UK Steel Industry

Iain Wright Excerpts

Thursday 17th September 2015 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

The debate opened with strong, passionate and eloquent speeches from my hon. Friend the Member for Redcar (Anna Turley) and the hon. Member for Brigg and Goole (Andrew Percy), characterising what is good about the UK steel industry. Their speeches were measured and consistent, showing the overall picture of the future British economy.

We have been here before. We had an Opposition day debate in January on the future of the UK steel industry, in which I stated that we need to focus on the long-term competitiveness of the UK economy and that, as my hon. Friend the Member for Redcar said, manufacturing should be central to our vision for a modern, dynamic and innovative economy. I also said that steel matters as literally the foundation of a 21st century innovative economy, providing high skills and well paid jobs to parts of the country that often suffer in the larger economic picture, and offering a vital role in the supply chain of key sectors such as automotives, aerospace, construction and transport. It is such a significant foundation industry that other parts of our valued economy will build on. The Government need to recognise its importance and work in partnership with it to secure its long-term prosperity.

I am worried, however, that since the debate in January the scale of the crisis facing the industry has become ever more grave and urgent. My hon. Friend the Member for Redcar and the hon. Member for Brigg and Goole outlined the urgent national issues facing the industry, but I want to reiterate some of them. My hon. Friend mentioned the urgent situation facing the SSI plant in Redcar. In the months since we debated the issue in January, we have faced the prospect of the first national steel strike in 30 years. Last month, Tata announced the mothballing of a steel plant in south Wales, risking 250 jobs. The fall in the oil price has put on hold projects in the oil and gas extraction industry, meaning that Tata plants making world-class pipes—such as the pipe mill in my own constituency—and other steel plants face diminishing order books.

The hon. Member for Brigg and Goole mentioned Gary Klesch, who has abandoned his plans to buy Tata’s Long Products Division, including the great plant in Scunthorpe. He said to the Financial Times last month that workers in the UK steel industry were

“being led to the slaughterhouse”

by the Government’s failure to tackle high energy costs and Chinese imports. He asked:

“What is the industrial policy when it comes to the massive dumping of Chinese steel?”

As the hon. Gentleman says, we should doubt some of Mr Klesch’s motives in pursuing industrial assets, and those comments are emotive and provocative, but his comments on industrial policy do smack of some truth and we need to investigate that still further.

[Nic Dakin (Scunthorpe) (Lab)]

The real problem with Mr Klesch’s comments, when he withdrew his interest in Tata Long Products, is the impact they have had on confidence in steel. Does my hon. Friend agree that there is a big job for the Government to do to act to restore that confidence?

[Mr Wright]

Absolutely. I could not agree more with my hon. Friend. He is a passionate defender of the steel industry, not just in his constituency but across the country. He is absolutely right. Industry has a part to play in that, we in Parliament have a part to play in that and the Government also have a role. Government policy is ostensibly about priorities: where to divert attention and resources relative to other things that need to be done.

Other countries recognise the role that steel plays in a modern economy. At one extreme, this can mean renationalising the steel industry, as Italy has done, to safeguard capability for the future. Other Governments try to level the playing field for their domestic industries by addressing costs, taxes, procurement policies and imports to give their domestic steel firms at least a fighting chance. I am concerned that the British Government seem to do the opposite. This is not a personal criticism of the Minister on the Front Bench, who has taken more genuine interest in the steel industry in four months than her predecessor did in four years. She is a strong champion and we welcome her to her post. However, she recognises that the steel industry is facing a perfect storm. UK-based steel firms find it increasingly difficult, if not impossible, to export their products because of overcapacity in the global market, the high valuation of sterling, and uncompetitive costs based on unilateral energy bills and disproportionate business rates. As my hon. Friend the Member for Redcar said, energy prices for UK-based steel producers are 50% higher than for our European neighbours. How can we compete on that basis?

