UK Steel Sector: Supply Chains

Amanda Solloway Excerpts

Wednesday 9th June 2021 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Amanda Solloway)]

It is a great pleasure to serve under your chairmanship, Sir Graham. I thank the hon. Member for Aberavon (Stephen Kinnock) for securing the debate and giving us the opportunity to discuss this incredibly important topic. It is encouraging to see so many hon. Friends and hon. Members participating. I am delighted to see the passion demonstrated by everyone this morning. That is a true reflection of the role that the steel sector plays in communities, and its importance as a foundation industry in the national economy.

Although ministerial colleagues and I are consistent and passionate advocates for the steel industry—hon. Members will know that I have a background in manufacturing—the topic of the debate is not within my policy portfolio. Should I fail to answer specific questions, I will ensure that they are responded to in writing by relevant Ministers or officials.

I thank the hon. Member for Aberavon for high- lighting safeguard measures. Hon. Members might be aware that the Trade Remedies Authority will make a recommendation on whether to extend or revoke the UK’s steel safeguard measures that are due to expire on 30 June 2021. The TRA is an independent body and the recommendation will be based on evidence, following consultation with interested parties from the steel sector.

As mentioned, the Secretary of State for International Trade can accept or reject the recommendation but not modify or partially accept it. She cannot extend the measures if the TRA does not recommend that. If the Secretary of State rejects the recommendation, then all the measures will expire. As my hon. Friend the Member for Scunthorpe (Holly Mumby-Croft) highlighted, my Department is working closely with the Department for International Trade on the issue.

The hon. Member for Sefton Central (Bill Esterson) spoke of the regulations governing the TRA. The Secretary of State for International Trade has spoken about her plans to review whether the UK’s trade remedies framework should be strengthened. I fully recognise that the global economic conditions continue to be challenging for the steel industry. Global overcapacity in the sector is a significant issue, and was estimated at 625 million tonnes in 2020 by the Organisation for Economic Co-operation and Development. The excess in capacity produced globally depresses prices and harms UK steel producers’ profitability.

The hon. Member for Newport East (Jessica Morden) raised the topic of bonded warehouses. The Secretary of State has agreed to meet the management teams at Liberty Newport and Tredegar. As referred to by the hon. Member for Aberavon, the covid-19 pandemic has clearly had a disruptive impact on the steel sector. Recent supply shortages of steel have temporarily increased its price. However, that is unlikely to be sustained as the markets readjust.

Although the economic context is challenging, hon. Members should be in no doubt that the Government are committed to the UK steel industry, as the Secretary of State has reaffirmed on numerous occasions, and to a sustainable future, supporting local economic growth and our levelling-up agenda. To that end, our unprecedented package of covid-19 support is still available to the sector, to protect jobs and ensure that producers have the right support during this challenging time.

Beyond covid, the hon. Member for Aberavon mentioned the Industrial Strategy Council. The Secretary of State for Business, Energy and Industrial Strategy and the Chancellor have outlined how we are taking forward its best elements in the plan for growth. I can reassure the hon. Gentleman and other hon. Members that the Government are working closely with industry and trade unions to understand how together we can create a sustainable steel sector in the UK. On 19 May, the Secretary of State co-chaired the second meeting of the UK Steel Council, which he reconvened in March this year. The council provides a forum for Government, industry and the unions to work in partnership, to develop a plan to support the sector’s transition to a competitive, sustainable and low-carbon future.

The second meeting of the joint industry and BEIS steel procurement taskforce was held yesterday afternoon. That was first launched in March and is chaired by Lord Grimstone. It explores what Government and industry can do to address the challenges the sector has reported when competing for and securing public contracts. I would like to reassure the hon. Member for Rotherham (Sarah Champion) that work is continuing to develop on the subsidy control regime.

Hon. Members, including the hon. Member for Birkenhead (Mick Whitley), have rightly focused on climate change, with welcome passion. In addition to our continuing close engagement with the sector, I can reassure the hon. Member for Newport West (Ruth Jones) that we are taking action across a broad range of policy areas, including decarbonisation, energy prices, international trade and procurement. These actions aim to boost the sector’s competitiveness in the short term and to support long-term investment and transformational change that will increase efficiency while aligning with our goal of a net zero economy by 2050.

To reach our ambitious net zero target, we will need the UK steel sector to decarbonise. Our new industrial decarbonisation strategy sets out for the first time the Government’s comprehensive assessment of how industry, including the steel sector, can decarbonise in line with net zero in a way that supports both competitiveness and clean growth. The strategy includes a commitment to work with the UK Steel Council to examine the implications of the Climate Change Committee’s recommendation to set targets for ore-based steelmaking to reach near zero emissions by 2035.

