Steel Industry

Iain Wright Excerpts

Wednesday 14th January 2015 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

I beg to move,

That this House recognises the importance of the UK steel industry including as a provider of highly-skilled jobs and research and development; values the steel supply chain which supports strategic industries such as automotive, aerospace and construction; notes with concern Tata’s proposed sale of its Long Products Division and the impact this could have on UK steel industry capacity; welcomes the efforts of UK steel producers to cut carbon emissions and expresses concern that losing trade to countries with less efficient processes could increase global carbon emissions; further notes with concern that some steel imports do not meet British standards; calls on the Government to recognise the importance of the steel industry and to work with it, the Scottish and Welsh Governments and trade unions to provide a co-ordinated plan for the industry’s future; urges the Government urgently to reconsider whether mitigating measures on energy prices, planned to start in April 2016, can be brought forward to support the competitiveness of UK steel producers, to press the European Commission to launch an inquiry into the CARES certification of imported steel products to ensure safety and traceability and to take action through the EU and World Trade Organisation to challenge the uncompetitive subsidisation of steel products; and further calls on the Government to introduce an active industrial policy for the metals industry, including strengthening supply chains, strategic approaches to public sector procurement, encouraging innovation, skills development and resource efficiency and providing support for steel exporters.

Manufacturing matters if Britain wishes to have a modern, dynamic and innovative economy. A vibrant manufacturing sector is vital to an economy that wishes to prioritise high value and secure jobs and improved productivity, and to see rising living standards for all. In turn, the steel industry is vital to the future competitiveness and flexibility of British manufacturing.

This is not a debate that harks back to an industrial past, although I am proud to say from the Dispatch Box that I come from a family of steelworkers. Both my grandfathers, Jimmy Wright and Alan Harland, were steelworkers for most of their working lives at the British Steel site in Hartlepool.

However, this debate is not about the past. It is focused on the future—on our long-term competitiveness as a leading economic nation and on what is needed to secure our place as one of the top-ranking economies in the 21st century. Steel has to be a key part of that vision of a modern, innovative economy. As our motion makes clear, the UK’s steel and metals sector provides highly skilled jobs in all parts of the United Kingdom, from Hartlepool and Teesside in God’s own country of the north-east to, among others, Sheffield and Scunthorpe; Corby; Deeside in north Wales; Cardiff, Port Talbot and Newport in south Wales; and Clydebridge and Motherwell in Scotland.

The economic contribution that those facilities make through the wealth that is created by the plants and the workers who make the steel, and the way in which that wealth is then circulated around firms and businesses in those areas, whether through the supply chain or the spending power of the steelworkers, is the foundation of many local economies. Indeed, we should stress that the steel industry is literally the foundation of many valuable sectors of the economy, forming part of a number of important value chains in manufacturing—the construction, automotive, aerospace and energy sectors, in which Britain has a competitive advantage and which all play a significant role in downstream activities for the steel industry.

[Andy Sawford (Corby) (Lab/Co-op)]

As someone who is also from a family of steelworkers, it is good to hear my hon. Friend speak strongly about the traditions of the industry as well as its important contribution today. Will he join me in thanking the Community union, particularly its president, Dougie Fairbairn, who is from Corby and a very strong ambassador for Corby steelworks? We are not part of the long products division that we are focusing on today, but we recognise that we need to fight for the future of the steel industry, whichever part we are in.

[Mr Wright]

I thank my hon. Friend for mentioning Community, which is a fantastic trade union that wants to secure the long-term viability of the steel industry and is working hard to make sure that that happens. Its keenness to work with the work force, with management and with Government to ensure that we have a future in the UK steel industry is second to none, and I pay tribute to it.

