Steel Industry: Contribution to the UK Economy

Jim Shannon Excerpts

Wednesday 25th January 2023 Westminster Hall

[Jim Shannon]

It is a pleasure to speak in this debate. I commend the hon. Member for Newport East (Jessica Morden) for setting the scene so well. I do not have a steel factory in my constituency, or an industry that it is dependent on help from Government, but I do have a strong construction sector that depends on the British steel that comes from the factories in the areas others have spoken about, so it is important for me to put on the record why I support what the hon. Members for Newport East and for Scunthorpe (Holly Mumby-Croft) and others said in their introductions, and what others will say.

I remember the last Westminster Hall debate on steel. The hon. Member for Newport East spoke then as well, and I think the hon. Member for Aberavon (Stephen Kinnock) led the debate. We can see that he is in the main Chamber—his name is up there on the screen—and he cannot be in two places at one time, although I venture sometimes to try. The only reason he is not here is that he has obligations in the main Chamber; otherwise, he would be here.

I have listened with great interest to the contributions of Members today, and I agree with much of what has been said. I have long been outspoken about the need for us to bring manufacturing home to purpose-built, modern, green factories that give local people jobs and produce the renowned high-quality steel for which we are famed. I absolutely support what the hon. Member for Newport East and others have said.

You will know, Mr Pritchard, because your knowledge of the issue is every bit as good as mine, that a major issue for my constituents—many will be able to say it with me—is the Northern Ireland protocol. Why do I mention that now? Let me explain. Some of the Members here will be aware—I suspect that you are one of them, Mr Pritchard—that last August His Majesty’s Revenue and Customs informed steel producers of a 25% tariff on some GB steel imports into Northern Ireland. The steel sector is important to me, and it seems that we are being penalised more than anybody else. The tariff is directly related to the Northern Ireland protocol—it is one of the issues apparent between the UK Government and the EU, to which Northern Ireland has no representation—and the rule changes in relation to steel imports. Some of those steel imports reasons relate to Russia’s invasion of Ukraine; we understand that.

There are big factors that are impacting UK steel, and Northern Ireland in particular, as expert Sam Lowe has outlined. As has been reported:

“Essentially, steel from Great Britain had been able to enter Northern Ireland without a tariff because it was covered by a tariff rate quota (TRQ) for UK exports to the EU. A TRQ allows a certain amount of a product to enter a customs territory without a tariff being paid, but once a set limit is reached tariffs apply.”

So we in Northern Ireland are being penalised to the tune of 25% for our British steel—our own steel—in our own country. The report continues:

“However, when sanctions were applied to Russia EU businesses could no longer buy steel from there. So at that time the EU scrapped country-specific TRQs for the UK and others in favour of one TRQ for Ukraine and another TRQ covering all ‘other countries’.”

The Northern Ireland protocol means that Northern Ireland continues to follow EU customs rules, and therefore suffers disadvantage, pain and cost factors. It is hard to comprehend. The tariff-free limit for supplies from Great Britain to Northern Ireland is set to be reached quickly. The UK previously had access to its own country-specific quota, which it could rely on to accommodate steel moving from Great Britain to Northern Ireland, but now such movements will be covered by the “other countries” quota, which could fill up much more quickly, given that the entire world has access to it.

What does that mean in practice? It means a 25% tariff on British steel moving from Great Britain to Northern Ireland. It means that, while European manufacturers can supply the UK with no tariff, the same does not apply to businesses in my constituency of Strangford. We want to use British steel from Newport, Scunthorpe and elsewhere, as we have in the past. It means that the local steel supplier just two minutes from my office in Newtownards is wondering how, with a 25% tariff increase, he can continue to be involved with construction industry clients that are already teetering on the edge of bankruptcy because of increased prices. It means that my steel importers—my British steel importers—cannot supply the suppliers of other Members in this Chamber. It means that all right hon. and hon. Members should stand and join with me in actively opposing the Northern Ireland protocol, not as a Northern Ireland problem but as a UK problem that affects their local economies and mine. I support the steel industry wholeheartedly, and I ask that every Member in this Chamber recognises my position as the Member for Strangford and does the same for Northern Ireland against this insidious protocol.

[Mark Pritchard (in the Chair)]

Before I call the Front-Bench spokespeople, who will have 10 minutes each, I am afraid that I will have to set a time limit of four minutes for our final three speakers.

