Thamesteel

Gordon Henderson Excerpts

Wednesday 21st March 2012 Westminster Hall

[Gordon Henderson (Sittingbourne and Sheppey) (Con)]

I congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing the debate in his capacity as chairman of the all-party group on the steel and metal-related industry, of which I am a member. What a passionate and emotional speech it was. I also congratulate members of the Thamesteel taskforce, which he mentioned. The taskforce was a brilliant example of how different, and sometimes conflicting, interests can work together for the greater good. I also put on record my thanks to Members on both sides of the House—although I have to say mainly on the Opposition side—who have supported the Thamesteel workers in their battle for justice.

Before talking about that battle, I want to explain a little about the events that led up to Thamesteel going into administration, many of which the hon. Gentleman touched on. Steel making first took place in Sheerness in 1972, and the plant was operated by a number of companies until it was taken over by Allied Steel and Wire in 1999. A couple of years later, ASW went into administration, and the plant was eventually bought by the Al-Tuwairqi Group, otherwise known as ATG—keep that name in mind. Since taking ownership of what became Thamesteel, ATG has imposed on the site a succession of disastrous management teams, which have run the company into the ground to such an extent that in the last three years Thamesteel lost £91 million.

It came as no surprise, therefore, that Thamesteel eventually went into administration, but what was surprising was the revelation that the work force were told at the end of December that all was well with the company and they should have no fear for their jobs, despite the December wage bill being paid only because of an injection of £170,000 from an ATG subsidiary company, HAT Holdings BSC. The plant stayed open during January, despite Thamesteel having 350 creditors to which it owed a total of £147 million. It has emerged in the past week that at least two creditors issued winding-up notices, one at the end of December 2011 that would have been issued as far back as October except for a technicality. The order would have become effective on 30 January 2012, but on 25 January Thamesteel applied to the High Court to enter into administration, appointing Mazars as administrator. One wonders whether the dates were coincidental.

It has transpired that Mazars met with senior Thamesteel managers as far back as October 2011 to provide directors with a summary of the insolvency scenarios available to them, and a report was sent to shareholders in November. Thamesteel directors clearly knew during November and December that they faced a mounting financial crisis, so why on earth did they not share the information with their work force, rather than spring it on them on 25 January when the administrator made 341 workers redundant?

Those workers had not been paid since the end of December, and it was left to the Government’s Insolvency Service to step in and pay some of the wages, but only up to a maximum of £400 per week. The Government also funded redundancy payments due to workers, and when we talk about the Government we should not forget that it is the taxpayer who has had to stump up the money. As is the way when dealing with public money, there was an inevitable delay in workers receiving anything from the Government, but I must pay tribute to the Insolvency Service, which ensured that the vast majority of the claims were processed within 12 days of receiving the necessary documentation from the administrator. I also add that the administrator went out of its way to work with the Community union and other agencies, including Jobcentre Plus, to get the appropriate redundancy payment—RP1—forms filled in as soon as was practicable after the administration was announced. Nevertheless, there are questions to ask about why it then took 15 days for the forms to be sent by the administrator to the Insolvency Service.

Due to the delay in paying workers, many of them were in dire straits and it was necessary to set up a local food bank to ensure that families did not starve. It is a national scandal that in the 21st century, in one of the richest countries in the world, redundant workers should have to rely on food parcels to survive, and we must ensure that that never happens again. We have to change the benefits system to ensure that redundant workers receive in a more timely fashion the help to which they are entitled. Perhaps the Government will consider providing an immediate interim payment, which could be adjusted as soon as the paperwork was processed.

For now, however, we must move on and address a more pressing question: what is the future for Thamesteel? My big fear is that the rolling mill will be stripped out and shipped to Pakistan. Why Pakistan? Because most of the senior Thamesteel managers are Pakistani nationals and ATG has an agreement with the Pakistani Government to set up a steelworks in that country. I have only recently learned something that feeds my suspicion. It is unattributable information that although the bids for taking over Thamesteel closed on Friday, an offer was received on Monday of this week, which possibly came from Al-Ittefaq Steel Products Company. ISPC is 60% owned by Dr Hilal al-Tuwairqi, who also owns ATG.

Let us be clear: stripping out the rolling mill from the Thamesteel plant would be the kiss of death for steelmaking on Sheppey, but it need not be that way. The Sheerness steelworks, under all its previous owners, was a profitable plant with a skilled, dedicated and loyal work force. Its financial plight has nothing whatever to do with that work force and everything to do with senior managers who had no real interest in or understanding of the British steel industry. To the current owners, Thamesteel was just a vehicle for producing cheap, semi-finished steel billets that could be shipped to Saudi Arabia to be rolled in the company’s Saudi mills. Thamesteel was a steel cow that could be milked, and it was.