As my hon. Friend said, this is not a sunset industry—steel cannot be seen as that. This is an industry that has, and should have, a future. Internationally, the acceleration of globalisation in the first half of this century provides rising demand for steel products, especially for long products, which I will refer to later. The World Steel Association has estimated that global steel use will rise from about 1.5 billion tonnes a year now to about 2.5 billion tonnes in 2050. Within that rising demand for steel, we see process innovation, technological developments, increasing efficiency and sustainability, and pressure to increase the added value of steel products by making them stronger, lighter in weight, less resource-intensive and more flexible in their uses and reuses. Those developments can be powerful drivers of comparative advantage for the UK steel industry.

[Mark Tami (Alyn and Deeside) (Lab)]

My hon. Friend will know that added value is key to the products that are made at Shotton. Does he accept that energy prices in this country are holding back some of the potential opportunities for expansion, because steelworks are finding it very difficult to compete with other countries in Europe and throughout the world?

[Mr Wright]

My hon. Friend has raised time and again the need for a level playing field for energy costs, as have other hon. Friends, and I will want to focus on that.

Our motion hopes to secure the support of the whole House by, crucially, recognising the importance of the steel industry. We must work in a long-term way to address the issues and challenges, whether in energy costs or other matters such as skills, research and development and innovation, to ensure that steel has a prosperous future, providing important highly skilled, well-paid jobs as part of a modern, open and innovative economy. To achieve that, we require a joint vision from industry and Government as to the importance of the industry, with an active policy that addresses the challenges and works with industry and all of Government in a co-ordinated way.

All too often, however, Ministers give the impression that the steel industry is not a priority. Their deeply unhelpful approach to the sector ensures that steel firms have to fight a battle on two opposing fronts, which undermines the future prosperity of UK steel. On the one hand, the Government offer the industry a laissez-faire approach—they say that its corporate ownership, capability and capacity, and product pricing are entirely up to the market—but on the other hand, they are intervening in the steel and metals sector in a purely negative way. By imposing additional burdens on the steel industry, they are tying steel producers’ hands behind their backs, removing the gumshield from their mouths and then pushing them back into the ring of the global marketplace. Such an approach to the future viability of the UK steel industry cannot work.

[Andrew Percy (Brigg and Goole) (Con)]

I share with the hon. Member for Scunthorpe (Nic Dakin) the Scunthorpe steelworks, which are very important to our constituencies, as well as to that of my hon. Friend the Member for Cleethorpes (Martin Vickers). One mistake made by this Government—my hon. Friend and I voted against them on this—was on the carbon floor price. One way to make things better would be to increase accessibility to UK Government work and contracts. There is general agreement on that, but we have not seen a great deal of progress.

[Mr Wright]

I am pleased that the hon. Gentleman has mentioned those two points. I will come on to the importance of the Scunthorpe works in a moment. As part of a real, active and proper industrial policy, it is incredibly important to ensure that we have smart procurement to maintain and enhance supply chains and industrial capability in this country. As he says, we often hear warm words, but we do not see decisive action from this Government or the devolved Administrations from across the United Kingdom.

The hon. Gentleman mentioned Scunthorpe, and I want to turn to the very important matter of the potential sale of Tata Steel’s long products division to the Klesch Group. That is worrying many hon. Members and steelworkers, and I raised that in an urgent question in October. My hon. Friend the Member for Scunthorpe (Nic Dakin), who has the largest affected plant in his constituency—unless it is in that of the hon. Member for Brigg and Goole, in which case I apologise—as well as my hon. Friends the Members for Middlesbrough South and East Cleveland (Tom Blenkinsop), for Rutherglen and Hamilton West (Tom Greatrex) and for Motherwell and Wishaw (Mr Roy) have been particularly strong on this matter.

It is absolutely imperative for Britain to retain a long products capability. The construction industry, both domestically and internationally, provides a real opportunity. Improving the rail network is a good example. Network Rail will spend billions of pounds on rail infrastructure in the next couple of decades, with projects such as Crossrail, High Speed 2 and possibly Crossrail 2. I shall expand on that later, but to respond to the hon. Member for Brigg and Goole, I would say that a proper, co-ordinated industrial strategy, with smart procurement as one of its guiding principles, could unlock real value for UK steel firms and their workers.

[Kevin Brennan (Cardiff West) (Lab)]

At the risk of repetition, I, too, come from a steel family. My father worked for more than 20 years at Llanwern, and I even managed six months there as a young man. Is my hon. Friend surprised that no one is present in the Chamber from Plaid Cymru, the Scottish National party or even the UK Independence party to debate an industry that is very important for our country?

[Mr Wright]

I thank my hon. Friend for his intervention, because I had not realised that no such representatives were in the House for this debate. Given the importance of the steel industry to the United Kingdom and the role that they could play in public procurement through various Governments and Assemblies, it is absolutely vital for them to be present.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

My hon. Friend makes an important point about procurement, particularly in Scotland. As he will be aware, when the devolved Scottish Government tendered for a new Forth crossing, they chose to place the steel order with a Chinese company, rather than to support Scottish jobs in my constituency and that of my hon. Friend the Member for Motherwell and Wishaw (Mr Roy). Does that not demonstrate that warm words but no follow-through means that British steelworkers lose out?

[Mr Wright]

My hon. Friend, who has been a real champion on this issue, has pre-empted one of my later remarks. His clarification about the contract is absolutely right. This £790 million contract for 37,000 tonnes of steel for the Forth bridge project would have been really helpful in making sure that we had a vibrant long-term steel industry in Scotland, but all the steel came from China and Europe, and certainly none of it came from Scotland. How can that be allowed if we have a real industrial policy? I do not believe in protectionism or bailing out obsolete industries, but Governments of any complexion working with industry and the supply chain to ensure their viability is the key to a modern, innovative economy. Other countries are doing that and so should we.

[Nic Dakin (Scunthorpe) (Lab)]

My hon. Friend is making a powerful argument. Did he notice how the Italian Government stepped forward before Christmas to ensure that their steel industry could carry on into the future and be in a strong position to compete in Europe and the world?

[Mr Wright]

My hon. Friend is absolutely right. Governments, in conjunction with industry, can look at the global steel market, consider where they want to fit into the value chain and how they can exploit it, and work together in a co-ordinated way on research, development, innovation and skills to ensure that they fulfil the potential.

What has happened with long products provides a good example. It is important that this country continues to have a long products capability for domestic and international reasons. It is important that we remain a key player in that area. That is not about helping obsolete, old-fashioned industries; it is about thinking about the future and about how we can exploit the opportunities. Just because a single company, albeit one as strong and as important to this country as Tata, makes a strategic decision to divest itself of its long products division, which comprises about 50% to 60% of its steel operations, this country should not lose that capability. Should not such matters be considered in an effective industrial strategy? As I said, it is not about bailing out obsolete industries, but about identifying the parts of the value chain where we can make inroads and receive dividends in the future.

[Frank Dobson (Holborn and St Pancras) (Lab)]

Does my hon. Friend agree that it was not helpful of the Government to refuse to find the loan for Sheffield Forgemasters that would have put it in a position to compete worldwide in nuclear engineering?

[Mr Wright]

I am pleased to see my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) in her place, because she was particularly strong early on in this Parliament on the issue of Sheffield Forgemasters. My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) is absolutely right. One key thing that an industrial strategy can do is identify the opportunities in the supply chain and work with firms to exploit that potential. When the Government came in, they did nothing to help and they might have undermined a great capability in that important part of the steel industry and its auxiliary supply chain.

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

Will my hon. Friend give way?

[Mr Wright]

I will give way to my hon. Friend, and I pay tribute to the work that she did earlier in this Parliament with regard to Sheffield Forgemasters.

[Angela Smith]

I thank my hon. Friend. Our capability to deliver supply chain opportunities in the nuclear industry has been compromised by the Government’s decision. It was cast at the time as a cancellation of Labour’s sweeties to industries in Sheffield in an attempt to win Sheffield Central in the general election. Will he take the opportunity to deny, even now, that that was the case and to say that it had been a serious strategic investment in a key industry for the UK?

[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.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Does my hon. Friend agree that it would be an absolute absurdity were steel production to end up being offshored to places such as China, where processes are far less carbon-efficient and carbon emissions will be higher, and where there are serious concerns about quality standards and environmental degradation?

--- Later in debate ---

[Mr Wright]

I will turn in a moment to the traceability and sustainability of imports, but I hope that my hon. Friend will be able to catch your eye later in the debate, Mr Deputy Speaker, so that he can expand upon those points.

The Port Talbot site lost 400 jobs in July, and on announcing the redundancies, Tata Steel’s chief executive Karl Koehler said that

“steel demand and prices are likely to be under pressure for some years. Our business rates in the UK are much higher than other EU countries’ and our UK energy costs will remain uncompetitive until new mitigation measures come into effect.”

State aid approval has not been pursued with any sense of urgency or vigour, and Ministers have allowed the process to drag on. Romania was able to commence and conclude state aid negotiations within six months, so why does it take years for the UK? Help to mitigate the renewables obligation will not come into force until April 2016, despite the fact that steel firms need help now. I appreciate that the process can take time, but will the Secretary of State commit to pursuing it with a renewed sense of haste? Crucially, if approval comes forward prior to April 2016, will the Government implement the measures as soon as possible?

The Secretary of State will acknowledge that when it comes to capital expenditure decisions, especially for an industry as capital-intensive as steel, global investors will base their decisions on a dashboard of different factors, including tax, access to a skilled work force, the regulatory environment, access to markets and innovation. In that context, inward investors see business rates as a fixed cost. They do not flex with changing market conditions and industrial output. Business rates are five to 10 times higher in the UK than in European neighbours, putting British-based steel at yet another cost disadvantage compared with our competitors.

I appreciate that the system cannot be changed overnight, and the Chancellor’s announcement of a business rates review is welcome and we support it. As part of that review, will the Secretary of State confirm that the Government are looking to simplify the system and ensure that it boosts manufacturing activity? Specifically, does the review cover the valuation of plant and machinery in the business rates system?

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The hon. Gentleman is right to mention business rates, which will soon be devolved to the Labour Government in Cardiff. What discussions has he had with colleagues about creating a business rates regime in Wales that would help the steel industry in my country?

[Mr Wright]

That is an important point, and ensuring co-ordination across the United Kingdom in things such as tax systems and procurement measures is vital. As part of a proper industrial policy, we must champion free trade and try to stamp out unfair trade. As part of that co-ordinated response, the Government should be working with other partners. We are concerned—my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) has already touched on this—that China and Turkey are subsidising their steel exports, making it impossible for UK and European steel products to compete on a level playing field, and domestic steel production suffers.

Imports from China now account for more than a third of the UK domestic steel market, and they are growing substantially year on year. I pay tribute to my hon. Friend, who has been particularly robust on that matter. We are calling for the Government to take decisive action within the European Commission and the World Trade Organisation to clamp down hard on unfair trade from other nations, but there is precious little evidence that the Government are standing up for steel and pursuing such an approach. What are they doing to ensure that fair change? The large increase in Chinese imports in recent years also includes steel reinforcement for concrete, or rebar. China has significant excess capacity in that product, and as such is exporting it to Europe. That particularly affects Celsa Steel, which is based in Cardiff, and my hon. Friend has been an extremely strong and assiduous champion for steel jobs and that firm in his constituency.

