EU Referendum: UK Steel Industry

Jonathan Edwards Excerpts

Wednesday 13th July 2016 Westminster Hall

[Stephen Doughty]

I absolutely agree. The fundamentals of this debate have not changed. It is about the action being taken on energy costs, on the UK steel industry’s terms of trade, on unfair dumping, on the additional risks now being created by the uncertainty about our future trading relationships and, indeed, on the crucial question of procurement.

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

I congratulate the hon. Gentleman on his work on this issue. Does he agree that an indication of the uncertainty is the announcement in Mumbai this week that Tata and ThyssenKrupp are now talking about a merger? That can only mean consolidation of the two plants in Holland and Germany. The Government need to step in and stop that merger.

[Stephen Doughty]

I share the hon. Gentleman’s concern about the future of all the steel industry in south Wales. I have no doubt that we will shortly be hearing from my hon. Friend the Member for Aberavon (Stephen Kinnock) on that subject. Additional uncertainty is being created by the news that we have heard in the past few days, and I am interested to hear the Minister’s perspective.

It is now more vital than ever that the Government continue to work with us, with the steel industry, with the steel trade unions—particularly Community, GMB and Unite—and with other partners to instil confidence that we will all work together to create the right business environment, which particularly applies to the devolved Administrations. The Welsh Government, following their re-election and the reappointment of Carwyn Jones as First Minister, have reiterated their commitment to doing everything they can to support the Welsh steel industry. We want that co-operative relationship, which has been in the interest of the industry, to continue.

Crucially, the steel industry is a question for the incoming Prime Minister. Will she take the kind of laissez-faire approach that we have seen from the current Prime Minister? There is no industrial strategy, and his idea was that we should not be intervening—the series of interventions in the steel industry came quite late, however welcome many of the steps taken by the Minister herself have been. Will the new Prime Minister form a Cabinet that is going to take decisive action in the national interest? That is the fundamental expectation of people in the steel industry. We need a proper industrial strategy, and we need tough action, particularly in relation to the Chinese.

I have a number of questions for the Minister on the uncertainty created by the referendum, particularly on the different trade options that might be on the table and their many implications for the steel industry. Like many others, I would argue that retaining access to the single market is crucial. There is a Celsa plant in my constituency. Celsa is a European company based in Catalonia that has plants all over Europe. Almost 100% of its trade is within the EU, so if we lost the ability to trade in that single market on the kind of terms we currently have, the additional cost of punitive tariffs, or other tariffs, could be devastating.

We also have questions about the future of the state aid rules under any regime. Let us not forget that it was often suggested during the referendum campaign that, somehow, everything was the EU’s fault, but actually the EU has taken many steps to support the steel industry across Europe. The reality is that there are rules that would apply under European economic area and World Trade Organisation trading arrangements. What does the Minister have to say about the different options on the table? What would be the best one for our steel industry?

Other uncertainties might be created in any transitional period. Let us not forget that this is not just about exports. Raw materials are imported, whether it is scrap, as with Celsa in my constituency, or other raw materials. There could be an impact both on the steel industry’s inputs and its exports. The other implication is for exchange rates. Some would argue that the fall in the pound provides a benefit to the steel industry, but of course that benefit is potentially offset by the changes in input costs. I can see no positive net benefit from the current currency situation. Indeed, any short-term marginal benefit will definitely be offset by the much wider risks. What is the Minister’s perspective on that?

UK Steel, which has done an excellent job of representing the interests of the industry as a whole and is working together with the different producers, has made it clear that we need to remove the unilateral energy costs; increase the procurement of UK steel; address unfair trade provisions; provide funding mechanisms for energy efficiency projects; and set out a clear direction for the investment and support required by the industry in the long term.

--- Later in debate ---

[Hannah Bardell (Livingston) (SNP)]

It is a pleasure to serve under your chairship, