Sector Deal for Steel

Debate between Stephen Kinnock and Jim Shannon

Tuesday 19th December 2017 Westminster Hall

[Stephen Kinnock]

I agree with my hon. Friend. The sector deal has been submitted under the umbrella of UK Steel and EEF, but with the full participation and support of Tata Steel, British Steel, Liberty Steel, Celsa Steel and a number of other key players in the sector. The steel industry really speaks with one voice on this.

Without a cost-competitive energy environment, steel companies cannot invest in the future, and the industry can survive only when it has the potential to thrive. Steel is too important a product for our economy, our security, our communities and our standing as a nation for us to have to rely on others for it.

[Jim Shannon (Strangford) (DUP)]

The fact that the UK produced some 8 million tonnes of steel in 2016, while China produced 808 million tonnes shows a vast difference. Does the hon. Gentleman agree—I think he is basically saying this—that it may now be time for the Government to enter into negotiations with the companies and also the unions to ensure that we have a manufacturing base for steel in future? We will not have one unless the Government act. It is time that they did.

[Stephen Kinnock]

I absolutely agree with the hon. Gentleman. As I will come on to explain, the sector proposal is the litmus test for the Government. We have had years and years of warm words, but this really is the moment to see whether the Government are serious about providing the support they say they want to provide.

Steel enables transport, construction, manufacturing, energy and consumer goods—you name it, Sir Henry, and if steel is not in it, it was almost certainly used to make, process or transport it. Steel is truly a foundation industry, and demand is growing. The report published last week, “Future Capacities and Capabilities of the UK Steel Industry”, showed that, by 2030, domestic demand for finished steel products will have grown by almost 2 million tonnes. That leaves almost 7 million tonnes of domestic demand to be met by the UK steel industry, which equates to a £3.8 billion opportunity per year.

That value is even greater if we consider all that steel goes into. Almost half the content of all cars built in the UK is British steel. In researching the “Steel 2020” report by the all-party parliamentary group on steel and metal related industries last year—I have a copy with me; I am sure the Minister has already read it, but I would be happy to hand it over—we heard from leading figures in the car industry that the presence of a successful domestic steel industry is a key determinant of where steel is sourced.

Steel is vital to the future of UK car manufacturing and innovation. Take the much-vaunted electric and self-driving cars, which were championed by the Chancellor in last month’s Budget. Along with the normal steel content of any car, what do hon. Members think their batteries are cased in? Steel. If we are to invest billions in that new technology, why on earth would we not invest in the capacity to monetise those innovations? If we do not have the capacity to manufacture, or the capacity to produce the steel for the batteries and the machines that manufacture them, we will lose out. The steel will be Chinese. The manufacturing and machinery will be German, and we will have spent billions on an idea that sees profit not in Port Talbot, Sheffield or Redcar, but in IJmuiden, Tangshan or Duisburg.

Despite investment in R and D falling by 90% over the past 25 years, the UK steel industry is still at the cutting edge. More than two thirds of steel produced in the UK today did not even exist a decade ago, so we should not let anybody tell us that steel is a sunset industry. It is an industry that is building a Britain for the future, which is why a go-ahead for the sector deal is vital. It is also important because steel is the ultimate economic and social multiplier. For every £1 of public investment in steel R and D, the return averages between £6 and £16. That means the £60 million transformation fund in the sector deal could add up to £960 million for the UK economy. I do not know about you, Sir Henry, but investing £60 million for almost a £1 billion return feels like a pretty good investment to me.

On average, steel jobs pay 40% higher than the average in the steel heartlands of Wales and Yorkshire and the Humber. Every steel job supports at least three further jobs in the local community and the national economy. Losing the steel industry would devastate towns such as Port Talbot, but the knock-on effects would be equally catastrophic. If the Port Talbot steelworks were to close, it would cost 40,000 jobs across Wales and the UK, costing the Government a total of £4.6 billion in benefits and lost tax revenue and reducing household spending in the economy by £3 billion over 10 years.

If we were to reshape the energy market, as the steel sector deal calls for, the most it would cost would be the equivalent of 57p per household per year. That is 57p a year against almost £8 billion in lost spending, tax and benefit payments if things were to go wrong. Once again, Sir Henry, that looks like a pretty good return on investment to me. There is a golden opportunity, with huge potential for growth. We should all applaud the Government for crossing the Rubicon and accepting the need for an industrial strategy, but the fact of the matter is that, if the Government fail to support the sector deal, that strategy will not be worth the paper it is written on.

Speed is of the essence. Steel companies only have so much capital to invest. That capital is spread across their global businesses, and if they cannot invest it here and now, it will go elsewhere. That is the nature of the beast. We have already seen Liberty spend almost £1 billion in Australia, and there are reports that British Steel—formerly Tata Long Products—is looking at an Italian plant. The clock is ticking and time is running out.

With the uncertainties of Brexit, the Government should be biting the hand off of anyone willing to invest at this time. Instead, steel companies have been fobbed off with all sorts of excuses. They submitted the sector deal on 7 September, but were only granted a meeting with the Minister at the very end of November—hardly the behaviour of a Government serious about supporting this foundational domestic industry. The fact is that the Government’s failure to engage on the steel asks set the tone. The sad reality is that trust between the Government and the steel industry has been shot to pieces. Warm words are no good to anyone if they are matched only by frozen actions.