2.5 billion to rebuild the steel industry. That is in addition to the £500 million for Tata Steel. The funding will harness public and private investment to secure jobs and boost growth. We will take action to improve the wider business environment for the sector, including reducing energy bills and enabling more green UK-made steel to be used in our infrastructure projects. The Government are clear, as the Secretary of State for Business and Trade, my right hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) has made very clear, that decarbonisation must not mean de-industrialisation.

Discussions regarding the transformation of Port Talbot have continued at pace over recent weeks, involving the company, the workforce and the Welsh Government. We are also in ongoing talks with British Steel in a similar vein.

More widely, in our first days in office we hosted steel union leaders to join us around the table and discuss our shared commitment to achieving a sustainable, profitable UK steel industry. The Secretary of State and I also met regularly with key industry stakeholders.

We know that this is not easy, but we are determined to create a brighter future for steel than the one we inherited.

[Martin Vickers]

I thank Mr Speaker for granting the urgent question. I will ignore the Minister’s political comments and focus on what is more important: the future of thousands of workers, in particular at the Scunthorpe works, part of which falls within my Brigg and Immingham constituency and where many hundreds of my constituents work.

There have been widespread media reports suggesting that coke will stop being imported from October, which would mean production would stop in Scunthorpe by Christmas. There are rumours concerning the fact that employees will be given notice very soon. That is obviously creating great anxiety among those directly employed by British Steel and those in the supply chain, which in northern Lincolnshire extends to many thousands of people and many businesses.

I accept that much of this is media speculation, but if you and your family are reliant on an income from British Steel or a business that supports the sector, it is a very worrying time. Many people who have worked in the steel industry all their lives, and people who know about the market for steel, have a genuine concern that turning off the blast furnaces would see the end, or at least the beginning of the end, of steel manufacturing, certainly in Scunthorpe and possibly more widely. If we allow Scunthorpe’s furnaces to close, we will become more dependent on world markets, and effectively the best outcome that can be delivered from that is Scunthorpe ending up rolling steel produced in countries across the world, which would leave this nation vulnerable to price and supply volatility. Unions have said that that would be devastating. Charlotte Brumpton-Childs, a GMB national officer, has been quoted as saying:

“Early closure of the blast furnaces at Scunthorpe would be devastating for the community and workforce”

—and so it would.

“Unions have been assured throughout the process that the blast furnace operations would continue throughout the construction of an electric arc furnace. There has been no consultation over an early closure.”

Indeed, when the Minister visited Scunthorpe earlier this year, she said—according to the Scunthorpe Telegraph, so it must be true—that the UK needs to maintain capacity to produce primary steel. Is that the Government’s policy?

[Madam Deputy Speaker (Judith Cummins)]

Order. I am sorry, but the hon. Gentleman has exceeded the two minutes allotted to him. I do not know whether he wants to give us one final sentence.

[Martin Vickers]

I will bring my remarks to a conclusion, if I may, Madam Deputy Speaker, by saying that if the UK is to maintain a domestic steel manufacturing capacity, the Government must accept that there will always be a burden on the taxpayer.

[Sarah Jones]

I thank the hon. Gentleman for his questions. Let me say a couple of things in response.

First, the hon. Gentleman talked about being political. It is not being political to say that the last Government allowed the steel industry to decline; it is a statement of fact. It is also a statement of fact to say that they left a £22 billion black hole in our finances, and a statement of fact to say that the money they committed to Port Talbot came from the reserves that they had spent three times over. I am ashamed to tell the House that the £500 million was not real money: it was in the reserves that the last Government had spent three times over in the first three months of the year. In contrast, there will be real money for our investment in steel, drawn from the national wealth fund.

Secondly, the hon. Gentleman is, of course, right in his analysis of the concern and unease that people are feeling given the importance of these jobs, and about the worry they must be experiencing as a result of what they are reading. All I can say to him is that we are talking regularly to the trade unions, as he would expect us to, and to British Steel and the local community. I am sure he will understand that I cannot comment on those commercially confidential conversations. He also made a point about virgin steel that we made regularly in opposition. We are looking into how we can secure primary steelmaking in this country through our £2.5 billion investment in UK steel.

[Madam Deputy Speaker]

I call the shadow Minister.

[Greg Smith (Mid Buckinghamshire) (Con)]

Thank you, Madam Deputy Speaker.

“British steel is integral to growth and prosperity”.

Those are not my words, but the words of the now Prime Minister less than a year ago.

“The drive for green steel must mean more jobs, not fewer.”

Again, those are not my words, but those of the now Secretary of State less than a year ago. During the election campaign, he said:

“We cannot…lose the ability to make primary steel.”

But now we see, quite clearly, that Labour’s plans for decarbonisation do in fact mean de-industrialisation, and that the drive for green steel will mean fewer jobs, not more. Under the last Labour Government output fell by 47%, and, similarly, the promises that this Government made just weeks ago to steelworkers in Scunthorpe, Port Talbot and Teesside, and across the country, have been broken.

For weeks the Government have allowed rumour and speculation about the future of British Steel to run rife, while thousands of workers question whether they will have jobs by Christmas. Contrary to what the Minister has said, when we were in government we worked to deliver a more sustainable, long-term future for the steel industry across the United Kingdom, including Wales, through our £500 million commitment to building an electric arc furnace in Port Talbot. Now we risk being the only G7 economy without the ability to produce virgin steel.

I ask the Minister the following questions. Has British Steel indicated to the Government that it will halt its import of coking coal later this year? If so, when did the Government become aware of that? Are they committed to seeing electric arc furnaces in Scunthorpe? What discussions has she had with the owners of British Steel about the possibility that it will switch to foreign imports from China to fulfil its supply chain obligations here in the United Kingdom? What meetings has she had with stakeholders, including Ben Houchen and the Welsh Government, regarding the impact of future announcements on other steelworks across the United Kingdom, including on primary steel production? Communities and supply chains across the United Kingdom need certainty from this Government.

[Sarah Jones]

It is hard to know where to begin in responding to that. The previous Government allowed steel to run down. The previous Government did not believe in an industrial strategy. The previous Government did not believe in boosting our supply chains. The previous Government did not understand the importance of the steel industry to our national security and the communities we serve across the country. This Government do understand the importance of steel: that is why we are committing £2.5 billion from the national wealth fund, on top of the £500 million set aside for Port Talbot, and we will develop a strategy that enables the steel industry to grow.

The shadow Minister knows that I cannot comment on commercial and confidential conversations that we are having. I can reassure him, however, that we are talking regularly with British Steel, that we are talking regularly with Tata, that we are in deep negotiations with them, that we are talking with the local community, that we are involved with the trade unions—something that the previous Government did not believe in but suddenly seem to think important—and that we will get the best deal for workers and for the steel industry.

It is a shame that we were not in government five years ago, because we are where we are with some of these conversations. The way the previous Government approached industry was to wait for things to get so dire that they had to spend millions of pounds of public money trying to booster something, whereas our approach is to build the industry up and put the right levers in place, and we will see success that way.

[Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)]

President Biden has just vetoed the foreign acquisition of US Steel, because he understands that it is vital to have sovereign capability in ensuring the manufacture of virgin steel. The reality is that at the end of the last Parliament we were unable to establish clarity around that objective from the last Government. Can the Minister tell the House today whether it is the policy of this Government to seek to ensure that this country carries on with its ability to make virgin steel?

[Sarah Jones]

I thank my right hon. Friend for his important question. We believe very firmly that a successful steel industry is critical to a vibrant and secure future. Crude steel production in the UK has declined by over 40% since 2010; that is a great shame, and we will be trying to reverse it. Virgin steel is incredibly important, which is why we have the £2.5 billion fund. We are looking at direct reduced iron production and other possibilities for the UK. We are working on it at pace, and I am happy to talk further about our thoughts.

[Madam Deputy Speaker (Judith Cummins)]

I call the Liberal Democrat spokesperson.

[Sarah Olney (Richmond Park) (LD)]

The steel industry has been left in a mess after years of mismanagement. The abandonment of the industrial strategy by the previous Government has been a disaster right across our economy, but nowhere more so than in strategic heavy industries such as steel, which face many complex and interconnected challenges. We can all agree on the vital importance of steel production, whether that is in terms of national security or of providing the materials that we need for a green economy. It is equally clear that the steel industry needs to be supported to move towards greener methods of production and a more sustainable footing, while ensuring that jobs are protected.