I urge the Government to recognise the Sheerness steelworks for what it is: an important industrial asset. Thamesteel, or whatever name the company ends up with, has the capacity to be profitable again. The plant has the capacity to turn over an estimated £500 million annually and employ 800 people. We need that capacity. Britain generates 1 million tonnes of ferrous scrap annually, of which 40% is recycled here, while the other 60% is exported. At the same time, perversely, Britain imports almost 50% of its steel reinforcing products. Surely it makes sense to convert more of the UK’s ferrous scrap into steel in this country. The gap between imports and exports will only get worse if Thamesteel is lost.

I understand that the administrator has received several bids and is in the process of analysing them. I hope that one of those offers, or more, is from a company that is interested in making steel. If a realistic offer is made, I urge the administrator, the creditors and the Government to accept it without hesitation. However, if the worst comes to the worst and the only offers are from companies that want to close down the site and strip its assets, I urge the Government to intervene immediately to save this important national industrial asset until, as the hon. Member for Middlesbrough South and East Cleveland said, somebody can be found who wants to produce steel on Sheppey.

I think that, given the right help, there are people willing to take on the plant, but the biggest problem is the working capital that would be needed to get steel rolling again until sales income was received. Working capital at full capacity would be a minimum of £25 million, but offering that sum as a loan guarantee would be a small price for the Government to pay to keep open the last remaining steelworks in the south-east.

I suspect that Ministers will advance at least two reasons why they cannot intervene. The first is that, under EU rules, they cannot offer subsidies to the steel industry, but if they are honest with themselves and us, they will admit that our European partners find creative ways to help their own industries. In Germany, for instance, the Government have tilted the tax system to help to reduce the high cost of energy in its steel industry. That is a subsidy in all but name. The second argument will be that in the current economic climate, Britain simply cannot afford to help Thamesteel. That will be met with disbelief by many people, including me. I can think of any number of Government budgets from which the money could be lifted.

For instance, over the next four years, Britain will provide £1 billion in aid to India, a country with a thriving steel industry. Now there is an irony. Even more ironically, Britain will give £240 million this year to Pakistan, the country in which ATG is building a Pakistani-subsidised steelworks to which it might well ship the Thamesteel rolling mill. It would be outrageous if British aid were used, albeit indirectly, to help to build a steelworks to employ Pakistani steelworkers while British steelworkers were losing their jobs in my constituency simply because the British Government refused to intervene. Of course, I might be wrong. The Minister might commit to helping to save the Sheerness steelworks and the 400 jobs that go with it. I assure him that if he does, he will make me and my constituents happy.

Before I conclude, I will briefly mention the administration of Thamesteel, as it is important. In my opinion, Mazars has acted professionally and with the utmost propriety, in accordance with the objectives and rules of administration, but I would like to raise a concern about those rules. Is it right that an accountancy firm consulted about insolvency options should then be appointed administrator? Is it in order for the administrator to make workers redundant without paying them the wages and other payments to which they are entitled when the company still has funds in its bank account?

While on the subject of Thamesteel workers, although they can claim back the wages owed for January and those claims will be classed as preferential, claims will be capped at £800 per employee and the balance traded as an unsecured claim. The company has 350 creditors, including employees and connected creditors—people with connections to the owners. For instance, HAT Holdings BSC holds a fixed and floating debenture on the company for £170,000, which will be paid first. Of the £143 million owed to creditors, £137 million is owed to connected parties. I would like the Government to consider changing the rules of administration to ensure that all money owed to ex-employees becomes preferential claims, and that the claims of non-connected creditors take precedence over those of connected creditors.

A final aspect of administration with which I am unhappy is the fact that although the administrator has a duty to investigate the conduct of the directors in the period leading up to administration, and those findings are then reported to the Insolvency Service, the report is confidential, meaning that nobody can question the thoroughness of the investigation or its conclusions. I would like the rules to be changed to allow a representative of the work force access to the report and the ability to object to its content and its conclusions.

Thank you for your forbearance, Mr Davies, in allowing me to make such a lengthy contribution. As you will realise, the issues involved in Thamesteel’s administration and the plant’s future are complex. I could say much more about the events leading up to administration, and there are many more questions that I want to ask, but at this time I want to say nothing that might jeopardise the possibility of Thamesteel being rescued and will save my ammunition for another day.

[Several hon. Members]

rose—