The Government advocate a wholly open domestic market, which leaves the industry vulnerable to dumping and fails to recognise smart local procurement, undermining UK-produced steel. The steel industry has one arm tied behind its back on exports, which, because of overcapacity in the global market, is increasingly difficult, and the other arm tied behind its back on imports. It is little wonder that the industry is punch-drunk and on the verge of a knockout.

I welcome this debate and I agree with the motion’s call for a key summit, but frankly we need more urgent decisive outputs. As Roy Rickhuss, general secretary of the Community union, has said:

“The UK steel industry is at a crossroads. Either it gets the support it needs from government to give it the chance of a competitive future or it continues to be subjected to warm words from ministers in the face of increasing decline.”

I could not agree with him more. On the subject of trade unions, this House debated the Trade Union Bill on Monday. In the Second Reading debate, I said that the Bill’s provisions run the risk of a more adversarial relationship between management and unions. The UK steel industry is characterised by fantastic, positive and productive industrial relations, which we lose at our peril. The UK steel industry will decline if the Bill is passed.

[Anna Turley]

I would like to draw attention to the role played by the Community union and the workforce, when the Redcar steelworks was mothballed in 2010, in securing the plant, finding a buyer in SSI and ensuring its future. That was absolutely fantastic and is a perfect example of a great union working with all parties to secure the future of the industry.

[Mr Wright]

What my hon. Friend says is really important. Steel plays a central role in a modern economy and it is really important that we put the empirical case. In places such as Teesside and south Wales we have seen that steel is in the blood of the workers who produce the steel. There is a pride that is difficult to match elsewhere. We need to make sure it continues.

On that basis, we have a simple but fundamental question to ask. We need to decide whether, as a country, we need a steel industry. We need to evaluate whether it is vital to our future prosperity, or whether, frankly, we can let it wither on the vine and just import what we need. I hope we decide that a competitive steel industry is essential to a modern British industrial base. If we do decide that, we need decisive action from the Government now—I stress now—to help to defend its long-term future.

I have a series of asks for the Minister. I know she is keen to help the steel industry as much as she can. Will she accelerate bringing forward the energy intensive industries package to ensure energy costs are made more competitive? Will she work across Government to remove plant and machinery from the business rates valuation for manufacturers, which acts as a massive deterrent against investment in manufacturing improvements, as well as being a big fixed cost disadvantage relative to European steel plants? Will she do more to support the industry in anti-dumping cases? She has already, in her short time in the Department for Business, Innovation and Skills, done an enormous amount. I think we are, as an industry, very grateful, but will she do more and outline to the House what she intends to do? Could she capture more value in the UK supply chain by promoting local content procurement targets, which lends capacity and capability to UK-based steel firms?

My hon. Friend the Member for Redcar knows my frustration. Overlooking our constituencies is the Teesside offshore wind farm, which presents a fantastic opportunity for steel to be part of a supply chain for an exciting offshore renewable industry that can literally power our future. The wind turbines and columns need an awful lot of steel. About 10% of the steel used in that significant local project was procured abroad—not from Hartlepool or Redcar steel mills. That is a disgrace. As a country, we need to be doing more about that; not protectionism, but making sure we safeguard the efficiencies of the local supply chain so we can have a viable future.

[Anna Turley]

Just yesterday I met Forewind, the company building the Dogger Bank wind farm a bit further out from our constituencies. That will come on stream in the next couple of years. It said to me that there will be a lot of steel involved. We have everything here on Teesside: we have the infrastructure, the skills and the steel. I hope to God that in the coming years we will have a blast furnace making the steel to build those wind turbines.

[Mr Wright]

I could not agree more. These are strong 21st century jobs in our supply chain that need to be nurtured by the Government, working in partnership with the industry. We need to safeguard that long-term prosperity.

Going back to my ministerial asks, will the Minister ensure that in sectoral strategies such as aerospace, automotive and construction—areas in which British industry is strong—she emphasises the importance of integrating material supply, which offers better synergy between the prime manufacturers and their suppliers in steel, which in turn can promote process and product innovation and efficiency, which in turn makes UK steel more competitive?

