Customs (Tariff and Miscellaneous Amendments) (No. 4) Regulations 2026
(Limited Text - Ministerial Extracts only)
Read Full debateThe Committee divided: - Ayes: 10 / Noes: 5 - Question accordingly agreed to.
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I beg to move,
That the Committee has considered the Customs (Tariff and Miscellaneous Amendments) (No. 4) Regulations 2026 (S.I., 2026, No. 572).
It is a pleasure to serve under your chairship, Mrs Barker. This is not my home turf; the Minister for Trade, my hon. Friend the Member for Rhondda and Ogmore (Chris Bryant), has been leading on this legislation, but he is engaged on trade business in Turkey today, so—somewhat like a turkey voting for Christmas—I am here with this Committee, which is good. I am glad that the shadow Exchequer Secretary is joining us today.
The instrument updates the UK’s tariff schedule to implement certain elements of the Government’s steel strategy, as set out by the Secretary of State for Business and Trade in March 2026. Specifically, the instrument will increase to 50% the standard rate of import duty on certain steel products, and it includes provision to ensure that the standard 50% rate will apply in place of any preferential tariffs agreed in trade agreements with partner countries or applied unilaterally by the UK. However, as part of the UK’s commitment to support Ukraine in its fight against Russia’s illegal invasion, the preferential rates agreed with Ukraine will continue to apply. The instrument also includes provisions for goods that were already under contract when the new steel tariffs were made public, so that the new, increased rate will not be paid on those that are imported between 1 July and 30 September.
A strong steel sector is critical for our national security interests, but, as in many other countries, steel overcapacity is distorting markets, driving down prices and threatening the viability of our vital domestic steelmaking sector. That is a key reason why UK crude steel production has fallen by more than half in the past 10 years. Global steel overcapacity is rising; the OECD expects it to reach more than 700 million tonnes next year.
Without action, overcapacity will continue to endanger our ability to produce steel when we depend on it for secure and resilient domestic supply chains. That is why the Government believe that the instrument is necessary. It introduces part of a robust new steel trade measure so that the UK steel production industry has the long-term conditions it needs to continue to play its vital role in robust and secure domestic supply chains, including in relation to our growth-driving industrial strategy sectors, defence and other critical national infrastructure sectors.
The instrument will come into effect on 1 July, alongside an accompanying instrument made under the negative procedure. Together, the two instruments will legislate for the steel trade measure set out in the strategy. Taking account of the importance of steel production for the UK’s overall national security, we must ensure that the UK steel industry can survive and continue to produce the steel needed for national priorities, including defence and critical national infrastructure. I hope that colleagues will join me in supporting this instrument, which I commend to the Committee.
James Wild (North West Norfolk) (Con)
As the Minister rightly says, he has been landed in it by his colleagues.
James Wild
Let us be in no doubt that these regulations, if approved, would cause serious damage to our manufacturing sector and be likely to result in the loss of thousands of skilled jobs. They replace the expiring UK steel safeguard measure. Two weeks from today, manufacturing and engineering businesses will be hit with a 50% tariff on steel imports across 20 product categories. Bright bar, wire and stainless steel are captured for the first time. As the Minister says, preferential rates—aside from those for Ukraine—are also being taken away.
In justifying the policy, the Government have said that higher tariffs will apply only to steel that is, or could be, made in the UK, but the industry has said repeatedly to Ministers and to Opposition Members that that is not the case. Those firms are clear that UK mills cannot produce the grades and type of steel that their businesses require. I raised that issue with another of the Minister’s colleagues, the Industry Minister, during an urgent question at which a number of Labour Members spoke against the regulations; I look forward to contributions from members of this Committee along the same lines. When I raised the issue, the Minister said that there were three mills in the country that could, with investment and additional capacity, provide that—but let’s get real. If approved, these regulations come into effect in just two weeks. That is not enough time to stand up the investment and the production for the grades of steel, the specification and the volume that so many manufacturing businesses need.