The Secretary of State may recall that I asked him a question on this issue during questions to the Department for Business, Innovation and Skills last year. As my hon. Friend has said, there is concern about traceability within the supply chain and the failure to comply with British standards—I am sure my hon. Friend will catch your eye during the debate, Mr Deputy Speaker, but I want to flag up the issue because it raises serious questions about the structural integrity of buildings and infrastructure. In answer to my question last November, the Secretary of State said that he was in the middle of an inquiry into whether the testing process operates effectively. Will he update the House on that inquiry, as well as on its findings, recommendations and actions?

I mentioned the potential of domestic markets in energy, construction and infrastructure that UK steel producers could tap into, but far too often—I think the House is united on this—British-based steel manufacturers miss out. I have already mentioned the £790 million contract for the Forth road bridge. In the North sea we have the largest offshore wind market in the world, and a supply chain that runs along the east coast—including Tata’s pipe mill in my constituency—that is ready and eager to make the steel. Tata’s offshore processing centre in Hartlepool is geared up to provide steel tubulars and line pipe for wind turbines and their foundations.

Every time I sit at Hartlepool United’s football ground, I can look out—it is often not worth actually watching the football—and see the fantastic Teesside wind farm project. However, less than 10% of the steel in that project was produced by UK-based manufacturers, even though there is a steel industry and supply chain literally on its doorstep. That is madness, and the Government need to work harder to address that.

I am not advocating protectionism, but I urge the Government to emphasise the importance of smart public procurement that aids the industrial and employment capability of supply chains in this country. Why do they not encourage local economic benefit clauses in public procurement contracts, as other countries in Europe do? Some of the work being undertaken in sectors such as automotives and aerospace is welcome, but the Government are failing to join up the dots with supply chain capability. Why do they not work harder to provide linkages between original equipment manufacturers and firms within the supply chain, to ensure that the needs and requirements of primes are understood, and that steel producers within the supply chain can adapt and work collaboratively? For example, when the Automotive Council identifies that £2 billion to £3 billion of additional value can be created in the UK car industry by reshoring some of that work, what is the Department doing, with industry, to ensure foundation industries such as steel, as well as chemicals and glass, can be positioned to take advantage of that great opportunity? By prioritising steel as a foundation industry, and as an essential part of industrial strategy and a vital component in the ongoing competitiveness and success of other, perhaps more visible, manufacturing success stories such as Airbus, Nissan and Jaguar Land Rover, UK manufacturing could be better placed to succeed in the future.

[Mark Tami]

rose—

[Mr Wright]

I give way to my hon. Friend, who is a passionate ambassador for Airbus.

[Mark Tami]

How many times has my hon. Friend been around factories to see very important machinery only to be told that it has had to be imported because it is not produced here any more, and that we used to produce it years ago but we no longer have the capability? That is very sad and shows where we are going wrong.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The shadow Minister has been speaking for 26 minutes and there are 13 speakers after the Secretary of State. I do not want to interrupt the shadow Minister—he is making a great speech—but I just ask him to bear in mind interventions.

[Mr Wright]

Thank you for your guidance, Mr Deputy Speaker.

My hon. Friend is absolutely right about making sure that we assess, in a strategic and co-ordinated way, a vision for the steel industry: how we want it to be linked in to a manufacturing sector that is vibrant and competitive, and how we can work collaboratively to ensure that that happens.

With that in mind, work is ongoing within the industry to produce a UK metals strategy. That is welcome. I am pleased that it is industry-led rather than top-down Government imposed, but its status is unclear and there is no evidence from Ministers that it will be accepted by Government. Will the Secretary of State state how he and his officials are engaging with the process? Will the strategy be given similar status to the 11 industrial sector strategies? How will the strategy develop and ensure it does not just consist of a nice launch and a glossy brochure, but then stays on the shelf and is not a real, meaningful and co-ordinated engagement to address the challenges and ensure the ongoing success of the steel industry?

Steel matters. It is vital to a modern and innovative economy. We need a Government who recognise that, and act to addresses the challenges and the opportunities of the industry. We need Ministers to champion it. We need a Government that will stand up for steel in this country. I commend the motion to the House.