The sector desperately needs the certainty of a new industrial strategy. Can the Minister give a clear timeline for exactly when we will see that industrial strategy? Can she confirm that when the Industrial Strategy Council is rebooted, it will be placed on a statutory footing through legislation so that it is properly empowered to support our industries in the long term?

[Sarah Jones]

I thank the hon. Lady for a very sensible and thoughtful list of questions. We will be putting the Industrial Strategy Council on a statutory footing, which is important. The points she makes about decarbonisation and support for the industry are really important. The previous Government supported the aims of dealing with the climate crisis and the need for decarbonisation, but they did not put in place any strategy to help anybody do anything on that front. We need a proper industrial strategy and, alongside that, a proper industrial decarbonisation strategy. How will our heavy industries decarbonise in a way that does not de-industrialise and does not mean that they shut up shop and go elsewhere? How will we make sure that we enable all these industries to thrive? The hon. Lady is right to say that it is not just about the steel industry. We are looking at a much broader range of industries by sector and by geography, to work out the best way to get this done in a way that protects jobs and protects our industry.

[Bill Esterson (Sefton Central) (Lab)]

Steel is a strategically important industry for this country, as my hon. Friend has made very clear, and I welcome her commitment that decarbonisation must not mean de-industrialisation. We must avoid the mistakes of the past. One of the mistakes made by the previous Government was the delay in developing grid capacity and grid connections. How are this Government working with British Steel and Port Talbot to make sure that the grid capacity and connections are in place to enable electric arc furnace production to be started as soon as possible?

[Sarah Jones]

My hon. Friend has hit the nail on the head, as I would expect him to. We face many challenges, but the grid is at the heart and soul of so many of them. When we met industry representatives in opposition, it was top of the list for everybody, and my hon. Friend knows that many companies are saying to us, “We’ve been told we can’t get a grid connection until the late 2030s.” This issue is a priority for us, and we are tackling it and working at pace. We have a whole range of policies to speed up the grid connections, to prioritise what we deal with first, and to work with the companies involved to make sure that we are going at pace. Steel is incredibly crucial, particularly in Scunthorpe, and we have to get it right.

[Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)]

In order for most plants in the United Kingdom to make virgin steel, they need to be able to bring in coking coal. The Labour Government’s policy is to ban bringing in coking coal, which means that thousands of jobs will be lost. What is the Minister going to do to reverse that decision so that jobs can be saved?

[Sarah Jones]

I thank the right hon. Gentleman for his question. As I said, we are looking at DRI and other ways of making virgin steel that mean we can both—[Interruption.] I am happy to have further conversations with the shadow Minister, rather than shout across the House at each other. I am happy to have conversations about how we can make sure that we both retain virgin steel production and adhere to our climate commitments.

[Torsten Bell (Swansea West) (Lab)]

The steel industry is a cornerstone of the south Wales economy as a whole, and the Minister will know that there is concern right across the Swansea bay communities about these developments, and I am visiting the plant in Port Talbot tomorrow to hear more about them. Will the Minister give us reassurance that the hard work she is doing will continue to be hand in glove with the Welsh Government and local councils? They are working day in, day out to make sure that there is a future for the steel industry and all these communities.

[Sarah Jones]

I thank my hon. Friend and welcome him to his place. I can absolutely reassure him that we are working hand in glove with the Welsh Government and local leaders. I have talked to the Welsh Secretary, as has the Secretary of State, who is not able to stay for the whole of this UQ, because he has a meeting about steel. That is how important this issue is to us, and we will make sure that we keep those working relationships. I welcome conversations with my hon. Friend and will meet any other local people whom he thinks we should be meeting.

[Sammy Wilson (East Antrim) (DUP)]

I have some sympathy with the Minister’s comments about the last Government’s record. Of course, under previous Conservative Governments, tens of thousands of jobs were lost in aluminium, oil refining and steel as a result of the obsession with decarbonisation and net zero. Unfortunately, I do not think we will see a different approach from this Government.

The Minister promises an industrial strategy, but can she assure us that there will be provision for steel to have a supply of coking coal produced in this country and that damaging and expensive decarbonisation requirements will not further detriment the steel industry?

[Sarah Jones]

I thank the right hon. Gentleman for his question. Of course, if we do not take measures to decarbonise and tackle the climate crisis, the costs to this country will be infinitely higher. This is not a choice. [Interruption.] The hon. Member for Orpington (Gareth Bacon) disagrees, but we need to make sure we can decarbonise in a way that supports our industry to make that transition, which is exactly what we are doing.

The point of an industrial strategy is to lay out a plan so that the industry gets the support it needs, so that investors understand the plan and so that, by working together, we can make sure we decarbonise. The Government are supporting that where we can and pulling the levers we can. We are supporting the industry to do the opposite of what happened under the previous Government, which is grow.

[Sarah Champion (Rotherham) (Lab)]

It is a real pleasure to see you in the Chair, Madam Deputy Speaker. I thank the hon. Member for Brigg and Immingham (Martin Vickers) for securing this important urgent question.

Rotherham has a proud history of steelmaking, but I have been fighting against Governments for the last 12 years for it to have a proud future. Will the Minister commit to addressing the underlying issues, to making sure all Government procurement goes to British steel- makers, and to addressing the punitive business rates and high energy costs that are hampering our development?

[Sarah Jones]

I thank my hon. Friend for making those important points. Our energy-intensive industries are hammered by energy costs, which are at the heart of this. Although the previous Government provided relief, we need a longer-term solution. We need to bring down those energy costs. That is why we are pushing for clean energy by 2030, which will be cheaper, and why we want to produce more energy in this country so that we are not reliant on Putin or affected by international events.

I have talked about business rates, and my hon. Friend is absolutely right that we need to look at that. Government procurement is very important, so we are looking at our supply chains and all the levers of Government to see what we can do proactively to make sure that, where we can, we are making, building and using in the UK.

[Nick Timothy (West Suffolk) (Con)]

I do not think the Minister answered the question asked by the right hon. Member for Birmingham Hodge Hill and Solihull North (Liam Byrne), so let me repeat it. Do the Government consider the manufacture of primary steel to be a strategic domestic industry that must be protected, yes or no?

[Sarah Jones]

Well, the previous Government did not. We have a £2.5 billion fund and, as I said, we are looking at DRI to make virgin iron. To be clear, we are having to deal with a mess that we inherited. Virgin steel is important, and that is what we are looking at. I am not going to say to the hon. Gentleman right now that this is what we are spending our £2.5 billion investment on, because this is being worked on at pace. We will come back to the House as soon as we have something to announce.

[Derek Twigg (Widnes and Halewood) (Lab)]

The defence industry manufacturing base is, of course, vital to this country, not least in the engineering jobs it provides. We know that steel is crucial to building armoured vehicles and ships, for instance. It is very important that we have a regular and guaranteed supply of steel, and we want to see more UK steel used in defence manufacturing.

[Sarah Jones]

I completely agree with my hon. Friend, who has much expertise in this area. The Department is working closely with the Ministry of Defence and the Secretary of State for Defence to make sure we are maintaining our defence. We are building as much as we can in the UK, with as many contracts in the UK as we can. We are using the power of Government to deliver that.

[Richard Tice (Boston and Skegness) (Reform)]

The hypocrisy of this debate is utterly extraordinary. Everybody agrees that steel is of strategic national importance, yet the obsession with net zero of both main parties, led by the Conservatives, is leading to the removal of our blast furnaces by both British Steel and Tata. That obsession is killing our steel industry and steel jobs, and leading to our inability to produce primary steel. Over 75% of all new steel generating capacity in the world is in Asia, and over 90% of that is produced in blast furnaces. Our obsession with net zero—

[Madam Deputy Speaker (Judith Cummins)]

Order. I am sure that the hon. Member is coming to his question.

[Richard Tice]

Given the obsession with net zero, will the Minister guarantee that if Tata is subsidised with more than £500 million to produce new electric arc furnaces, the money will be linked to the construction as opposed to Tata taking the money early and then not building the furnaces?

[Sarah Jones]

The hon. Gentleman talks about our obsession with decarbonisation and producing green steel, but we also have to go with the market. The market and big companies are now saying to us, “We want to buy green steel”. That is what they are demanding and what we will produce. If we do not, we will not be selling it on the same basis. We will use the money we are investing through the national wealth fund to develop a steel strategy that will enable us to bring new entrants into the UK, which the previous Government did not try to do, so that we can have a vibrant, competitive steel economy in the UK and create good, highly paid jobs in the green industries of the future. If we fall behind, others will come before us and take our jobs.