I have met representatives of companies in my constituency and beyond, and their message is stark: the Government are jeopardising jobs in crucial sectors, in a flawed attempt to protect UK steelmaking. That approach fails to understand how supply chains in defence, aerospace and other sectors work and why these regulations will undermine our national security.
As the Minister says, the newly broadened commodity codes are set out in the tariff of the United Kingdom—the 18,053 pages of it—and the quotas that will accompany that rate will be in separate regulations. That means that the industry currently has no certainty. The regulations are a risk to manufacturing jobs. They have been rushed without an adequate evidence base. The codes are drawn so broadly that they catch manufacturers for whom no domestic alternative exists. The instrument simply will not achieve the Government’s aims, so the Opposition will not be supporting it today.
I acknowledge the Minister’s point about the global overcapacity of steel. The US, Canada and the EU have introduced similar tariffs, and domestic production is important to our national security. However, agreeing with the importance of steel production in the UK is not the same as agreeing with the approach that the Government are taking in the regulations. The downstream steel-using sector employs 300,000 workers; primary steelmaking employs 30,000. Any credible strategy must account for both sides of that equation. Let us be clear on what the regulations are: they are a 50% tax on steel that British manufacturers cannot always source domestically because it simply is not made here or is not produced in the necessary volumes. That is why industry is sounding the alarm at the scope.
The stated policy is to protect all steel products that could be made in the UK, covering 100% of domestic production, but the commodity codes are drawn so broadly that they are catching manufacturers for whom there is no viable domestic alternative. That will be felt by British manufacturers who rely on specialist steel to produce high-value components for aerospace, defence, Formula 1 motorsport, energy and precision engineering. Those impacted are the manufacturers, the fabricators, the engineers and the specialist processors who depend on steel inputs that are simply not available in the UK. Materials used in house building, rail, logistics centres, food warehouses, pharmaceutical facilities, roofing, cladding and other specialist building capability will be hit.
Another point that colleagues across the House raised in the urgent question is that the fabrication sector has warned that 30,000 jobs could be at risk from these regulations and the tariff they introduce, as overseas competitors simply ship in fabricated products tariff-free. Canada amended its tariffs to include fabricated steelworks. I look forward to the Minister explaining why the Government have chosen not to do the same.
Our defence sector was represented at a roundtable that I was at earlier this week with colleagues from the Liberal Democrats and other parties. Many of the specialist steels used by UK manufacturers are currently not produced, approved or supplied at scale in the UK in the required grades. That is particularly acute in categories 14 and 27, which are currently due to face 50% tariffs once significantly reduced quotas are exhausted. This is not simply a matter of flicking a switch and changing supplier: in many cases, the steels that are required, for example in aerospace, are subject to very strict technical approvals and to very lengthy certification requirements and customer specifications, with supplier approval often taking years.
As for the supply chain, these partnerships are decades in the making and UK producers are unable to say if they will be able to produce what is needed. Companies cannot work on the basis that something “could be produced in the UK”. They need the product now.
These regulations will come into effect, if approved by Members, in two weeks, so I have a clear ask to put to the Minister: will he at least remove categories 14 and 27 from the incoming tariff regime, where there is insufficient domestic production capability, ensuring that tariffs are not applied to specialist steels that the UK does not currently produce? If UK firms cannot access the material that they need at competitive prices because of the tariffs that these regulations introduce, its customers may cut UK production. They may well move sourcing overseas or relocate parts of the supply chain to avoid avoidable cost increases.
That is certainly something that Airbus was talking about in relation to the next generation of civil aerospace. Airbus is unlikely to come to the UK if the tariffs make us far less competitive than its three EU partners. The Confederation of British Metalforming reports that manufacturers are already reviewing offshoring options and moving abroad. The British Chambers of Commerce has warned that firms may need to halt production altogether or are considering relocating. Once manufacturing capability leaves the UK, it is very difficult to draw it back, particularly given the energy policy that this Government are following and the prices that flow as a result. As the CBM’s president has put it,
“you cannot protect upstream production at the expense of downstream survival.”
