UK Steel Industry

Debate between Andy McDonald and Iain Wright

Tuesday 12th April 2016 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

It is an absolute pleasure to follow my colleague on the Select Committee on Business, Innovation and Skills. I do not agree with much of what he said, but the rigour of his analysis, both in his speech and in his work on the Committee, makes the Committee much sharper in what it does, so I commend him for that.

I welcome the emergency debate, because steel industry is facing a real emergency. It has faced it for some time. The Committee found, going back 40 years, that successive Governments failed to value manufacturing and domestic steelmaking capability as the foundations of an innovative economy. Other countries—and this is in reference to an intervention from the hon. Member for Warrington South (David Mowat)—value their domestic steel industry more than we do, which makes them more resilient to the perfect storm of over-production and low steel prices affecting global steel markets.

I want to put it on the record that the challenges facing all steel manufacturers around the world are vast. China produces more steel than all other steel manufacturing nations put together. In two years China has produced more steel than we, the inventors of modern steelmaking, have produced since the start of the industrial revolution, so even if the Government were doing all they could, those challenges would remain vast.

The Government could do more, because Britain does not face a level playing field in respect of steel production. One contributing factor is the high pound. I know that the Government will not do anything to affect that, but they can intervene directly on uncompetitive energy costs and business rates, which put British-based steel manufacturers at a disadvantage.

In December we on the Business, Innovation and Skills Committee published our report on the Government response to the steel crisis. That was prompted by big turbulence, particularly the closure of SSI in Redcar in early October. It revealed the shocking absence of an effective early-warning system in Whitehall designed to detect and address mounting problems in the industry. Industry had been crying out for some time, with five asks concerning procurement, business rates and energy costs, but the Government had been deaf to such pleas. Had they been alert, they would not have had to resort to crisis management and preside over the tragic hard closure of an integrated steel facility, the second most efficient blast furnace anywhere in Europe, and the loss forever to the steel industry of jobs and skills.

The Select Committee’s report found that the Government recognised the vital importance of the steel industry, but the increased activity had not yet translated into a measurable impact on those in the industry and the communities that they sustain. Five months on from the closure of SSI, with other losses such as Caparo, and with the decision last month by Tata to sell its UK steel operations, it is difficult to avoid the conclusion that lessons have not been learned and that increased activity has not resulted in positive outcomes.

[Andy McDonald]

My hon. Friend talks about the absence of an early-warning system. In his capacity as Chair of the BIS Committee, does he have any concerns that there is insufficient capacity in the Department to respond to challenges as they emerge on world markets?

[Mr Wright]

My hon. Friend makes an important point. The Department for Business, Innovation and Skills should be looking out for the British economy, making sure that it is the Department for future economic growth. It needs the civil service capacity to do that, and the proposal for it to lose 30% to 40% of its headcount will have enormous consequences for those early-warning systems and for the expertise and knowledge of the steel industry and other key sectors that are needed to ensure that Britain can thrive.

Today and yesterday in his statement, the Secretary of State stated that he was aware that Tata was planning to hard close its steel operations in Port Talbot and elsewhere, but that he prevented that from happening. He was fully aware of the enormity of the crisis, yet he still flew to Australia rather than Mumbai. The evidence surely suggests that he was left blindsided by Tata’s decision, which again demonstrates that no effective early-warning systems were in place. The Secretary of State should have gone out with Roy Rickhuss and with my hon. Friend the Member for Aberavon (Stephen Kinnock) to the Tata board meeting to bat for British steelmaking. The fact that he subsequently went to Mumbai, days after that key board meeting, shows that he knew he had made an earlier error.

The contrast must be made with the events of 2012, when Vince Cable as Business Secretary went to New York to persuade General Motors to make a long-term commitment to the UK, despite overcapacity and loss making in car-manufacturing operations in Europe. As a result of close partnership between the Government of the day, trade unions and local management, GM closed a plant in Germany and committed to build the new Vauxhall Astra at its Ellesmere Port facility. Given the great industrial relations in steel, fantastic trade unions, exceptional steelworkers and committed local management, why cannot this model be adopted for the steel industry?

We must look to the future and ensure that we have a sustainable steel industry. I have mentioned the existential threat to British steelmaking, but it is important to recognise that steel should be seen not as an obsolete industry, but as one whose future is essential to much of British manufacturing. We should be honest about the challenges, but we should not talk the industry down, which would further hasten the signing of its death warrant. We all have a responsibility to ensure that customers do not take flight.

The Government can help significantly with that. They have brought forward welcome changes to procurement rules that should favour British-made steel and its products during the awarding of public contracts. Something similar was announced in October following the steel summit, but we have no tangible evidence in the form of new contracts flowing to British plants and mills. Not a single pound of value has been seen. I asked the Secretary of State yesterday after his statement how greater and urgent collaboration was taking place between the Government, the Steel Council and the strategic sector councils such as the Automotive Council, the Aerospace Growth Partnership and the Offshore Wind Industry Council. Will the Minister provide further clarity about that?

Steel plays a major part in the infrastructure of the country. On 23 March, six days before the Mumbai meeting, the Government published the national infrastructure delivery plan. It contains one reference to steel. Will the Government commit to talking to the Cabinet Office to make sure that more can be done? This is incredibly important for my constituency in respect of the steel pipe mills and for the future of British manufacturing. It is important that we move from warm words to tangible action to safeguard British steel.

Steel Industry

Debate between Andy McDonald and Iain Wright

Wednesday 14th January 2015 Commons Chamber

[Mr Wright]

My hon. Friend is absolutely right. It was a serious, strategic, targeted investment that was based on a credible assessment of what would be required in our future industrial capabilities. As someone who has a nuclear power station in his constituency and who wants to see the supply chain in steel and other parts of industry thrive as a result of a new generation of nuclear power, I think it is important that we look at this issue in a co-ordinated manner.

I want briefly to conclude my remarks about the long products division. I do not want to see assets stripped away from the UK by a buyer, so I have some questions that I hope the Secretary of State will answer when he responds. What guarantees will the Government extract from any potential buyer of the long products division on the safeguarding of jobs, additional investment and the maintenance of existing sites, such as Scunthorpe, as places where steel is made? Is any such deal contingent on grants and funding being provided by the Government, and what would those be?

The Secretary of State will be aware of the UK’s national trade union steel co-ordinating committee, which is made up of representatives of Community, the GMB, which is my union, and Unite. It has hired the consultancy Syndex to look at alternatives to Tata’s selling its long products business. What support is being given to that work, and what pressure will the Government put on all the parties concerned to ensure that any recommendations in the Syndex report are considered and acted on?

[Andy McDonald (Middlesbrough) (Lab)]

My constituency exists because of iron and steel, and many of my constituents continue to work in the Teesside plant. Does my hon. Friend agree that the Community union has at its disposal incredible expertise and knowledge about processes and markets in the industry? We would be foolish to ignore that resource. It should be exploited to the full as we try to preserve the long products division of Tata Steel.

[Mr Wright]

My hon. Friend is right. I would like to class him as a good friend, and I take great pleasure in pointing out that West Hartlepool was a thriving industrial port at a time when his area was just sand dunes. I appreciate, however, that his area was later nicknamed “Ironopolis” and was an important part of the iron and steel industry in the 19th century. He makes an important point—why would we remove assets, both physical and intangible? Why do we not exploit the real talents that lie within the trade union movement and the work force to ensure that we have a real future for the steel industry?

With regard to the ownership of the long products division, the Government say, “Let the market decide”. However, they are intervening in other areas, producing an uneven playing field for British-based producers, to the detriment of the UK steel industry’s competitiveness. Nowhere is that more acute than in the field of energy costs, as has been pointed out time and again, including by my hon. Friends the Members for Alyn and Deeside (Mark Tami), for Middlesbrough South and East Cleveland, for Scunthorpe, for Newport East (Jessica Morden) and for Llanelli (Nia Griffith).

The future of the steel industry should prioritise low carbon and sustainability, and the task of an industrial policy is to assist the sector in the transition. It should not happen in a way that forces UK steel producers out of business or away from these shores. We should not get into a ludicrous situation where there are higher global carbon emissions because we are importing more and more of our steel requirements from countries with reduced regulation.

Steel costs more to manufacture in the UK than in European neighbours, often by as much as 25% to 50%, because the French and German Governments have prioritised the steel industry as being vital for manufacturing, have not imposed cost burdens on it and have worked to mitigate any pressures quickly. In contrast, the UK Government’s response has been half-hearted and slow, reflecting the lack of priority that they give to the steel industry.