Steel Industry

Greg Smith Excerpts

Wednesday 16th October 2024 Westminster Hall

[Greg Smith (Mid Buckinghamshire) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Harris.

I thank and congratulate the hon. Member for Boston and Skegness (Richard Tice) for securing this debate in Westminster Hall this morning. I also thank everyone who has contributed to it, particularly the hon. Member for East Londonderry (Mr Campbell), whose intervention will potentially go down in history as one of the most innovative ways to participate in a debate on steel, and my hon. Friend the Member for Brigg and Immingham (Martin Vickers) for his superb contribution.

Just a few weeks ago, I challenged the Minister in the main Chamber on the Government’s approach, not just to Port Talbot but to the UK’s entire steel industry, yet just a couple of weeks later we are on the cusp of Scunthorpe steelworks potentially closing completely by Christmas, despite the owner’s clear ask to the Government to safeguard what amounts to thousands of jobs and a vital component of our economic security. If we let Scunthorpe close, on top of Port Talbot, we risk becoming dependent on cheap imports, particularly from China.

Although I understand that the Chancellor and the Prime Minister have had some issues understanding their own manifesto commitments of late, surely the Government cannot possibly have dropped their clear commitment to steel in their manifesto. Surely not, given that 90% of Network Rail steel is sourced from Scunthorpe, and that Liberty and British Steel support more than 3,500 highly-skilled jobs there—those people are dependent on the commitment that the now party of government made in their manifesto. I understand that the Government’s talks with the owners have already stalled and broken down—not the best start for the Secretary of State and the Minister. I remind hon. Members that, less than a year ago, when in opposition, the Secretary of State said that the drive for green steel must mean more jobs, not fewer, but the reality on the ground today is fewer jobs in steel in our country.

The Minister knows that Scunthorpe is now the only site in the UK with the ability to produce virgin steel. If she allows it to close on her watch, we will be left open and vulnerable to cheap imports from China, and that must not be allowed to happen. Equally, I understand that the Government are not prepared to support virgin steel manufacturing while new electric arc furnaces are being commissioned and are coming online. Is that correct? If so, how does it chime with the Secretary of State’s previous commitment that decarbonisation must not mean deindustrialisation?

With the import of coking coal due to end this month, and the possible closure of the Scunthorpe plant completely by Christmas, resulting in thousands of job losses, time is running out. The Government simply must get a grip of the situation. The loss of that vital industrial and economic asset will result in 5,000 job losses across the supply chain and the end to steel production for the first time since the start of the industrial revolution.

Given the choice in front of them, the Government must take responsibility not just for Scunthorpe but for the downstream impact on our shipbuilding industry, the defence sector and, as the hon. Member for Boston and Skegness said eloquently, the production of the wind turbines that, on the other hand, the Government are encouraging—in fact, one of their first acts was to end the ban on onshore wind. They cannot have it both ways: if they want to have their cake and eat it, they need to support the steel sector. The Government have already let Harland & Wolff down. Will they do the same with the whole of the steel sector?

The Government’s plan seems to be to divert imports of steel from China through Brazil to give the impression that this is somehow an innovative solution. I am afraid there is nothing innovative about this Labour Government’s approach. They are masking their failure to secure a future for our steelworkers and our economy as a whole, and at the same time they are risking our national security in the face of growing threats from, among others, China.

[Jessica Morden]

Will the Minister give way?

[Greg Smith]

I am not quite a Minister yet, but I will give way.

[Jessica Morden]

The shadow Minister talked about taking responsibility, but will he take responsibility for the fact that for 14 years we had no industrial strategy, no steel strategy and endless steel Ministers? Labour Members begged to have any kind of strategy for steel. Therefore, the situation that this Government inherited just a few months ago is the responsibility of the previous Government.

--- Later in debate ---

[Greg Smith]

I am grateful to the hon. Lady for her intervention, but as my hon. Friend the Member for Brigg and Immingham set out, the last Conservative Government took many concrete steps to support our steel sector. I gently remind Members on the Government side—there is no sugarcoating this for Members on my side—they won the election. They are responsible now and have to take decisions for the future of steel; it is no good constantly coming back and trying to do the political point scoring that we have seen time and again in the Chamber. The other side is in charge now, so they can make the decisions. If this Minister wants to stand at the Dispatch Box in a few moments and make those commitments to virgin steel, to steel production in this country, to Scunthorpe and Port Talbot, that will be welcomed by both sides of the House, because both sides of the House want the future of steel to be secured in this country.

What we are seeing on the ground right now is something different, however, because we have returned to the Labour party playbook: scrap jobs, scrap production and become reliant on higher-polluting countries for imports. That is not what I call decarbonisation, so I ask the Minister to come clean. What has gone wrong so early in this Government’s tenure? Why are she and the Secretary of State unable to fulfil their manifesto commitments? Can the Minister explain what will happen to those thousands of jobs in the steel sector across our country? We need the steel strategy now, not a promise of it for the future. Time is running out.

--- Later in debate ---

[Sarah Jones]

I thank the hon. Gentleman for his intervention and for reading out a message from somebody watching the debate. We all agree that it is time for action and that is exactly what the Government seek.

I will expand on our plans. The steel strategy will be developed and delivered in partnership with the steel sector and the trade unions, of course. It will work in lockstep with the Government’s industrial strategy. Our intention is to increase our UK capabilities, so that we can create a more vibrant, competitive steel sector. That will turn around the situation we inherited, where— I want to emphasise this—under-investment had resulted in dated infrastructure.

