2015 Steel Summit Commitments

Angela Smith Excerpts

Tuesday 10th July 2018 Westminster Hall

[Anna Turley]

My hon. Friend is right. It was the second-largest blast furnace in Europe and the coke ovens were fantastic; they were capable of producing much more, including foundry coke, for which there was a huge market. It had a huge role still to play in the British steel sector, and we did not have a strategic nationwide approach to looking at those assets and preserving the value they had for our economy and for the future. I know many hon. Friends here want to contribute and share their thoughts and experiences, so I will not take too much time, but I will just give an overview of where we were and where we are now.

First, I will start with electricity costs. We asked for help with bringing the cost of electricity in line with that of our EU counterparts. In 2015, the Government introduced compensation for energy-intensive industries a few months earlier than planned, but a large disparity between electricity prices in the UK and the EU still remains. It translates into a total additional cost to UK steel producers of around £43 million per year, or around 17% of the sector’s net earnings, which is a significant margin to be losing in excessive energy costs. Europe offers many examples of acceptable state aid solutions to the energy challenge, but the Government have not given any serious consideration to what we can do.

Secondly, I come to business rates, which irk sectors across the UK, not just steel. The sector has put forward a number of proposals, such as removing plant and machinery from business rates calculations or offsetting previous trading losses against future business rates, but change in this area has been met by resistance, even though the sector has committed to reinvesting any savings, which would have a huge impact on local steel-producing regions. That feels like a short-sighted approach from the Government, ignoring a powerful tool for incentivising capital investment, increasing the productivity of the sector and helping to deliver a northern powerhouse boost.

Thirdly, public procurement is another area where the UK has so much potential to support UK steel makers, especially through large infrastructure projects such as HS2 and the Heathrow expansion. I know that British Steel in my constituency has aspirations to win contracts on those projects, and many other colleagues will have similar ambitions for their areas. There has been a close working relationship between the sector and Government on procurement.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Does my hon. Friend agree that the Government have missed a real opportunity for UK plc generally, and for steel in particular, with their decision to refuse the Swansea Bay tidal lagoon?

[Anna Turley]

My hon. Friend makes a vital point, not just in terms of opportunities in that area for the creation of jobs and the boosting of the local economy, but in terms of the huge implications for the steel industry that we know such major infrastructure projects have in keeping that pipeline going.

The publication of an annual steel pipeline to provide early sight of such opportunities for UK producers has revealed over 4 million tonnes of steel requirements in the coming years. The publication of the procurement policy note on procuring steel in major projects has also helped to encourage a more holistic and proactive approach to steel procurement. Despite these steps forward, the benefits of this relatively low-cost way of subsidising UK steel and jobs are not being maximised. The guidance is interpreted differently by different Departments and organisations, and information sharing is still far too limited. Clearer and more detailed data on the amount of UK steel in public projects would be a welcome improvement, to track progress and to ensure it is held up to the light of public scrutiny. Introducing a baseline for levels of steel in UK projects would also help to maximise the benefits to domestic steel production.

Fourthly, trade remedies have been an incredibly important defence mechanism in the battle against state-subsidised steel, which is flooding the market and forcing down prices.

--- Later in debate ---

[Claire Perry]

No, no—far from it. The hon. Gentleman invites me to move on to the next part of my response, which is about exactly this issue. One of the first parts of the sector deal is getting the sector to work together to say, “What is it that we collectively need going forward?” We had the “Future Capacities and Capabilities of the UK Steel Industry” report produced at the request of the industry; the Government paid for it with taxpayers’ money. It highlighted onshore opportunities that will be worth up to £4 billion a year by 2030. This is about customer demand and substituting for imports specialty steels, higher-quality steels or steels that can support the investments in the offshore wind industry—things that are now being imported. That opportunity exists for the UK plants and it is forming part of the sector deal.

As I have urged hon. Members to recognise before, we should not use the steel sector deal as a measure of how much the Government love the sector. The idea is not to have Government write it and say, “This is what you need to do.” It is for the industry to come together and set out what it needs and wants from Government. We have seen the publication of sector deals that directly benefit the industry that we are talking about. The automotive sector deal was an early one out of the traps. The automotive industry has already increased its use of UK-made content. That went up from 36% previously to 44% two years ago, and the aim is to reach 50% or more by 2022, as a direct result of the sector deal. The construction sector is a vital market for many of the steel products in this country, and we published the construction sector deal last Thursday. It aims to build homes and offices quicker than in the past and it also has commitments in relation to domestic content.

We are absolutely committed to securing a steel sector deal that works for Government, industry and employees. It would be unfair to blame any delay on my hard-working officials. This is about getting the right deal—one that is not just a simple request for money but is saying, “What are we collectively going to do to increase productivity and competiveness, so we can invest again in these steel plants and create jobs in these important areas?”

[Angela Smith]

I do not agree with the Minister’s comments about the tidal bay lagoon, but there are other aspects of UK manufacturing where a sector deal could play a real part. The development of the shale gas industry is one of those. Can the right hon. Lady update us on progress made in maximising UK steel content in the shale gas industry?

[Claire Perry]

That is an excellent point. The hon. Lady will know that I am keen for us to have an energy policy that delivers secure, affordable, low-carbon and innovative energy. I believe that onshore shale gas can play a part in that, and we are soberly going through the process of testing the wells. She raises an important point about ensuring that that work is done using UK steel content. I will take that away for my conversations with the companies, but I did hold a very effective shale industry roundtable, at which I was struck by the number of small companies that are making the pipes and specialty products that rely on UK steel and the opportunities for them, so the hon. Lady makes an excellent point.

I again reassure colleagues here today that work is going on on the sector deal, but we have to encourage the companies that we are working with and that provide so many jobs in the constituencies represented here to think about what they will do. There are positive signs. We are seeing steel companies investing in very good research and development. Companies are bidding for money from our industrial strategy challenge fund—the current wave—for more innovative products, and that is incredibly important going forward.