The Minister will doubtless be aware that Canada offers steel tariff relief through a remission framework, allowing Canadian businesses to request relief if they are unable to source specific steel imports domestically. What assessment have the Government made of such an approach? If companies can demonstrate that they cannot source the steel in the UK, the Government’s policy intent is that they should not be penalised. Such a relief scheme would achieve that aim.
If companies are effectively required to buy from UK producers, pricing will reflect the tariffs. Industry is already reporting that quotes for products are priced just below where the 50% tariff would fall. Who’d have thunk it? Vital inputs are made only by UK Steel, which is behind its planned levels of production and would of course then be a monopoly supplier. Firms have to risk either unpredictable supply or expensive imports.
Given the long-term fixed-price contracts that are common across the defence supply chain, involving tens of thousands of small and medium-sized enterprises, a 50% tariff imposed through these regulations cannot easily be passed on, to say it lightly. One SME at the roundtable told me that it would mean an extra £1.2 million on a turnover of around £30 million, which it would simply be unable to fund.
Companies will be incentivised to move production overseas. Ministers should be listening to these sirens and acting before it is too late and jobs are offshored. Even at this late stage, what engagement is the Minister having—perhaps with his ministerial colleagues who are leading on much of the policy, and with industry—to ensure that costs are contained and downstream manufacturing is protected?
If the tariffs are approved, they will come into force and quota rates will apply, but the Government have already said that those rates will be substantially lower than under the steel safeguard. Cutting quota volumes by an estimated 60% overall and by up to 97% in some categories will be achieved through the negative procedure. In discussions with hon. Members, including Labour Members, the Business Minister said that the Government were still negotiating those changes and where the tariffs would sit. I understand that, and I understand that discussions are going on with the EU, but that means that companies still lack certainty before these measures come into force in two weeks.
I implore the Minister to ensure that tariff quota levels are set at a sufficient volume to avoid the huge damage to our industrial base that companies have made very clear is likely if things proceed on this basis. Will the Minister commit to keeping the regulations under review? At the moment, it is proposed that they be reviewed only every 12 months. That is utterly inadequate, given the risk we are all being told about by companies in our constituencies, so I hope he will commit to reviewing them more regularly.
Lastly, I turn to a topic that I raise regularly when the Treasury brings measures forward: the absence of a substantive and costed impact assessment. It is frankly astonishing, with a change of this magnitude, that the downstream effects have not been properly looked at by the Treasury or the Department for Business and Trade. The explanatory memorandum, such as it is, admits that these measures will “raise steel prices”,
“increase…costs for user industries”,
harm downstream businesses and
“impact Small or Micro Businesses”.
I wonder why the Government have not done a fully costed assessment of what that will mean for our aerospace, defence, construction and other sectors that rely on steel. Perhaps the Minister can explain that.
National steel capacity matters for defence, for national security and for supply chain resilience, but these regulations simply fail to achieve the Government’s objective. Instead, they pose a threat to 300,000 jobs in downstream manufacturing. Ministers say that they are listening, but they have not put forward any changes or any solutions to the problems raised by companies. There is still time—just—for them to do so and avoid the enormous damage that we are being warned about.
If Ministers are determined to press ahead, we have two further requests: first, that they delay the implementation of these tariffs for at least six months, to give manufacturers as much time as possible to adjust, and secondly that they develop more forensic definitions and exclude grade sizes and specifications of specialist steel that is not produced in the UK.
The Opposition will vote against this measure. We ask the Government urgently to reconsider their plans, and instead to protect jobs and promote economic growth.
Dan Tomlinson
I thank Members for their contributions and questions in this debate on an important statutory instrument. It is right and proper that the Opposition have the chance to question and interrogate the Government’s decision making on the significant change that we are bringing forward.
