Steel Industry

Jonathan Edwards Excerpts

Wednesday 14th January 2015 Commons Chamber

[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.