In 2019, we announced a £250 million clean steel fund to support the sector to transition to low-carbon iron and steel production through the new technologies and processes, which could potentially include supporting hydrogen-based steelmaking. Other recent and ongoing work to support the sector includes the £350 million industrial energy transformation fund, which aims to support businesses with high energy use to cut their bills and reduce carbon emissions. As part of the industrial strategy challenge fund, we are also providing up to £66 million to help the key foundation industries, such as steel, develop innovative technology to reduce energy and resource use.

The hon. Member for Birkenhead made an important point about technology. Science and innovation have been made a priority by the UK Government, in recognition of the strong economic benefits of public investment in science and innovation and the capacity to leverage private investment. That is why we will increase R&D investment to £22 billion per year by 2024-25. We plan to establish a net zero hydrogen fund, with £240 million of capital co-investment until 2024-25. That will support at-scale hydrogen production projects, allowing steel producers the potential to access suppliers of low-cost hydrogen.

As we support the UK steel industry’s decarbonisation, we must do so in a way that enables us to compete globally and across Europe. Several hon. Members have raised the issue of industrial energy prices. We of course recognise that they are currently higher in the United Kingdom than in other competitive economies.

The hon. Member for Newport East mentioned the Ofgem targeted charging review. As she will know, network charging is a matter for Ofgem as the independent regulator, and decisions on its targeted charging review are for it to make. However, the Government continue to engage with Ofgem in order to inform our understanding of the reforms’ policy implications. We have provided more than £500 million in relief to the steel sector since 2013, in order to make electricity costs more competitive.

Finally, I turn to procurement and supply chains. I welcome the point made by my hon. Friend the Member for Scunthorpe. We are working hard to ensure that UK steel producers have the best possible chance of competing for, and winning, contracts across Government projects. I previously mentioned the steel procurement taskforce, but I can also assure the hon. Member for Rotherham that the Government have recently consulted on an ambitious package of major procurement reforms, with the aim of creating a simpler and more flexible regime that works much better for British businesses, including our steel businesses.

The Government are also working the with industry to ensure that Departments and other sector organisations follow guidance to account for social and environmental benefits when buying steel. That includes publishing details of upcoming national public infrastructure projects every year, so that steel businesses can plan for future demand.

The steel pipeline shows how the Government plan to procure 7.6 million tonnes of steel over the next decade for infrastructure projects such as the expansion of the offshore wind infrastructure, the construction of Hinkley Point C, as has been mentioned, and the maintenance and upgrading of the UK’s motorway network.

[Jim Shannon]

It is important that we have steel for offshore wind power and so on, but it is also important that we have steel available at competitive prices for the construction sector. What can the Minister do to assure me on that?

[Amanda Solloway]

I will, of course, pass on the hon. Gentleman’s question.

I will move on to Liberty Steel. The hon. Member for Newport East rightly highlighted its importance to many Members and their constituents, and its recent financial difficulties, which were also raised by the hon. Member for Rotherham. As the Secretary of State reaffirmed to the Business, Energy and Industrial Strategy Committee in an oral evidence session, we continue to monitor the situation closely and engage with the company, trade unions, local MPs and the wider steel industry. Liberty is important.

[Seema Malhotra]

Does the Minister appreciate that there is a need to work to support plants that are viable—such as Stocksbridge and Brinsworth, which purchase their supplies from Rotherham—and provide the working capital that is needed for orders that are there and products that are there to be made?

[Amanda Solloway]

I thank the hon. Member for her contribution. Again, I will pass that on, with the passion that she has shown, to the relevant places.

I return to Liberty Steel. We continue to monitor the situation closely and to engage with the company, trade unions, local MPs and the wider steel industry. Liberty is an important supplier of steel and provides highly skilled jobs. The Government believe that Liberty sites can be viable and we remain hopeful that the commercial issues can be resolved to ensure future success.

It is, however, first and foremost the company’s responsibility to manage commercial decisions for the future of the organisation, and we welcome the dedicated efforts being made by Liberty to find solutions. I hope that I have reassured hon. Members, who have displayed sincere empathy for our steel sector today, that the Government are working tirelessly with the industry to secure its future through difficult times.

Focusing specifically on Tata Steel—I know that that is of great interest to the hon. Member for Aberavon, and I have saved discussion of it for my summing up—I can assure Members that the Government will continue to work closely with the company and the unions as they shape the business strategy to support the future of high-quality steelmaking in Port Talbot.

I have set out a wide range of actions that demonstrate that the Government fully understand the vital role that steel plays for communities, for our economy and as a foundation supplier for our manufacturing base. UK industry will continue to need high-quality steel, and British steel is among the best steel in the world. As we level up our country, we are actively considering where there is scope to go further to support our steel industry.

We are committed to sustainable decarbonisation, decarbonising a globally competitive future steel industry in the United Kingdom, and I look forward to working with Members towards achieving that goal.