It is worth understanding that the Government have been engaging in detail with industry on this since the announcement in March. My understanding is that a number of codes—nine, I think—have been changed since that announcement. That is as a result of engagement and meetings with industry—with those downstream sectors—by the Minister for Trade, my hon. Friend the Member for Rhondda and Ogmore (Chris Bryant), and others on whether or not it is possible for them to access UK-produced steel.
The shadow Exchequer Secretary, the hon. Member for North West Norfolk, asked me about codes 14 and 27, which are of particular relevance to the aerospace and defence industries. The Under-Secretary of State for Business and Trade, my hon. Friend the Member for Stockton North (Chris McDonald), was asked about that earlier today. He has been meeting with that sector today, I believe, to talk about the impact on them and to consider what the Government can do.
The shadow Exchequer Secretary also asked about a review. It is the Government’s intention to keep this under review, with a formal review point after 12 months, as he noted. On the quota levels, I take the point that there is uncertainty at the moment, given that we are approaching 1 July. I hope that, in line with good policymaking principles, we will be able to set out that detail as soon as possible for the businesses affected.
The hon. Member for Keighley and Ilkley is always good at representing the businesses in his constituency and making his points clearly and forcefully. I commend him for his remarks today.
Robbie Moore
Could the Minister explain, not only to me but to the businesses in my constituency of Keighley and Ilkley, why, if the explanatory memorandum accompanying the legislation clearly states that these regulations are
“expected to have negative impacts on downstream businesses that use steel”,
he and his Labour party are comfortable introducing it?
Dan Tomlinson
I was just coming to that point. As the hon. Gentleman and the shadow Exchequer Secretary have pointed out, the Government are not hiding from the impacts of the measures on some downstream sectors and businesses. He has just read out the explanatory memorandum that the Government themselves produced. The Government have taken a strategic view: in the end, we need a tariff and quota system that protects domestic steel so that, if the worst happens and we need to ensure that we have domestic supply in times of crisis for vital production here in the UK, we have it. Hon. Members know that we have seen a significant reduction in steel production in the UK—I believe a reduction of 50% over the past 10 years—and the representations that the hon. Member for Keighley and Ilkley, and individual businesses and business groups have made to Ministers over recent months have of course been taken into account and considered, but on balance the Government’s view on this strategic assessment is that, in the end, strong production and a strong downstream sector go hand in hand.
James Wild
This is the kernel of the issue. The Minister is talking about protecting UK steel production, but as I and other colleagues have outlined, and as industry is furiously telling all MPs across the House, at the moment no UK production meets the demand that industry has, whether that is in the precision, the grading or the volume necessary. In two weeks’ time, however, a 50% tax is going to be slapped on businesses buying such steel, which they cannot get in the UK and for which they are forced to go overseas. How can that possibly be the right approach? Does he not recognise that that will lead to job losses and to businesses failing?
Dan Tomlinson
As I said, the Government have set out in the explanatory memorandum the fact that there will be an impact from the tariffs, from the 50% rate, but the Government’s view overall is that it is important to ensure that we have a strong and thriving domestic steel sector, which can help businesses here in the UK to weather, and to minimise their exposure to, global shocks, so that we can have a reliable and secure domestic supply. That is very important, and if we had continued on the path that we were on for the long term, we would have seen a continued decline in our domestic supply and in our ability to ensure resilience and security at times when we as a country might need them most.
Carla Lockhart (Upper Bann) (DUP)
The reality on the ground is very different. The demand required is 9.1 million tonnes per year, with 5.6 million tonnes being produced in the United Kingdom. We all want to see domestic production increase, but until we see that and allow it to happen, we cannot slap a 50% tariff on what we need to import to keep our manufacturing, our construction and our infrastructure sectors functioning, and to avoid supply chain complications, potential shortages and increased building costs. To my mind, this is a farming inheritance tax moment for the Government. If they do not pull back from it, they will see industry crippled across this United Kingdom—industries such as our manufacturing, our construction and our infrastructure. I encourage every Member in Committee to think long and hard before destroying our home-grown industries.