[Matt Western (Warwick and Leamington) (Lab)]

Everyone agrees that steel is a crucial strategic foundational industry for this country, but it suffers from very narrow margins. It is one of the least profitable sectors of all. In this country, we suffer from a real cost disadvantage because of energy prices. Other countries, such as France and Germany, have much lower energy costs. They have a lot of nuclear, which meets net zero requirements. Does the Minister agree that underlines the importance of why this country urgently needs an energy strategy?

[Sarah Jones]

My hon. Friend is absolutely right. We need to ensure we are producing cheap, clean energy in this country. As he rightly says, that means nuclear, as well as solar, wind, offshore wind and everything else in our armoury. This Government have been unbelievably proactive, with the Secretary of State for Energy Security and Net Zero ending the ban on onshore wind and agreeing to some of the solar panel installations we need. We had an enormously successful contracts for difference round that will allow floating offshore wind and other types of energy, and we are talking in detail about where we will take nuclear. Together, all those things mean that the country will have lower energy costs, that we can be more competitive and that our industry can thrive.

[Mr Richard Holden (Basildon and Billericay) (Con)]

The Minister was asked a question by the right hon. Member for Birmingham Hodge Hill and Solihull North (Liam Byrne), which was repeated by my hon. Friend the Member for West Suffolk (Nick Timothy), about whether this Government will commit to virgin steel making in the UK. At the third time of asking, will she commit to what the Secretary of State committed to before the general election?

[Chris Philp (Croydon South) (Con)]

Yes or no?

[Sarah Jones]

I welcome the right hon. Member for Croydon South (Chris Philp) to his place.

As I have made clear, we have been landed with an inheritance in which steel has declined by 40% and we are in very late-stage negotiations in Scunthorpe and Port Talbot. We are dealing with the consequences of that, which the previous Government failed to do. We will be putting a £2.5 billion investment into steel, and we are working at pace looking at DRI, which produces virgin steel, and at other options. We are looking at how we can introduce competition and new entrants into the market. We will work a lot faster and harder than the previous Government, and we will ensure that the steel industry thrives.

[Chris McDonald (Stockton North) (Lab)]

The global steel industry is investing many billions of pounds in new green technology that is more productive than current steel technology. Does my hon. Friend agree that our plan for steel will allow us to attract that private sector investment here, in great contrast to the previous Government’s policy that saw our steel industry decline to a size smaller than that of Belgium?

[Sarah Jones]

My hon. Friend, who is an expert in this area and with whom I have talked many times, will know that I agree with him. We need to introduce new entrants into the market, to stimulate the market and to encourage competition. The previous Government had a hands-off approach until an industry was about to collapse, and then they suddenly had to intervene with hundreds of thousands of pounds of taxpayers’ money. That was completely the wrong approach. As it turns out, the hundreds of thousands of pounds of taxpayers’ money that the Government put aside for Port Talbot came out of their reserves, which they spent three times over and was not real money. This will be real money. We will develop a proper steel strategy, and I very much look forward to working with my hon. Friend on devising it.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for her answers. Whether we like it or not, we have to deal with the reality before us. She may be aware that KME Steelworks in Lisburn has reduced costs and its carbon footprint by introducing a new, on-site nitrogen generation system. What financial aid is available to other companies to help to meet their environmental goals when they are facing costs like never before and there is pressure on the industry?

[Sarah Jones]

I thank the hon. Member for that question. We need to be technology agnostic and look at what the new industries, the new developments and the new research are telling us. We are doing that, which means some companies taking risks, with the Government needing to intervene when we see a new market in need of support. We will have that approach in Government. We are technology agnostic—we need to look at what will work, what will make our country thrive, and also what other countries are doing.

[Joe Morris (Hexham) (Lab)]

The previous Government’s plan for steel was to pay half a billion pounds to Tata Steel to not make any steel for years, while placing thousands of highly paid and highly skilled workers at risk of redundancy with no guarantee of jobs in the future. Can the Minister reassure me that she is taking steps to secure the future of our strategic industries?

[Sarah Jones]

I thank my hon. Friend for that question. Steel is an incredibly important strategic industry for the UK and it will be saved under this Government from the decline that we saw under the previous Government. The £2.5 billion that we are investing alongside the £500 million for Port Talbot will ensure that our industry thrives. We are working closely with industry, the unions and local communities, and we will work with our regional metro mayors and others, to make sure that we have the right industries in the right places and that we see success where previously we have seen decline.