When we talk about the steel industry, there is a tendency to talk about the past. We should not shy away from our strong and proud history of, frankly, inventing the global steel industry—it is something to be proud of—but this debate should not be a history lesson. This is about looking to the future. A 21st-century, modern British economy has to have manufacturing and steel at its heart. That is what we are shouting for and demanding. I hope the whole House can unite in asking how we in Britain are going to stand up for steel.

[Tom Pursglove (Corby) (Con)]

It is a great pleasure to speak in this debate, which I am grateful to the Backbench Business Committee for securing. It is also a great pleasure to follow the various remarks made this afternoon, first from the hon. Member for Redcar (Anna Turley), who made a strong case for her constituency and gave us a positive, constructive and helpful overview of the problems facing the industry. As I often do, I ended up agreeing with my hon. Friend the Member for Brigg and Goole (Andrew Percy) about the EU dimension. The hon. Member for Hartlepool (Mr Wright) made some interesting comments, and I hope that the Business, Innovation and Skills Committee, which he chairs, will play a leading role in bringing forward these arguments, informing the debate and playing a constructive part in it. He redeemed himself later in his remarks, having earlier left me slightly disappointed by the tone of his remarks about the work of Ministers. I pay tribute to the Minister—

[Mr Iain Wright]

She’s good.

[Tom Pursglove]

I am glad that that is on the record, because the Minister has done an awful lot, particularly on anti-dumping. As Members know, Ministers take these concerns seriously and have been providing what support they can.

Corby has a proud history of steel production that began in Roman times, when the area was worked for iron ore. During the industrial revolution, the ironstone industry thrived in the area, with the discovery of extensive ironstone beds, and by 1934, the steel firm Stewart & Lloyds had moved into Corby to build a large ironstone and steel works, which took the population of Corby from just 1,500 in 1931 to 12,000 in 1939, well and truly putting the town on the map. Many people moved into the area to work in the steel industry, most notably from Scotland, and Corby is regularly known locally as “Little Scotland” owing to the large number of skilled Scottish workers who moved there for the steelworks. This has had a direct impact on the make-up of the area, and today we still have a proud Scottish community in the town and its surroundings. As Corby’s voice in Westminster, I am here to speak in favour of this motion and to urge Ministers to hold a summit on this key industry, which is a large employer not only in Corby but across the country. I know that all Members advocate on behalf of their local workforce, but the Corby workforce are incredibly hard-working, dedicated and committed. I hear such comments week in, week out in my constituency, and I am incredibly proud of that.

Today’s motion has unified Members from both sides of the House who are working constructively together, through the all-party group on steel and metal related industries, to get a better deal for the UK steel industry. I thank my right hon. Friend the Secretary of State for Business, Innovation and Skills for agreeing to meet the APPG in the coming weeks and the Minister for standing up against Chinese dumping. She has taken action in the European sphere, and I trust that she will continue to fight for steel in upcoming anti-dumping cases at EU level. I appreciate their willingness to listen, and I hope that by working together we can find solutions to the problems facing the industry. I also welcome the answer given by the Secretary of State for Energy and Climate Change to my question this morning. She advocated on behalf of buying British products, which is something I am sure we all agree with strongly. I hope that that will come across in future discussions with Ministers and that they will continue to advocate that position publicly.

Mr Speaker, did you know that the steel tubing used in sprinkler systems and managed motorway gantries is made in Corby? Furthermore, as I alluded to in my maiden speech, one can also see Corby steel products at the London Eye, the Wembley arch and the Olympic stadium. These are just some of the products manufactured in Corby, and we should all feel proud that it is British products we can see at these iconic locations in our country. I strongly believe we should shout from the rooftops for British business and support UK supply chains.

I know the industry faces challenges in that regard. Foreign competitors are winning UK contracts over British businesses because of the combination of the current exchange rates and cheap imports, which can provide a more competitive end price. However, the value of steel to the UK is not just in the end product but in the value throughout production. By buying British, we can support our own industries and those working in these sectors, boost our own economy and in turn benefit from this growth. If foreign companies win contracts, this does nothing to further those aims. Furthermore, all the evidence suggests that the quality and standard of British steel is far superior to that imported from elsewhere. That is why I am such a strong supporter of the charter for sustainable British steel, an initiative I would like to see adopted across Government, local authorities and broader public sector procurement.

On the wider context, the benefits of buying British massively outweigh the benefits of importing from foreign countries. First, the transportation costs are lower, and, as we heard in Question Time earlier, it is also better for the environment. Secondly, it creates skilled jobs and the ability to offer young people apprenticeships and graduate jobs. Tata Steel, in my constituency, has led on this, nationally employing 500 apprentices and graduates this year alone, and in Corby it has taken on six new apprentices, investing an estimated £10,000 per year in each. As the local MP, I appreciate Tata’s commitment to local young people. From speaking to local apprentices, I know how important these opportunities are in terms of learning a trade, having a job and, perhaps most importantly, getting the opportunity to forge a career.

Fundamentally, the procurement process must be looked at, and I believe that the Government, local authorities and the wider public sector can do more to promote procurement strategies to support domestic manufacturers. This would obviously require a shift in culture in some areas, but a steel summit would begin that dialogue. Speaking of sustainability, it is vital that the steel industry and the Government identify a constructive way forward on energy costs and green taxation—an onerous burden that Members on both sides of the House have alluded to in departmental questions this very week. The huge costs associated with energy supply for energy-intensive manufacturing immediately puts British business in a difficult position and at a competitive disadvantage over foreign rivals. Indeed, data on EU industrial electricity prices for extra large users between July 2008 and December 2013 show that Britain was the most expensive even before tax. I am aware from my conversations in Corby and east Northamptonshire and from visits to local firms that this does not just affect the steel industry but plagues other sectors, such as the plastics industry.

The current system, whereby energy-intensive industries pay huge energy bills up front and then receive compensation afterwards, is unhelpful. I would be intrigued to know how much the bureaucracy is costing both individual businesses and the Government to administer. By opening a dialogue, as the motion states, we can seek meaningful and urgent solutions to this problem. I am increasingly coming round to the point of view that it would be better to exempt energy-intensive industry from these burdensome levies and charges, but in the shorter term I agree with implementing the compensation package in full and in a very timely manner.

The UK prides itself on innovation in business, as MPs see week in, week out in their constituencies. British businesses are at the cutting edge of international innovation. I struggle to understand, therefore, why industries such as steel are penalised through the business rates system, which disincentivises investment and pushes up costs. How can it be right that these businesses pay rates not only on the size of the site but whenever they invest in new machinery and equipment? An example of this was the Tata Steel site in the constituency of the hon. Member for Aberavon (Stephen Kinnock). Tata Steel invested £185 million for a new blast furnace for its Port Talbot site, which then led to an increase in business rates of £400,000 a year, despite the fact the site did not change in size or scope. Penalising investment like this is detrimental to British industry, and I believe that the Government, who have made clear their commitment to business-led growth, should be working with industries to stop this tax on innovation.

During my remarks, I have outlined just a few of the complex and wide-ranging issues affecting the steel industry. I very much look forward to visiting the Tata site in Corby in the coming weeks, but it is apparent in the short term that we need high-level discussion between all those involved in this important strategic industry. That is why I wholeheartedly support today’s motion.

Going forward, I hope that the cross-party spirit that has characterised the debate—today, but also in the months since I became a Member—endures. I hope that Ministers will continue to engage, listen and work with colleagues of all parties who are concerned about the future of this vital British industry. While I appreciate that at this point some issues are out of the hands of the UK Government, as they have shown, they can do things to hold back the tide and give steel companies an opportunity to adapt and move forward. It is vital for the survival of the industry that we come together to make progress before it is simply too late.