Dan Tomlinson
The existing framework falls away at the end of June. Opposition Members have suggested that where the Government wish to proceed, we should instead delay, but our concern is that that would leave the steel sector as a whole totally undefended and exposed to the significant oversupply of steel production across the world. We do not want to see continued degradation and reduction in our domestic steel production. In the end, that would be bad for our whole country—for businesses large and small, and not only those involved in steel production and manufacturing, but other businesses and our broader economy. That is the strategic assessment that the Government have made.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
The Minister is being very generous with accepting interventions. I understand the point he is making about global oversupply; for example, in the housing sector there is an abundance of rebar, which is essentially very cheap, low-grade steel, as it is used in the construction industry, and demand is falling because of a general slowdown in construction. However, that product is completely different from the high-grade 409L steel used in specialist watch-making and medical instruments.
Harefield hospital in my constituency relies on that steel for highly specialised medical instruments that are made in the UK, including small parts such as stents, which keep people’s hearts pumping. Simply saying that there is a generalised global oversupply does not remotely help the individual businesses in the UK that depend on the supply of highly specialised products. Given that the Minister said that the Government have a strategy and want to take a strategic approach, how will they ensure that supplies are present in the United Kingdom before adding 50% to the cost of British manufacturers, upon which our NHS, as well as the other sectors we have heard about, depends?
Dan Tomlinson
I thank the hon. Member for his question; he makes an important and valid point. Of course, if the different types of steel, products and manufacturing are not and cannot be produced in the UK, the 50% tariff that we are debating will not apply. Also, this House has not yet passed the quota levels, and Ministers are continuing to engage with businesses and industry. In preparation for today’s debate, I spoke to the Ministers who have led the work on this legislation, so I know that engagement has taken place in great depth over recent months to make sure that the Government account for concerns and get this difficult but important decision right.
On the complexities and challenges around the operation of the Windsor framework in Northern Ireland, and goods being “at risk” or “not at risk”, it is, of course, a difficult and sensitive issue. Broadly, the Government’s approach is to continue to find ways to reduce friction and to deepen our relationship with the European Union. Just yesterday, the Prime Minister confirmed that on 22 July, there will be a summit, during which we can hopefully make progress on a sanitary and phytosanitary agreement and other areas. I am afraid I will have to disappoint the hon. and learned Member for North Antrim, as I cannot give more detail than was given in the House this morning by the Ministers leading on the policy, but the EU and the UK are committed to working together on seeking a solution, and are engaging constructively.
Of course, this issue is important for businesses and communities in Northern Ireland. As a Minister for His Majesty’s Revenue and Customs, I have responsibility, in part, for the operation of the Windsor framework, and I have been looking with my officials at what more we can do to help.
James Wild
I sense that the Minister is either giving way or looking for a note with the answer to a couple more of my questions; I thought I would give him the opportunity to find a note.
I referred to the Canadian example. Canada provides relief to companies that are unable to source steel in Canada that is part of the tariff regime. The Minister keeps saying that if it cannot be produced in the UK, it will not be covered by tariffs, so that should be a simple thing to do. These codes will inevitably include products that are not able to be manufactured in the UK, so why can companies not get relief if that proves to be the case?
Dan Tomlinson
Of course the Government will continue to engage with industry and we will listen to any representations made. I am interested in the example from Canada, and I will personally make sure that it is passed on to the Minister with lead responsibility.
Even if Members are not fully satisfied with my responses, I hope they feel that I have endeavoured to take a range of interventions and respond as well as I can to the points raised. I hope Members can see that the goal of the instrument is to implement policy in line with the steel strategy to support the UK steel sector as a whole. For those reasons, I commend the legislation to the Committee.
Question put.