--- Later in debate ---

[Bill Esterson]

The Minister says from a sedentary position that I am making out that her role is not important enough. I am not doing that at all—I think it is a very important role. It is important that steel Ministers have longevity in the role, but it is also important that there is a strategic role at Cabinet level. That was the point I was making; it was certainly not my intention to undermine the Minister. I hope she will take back to the Secretary of State the points made in writing by the trade unions.

Returning to the Government’s late response, I hope it is not as a result of the announcements at Liberty that we are suddenly seeing press reports of hundreds of millions of pounds potentially being available. I know that the Minister will not be able to confirm that today, because of ongoing negotiations. But I do hope that the press reports come to fruition. When she was Prime Minister, the right hon. Member for Maidenhead (Mrs May) promised £250 million for a green steel fund, but that did not happen. I am afraid that our memory of what Government have previously promised the steel industry is still strong.

I gently say to Government Back Benchers that what sounds like blaming the last Labour Government for 13 years of Conservative policy does not wash with people. The figures show that steel industry production in this country has declined by half since the global financial crisis. Thirteen of those 15 years have been under a Conservative or coalition Government. We have fallen from 17th to 25th in the world for steel production since this Government came to office. Of course, this is at a time when China and India have dramatically increased their steel production and every other steel-producing nation has experienced decline—it is just that the decline has been higher in this country over the past 13 years. As Members have pointed out, of the top 10 steel-producing countries, we are the only country currently in decline. We have to address that. We can and should go through the history, as long as we learn from it. As long as we apply the lessons from history, we will be in the right place.

My hon. Friend the Member for Neath (Christina Rees) made a heartfelt contribution about the value to communities of the steel industry, using her own family history to make the point about how vital it is to the Welsh economy. Indeed, she was one of the Members who made the point about this country being the only one of the top 10 steel-producing nations where the industry is in decline. The question is: what are we going to do about it? We have to address the challenge of our energy prices. The prediction for this year’s energy prices is that in Germany, steel-producing companies will pay £107 per kWh for electricity and in this country it will be £174. This cannot continue. The Government must take action on the emissions trading scheme. Members have explained the significant cost to the industry—£120 million amounts to 60% of capital investment in the steel industry. These are the challenges the Government must take on in a strategic way, not by using yet another sticking-plaster approach to a problem in the economy.

The Government can and must do more on procurement. Environmental, social and labour clauses are at the heart of Labour’s plan for procurement. It is beyond belief that this country is the only major country that would even dream of giving a contract for warships to an overseas company. There is no guarantee that the Spanish consortium awarded that £1.6 billion contract will use UK-made steel in producing those fleet solid support ships. Other countries take a more strategic approach. The United States has the Inflation Reduction Act, with strong commitments to the transition to low-carbon steel production at its heart. Such a commitment has also been made by other countries whose investments are years ahead of what is going on in this country, including Canada, Spain, Belgium and Germany. They are committed to low-carbon steel production.

[Jim Shannon]

The hon. Gentleman mentioned the contract for warships. In Belfast, Harland and Wolff has benefited from that, but the disadvantage is that if it wants to buy British steel and bring it over to the Northern Ireland, it will be 25% more expensive. Again, that is a conflict of the Northern Ireland Protocol Bill.

[Bill Esterson]

The hon. Gentleman is absolutely right that we need to sort out the Northern Ireland protocol. That is a slightly longer and wider debate, but it is an important point for him to raise as a Northern Ireland MP.

I want to remind the Minister about the problem with Russian steel, which my hon. Friend the Member for Newport East mentioned. It cannot be right that melted and poured Russian steel can be diverted via a third country and then imported into this country. Sanctions have to apply to all Russian-produced steel. We have had the Government announcements, media reports and lots of talk over the past 13 years from 12 Ministers. What we need is a proper strategic approach. Labour is putting forward an industrial strategy and plans for a green steel fund of £3 billion. That is the kind of strategic long-term commitment that will deliver the confidence and certainty to the industry that is needed. We have a plan. We have proposed a billion-pound fund for energy-intensive industries and it could help right now. The Government can adopt our plan if they want to. It is there in writing in the public domain. They can adopt that plan or come up with their own, but it has to be at a strategic level—no more sticking plasters. We need a strategic long-term answer for the future of this vital strategic industry.