My hon. Friend the Member for Stockton North (Chris McDonald), who knows so much about the steel industry, made the point about the efficiency and economy of the new technologies, and why blast furnaces have struggled to make money for the businesses that own them in this country. British Steel’s blast furnaces were built in 1938 and 1954. Both the blast furnaces at Port Talbot were built in the 1950s. They have become incredibly unproductive because they have not been invested in. The new technologies are simply more productive. If we do not keep up with what the rest of the world is doing, we simply will not be able to compete in the market.

We inherited an industry on the brink. Nevertheless, within 10 weeks of coming into Government, we negotiated a better deal with Tata with better safeguards for workers and more money invested in their future. Our £2.5-billion fund for steel will ensure that we have a steel industry for the future. The Government’s ambition is to ramp up investment, strengthen our supply chains and create more well-paid jobs in the places they are needed.

We talk of primary steel. With the help of experts, we will review the viability of technologies for the production of primary steel, including direct reduced iron.

[Greg Smith]

The Minister just said that she will review the options. I hope this is a binary yes/no question: is there a ministerial direction in the upcoming steel strategy to include a commitment to virgin steel production in the United Kingdom?

[Sarah Jones]

I think I was fairly clear. We have been in opposition. We want to produce primary steel in this country; the previous Government got us to a point where that is almost impossible without huge investment. We are supplying £2.5 billion of investment and looking, quite rightly, at the best way to spend that to create a viable steel future for this country. We are looking at direct reduced iron as part of our steel strategy, which the previous Government did not do.

The UK’s ambition is to ramp up investment. Many hon. Members talked of the need to procure British steel in this country, and we are now in a situation where 95% of the steel procured by the UK Government for infrastructure is British, if the necessary type of steel is made in the UK. The issue is that we do not produce all the different and right types of steel, so we need to ensure that we use the Procurement Act 2023 as much as we can to drive economic growth in steel.

I disagree with the hon. Member for Boston and Skegness on whether the green agenda can drive up jobs—we think that it can. For example, the Korean company SeAH is building a factory in Teesside that will build monopiles, which are the big structures that go into the ocean and anchor wind turbines. It is currently building that structure with 30,000 tonnes of steel from British Steel. We want to get to a point where we are not only building those kinds of factories in this country but using British steel where we can to make the infrastructure.

At the moment, we do not have a factory that makes turbines on the scale that we need for floating offshore wind, but SeAH is building that factory because it has an agreement with RWE, which will be running the turbines that it builds in future. That green job development into wind and renewable energy is driving our ability to build a factory in Teesside to create hundreds of jobs to build those monopiles, and we are using British steel. That is the kind of future that we want to see through the steel strategy; we are looking at those opportunities to bring new steel companies into this country and to find ways to drive up production in this country.

I should address the issues holding us back, as they were mentioned in the debate. China and excess capacity is a huge issue that we should not underplay. China is now the biggest steel producer in the world and its unfair subsidies have led to massive steel over-production, which fuels global overcapacity and drives down prices. That is a global issue with local consequences that makes profitable steel production here in the UK much harder. That key global situation is helping to shape our future steel strategy and we will need to tackle that problem through things like the carbon border adjustment mechanism—CBAM—and ensure that we are working with a level playing field.

Energy prices were mentioned by many Members, and for too long British energy-intensive industries, including the steel sector, have been held back by high electricity costs. Again, I disagree with the hon. Member for Boston and Skegness: electricity prices are set by global gas prices and the problem is our dependence on fossil fuels, as well as the fact that we did not mitigate for that situation in this country at all. When all the prices shot up with the war in Ukraine, we were in a worse position than many countries around the world.

The British industry supercharger that the previous Government developed, which the hon. Member for Brigg and Immingham (Martin Vickers) mentioned, will bring down electricity costs for the UK’s most energy intensive industries, but we know that we need to go further. It brings down only 60% of costs and there is still a disparity. We believe that, in an unstable world, cheap home-grown green energy is the future. That is what will drive down prices, reduce our exposure to the volatile fossil fuel market, protect bill payers and strengthen our energy independence. Fundamentally, that is what will bring down costs in the long term.

Members also mentioned the challenges of decarbonisation. Tata and British Steel’s plans to invest in electric arc furnaces are driven by market conditions and the desire to reduce their carbon footprint—customers want greener steel. The UK is going to have a CBAM. If we were producing steel in the UK with blast furnaces, we would be massively inhibited because the EU is bringing in a CBAM, so the cost of exporting to the EU would be much higher. We have to deal with the world as we find it, which again is where we disagree with the hon. Member for Boston and Skegness. We cannot look back and try to re-create the past; we have to deal with the world as we find it, which means that we have to move towards those more efficient and greener energies.

The EU, where 78% of our steel exports went in 2023—that is worth pointing out—will bring in its carbon border adjustment mechanism in 2027. We rely on exporting a lot of the steel we produce to the EU, and we would be at a massive disadvantage were we to carry on producing steel from blast furnaces. We have committed to a UK carbon border adjustment mechanism, which will give UK businesses the confidence that, when they invest in decarbonisation and electrification, they will not be at a disadvantage. That is important.

On other issues mentioned by hon. Members, I should touch on Scunthorpe, because that is at the forefront of everyone’s mind. No one wants to see any job losses, and everyone wants to see the steel industry thrive. Through our strategy, that is what we want to do. For commercially confidential reasons, which I am sure hon. Members understand, I cannot talk about our conversations with the owners, but I reassure Members that we are having conversations all the time and that we are working unbelievably hard to get a solution for Scunthorpe and to give the certainty that the hon. Member for Brigg and Immingham talked about. I completely understand the issue with the instability of the current situation, but all I can say to him is that we are doing all we can to work with the company on what the future will be.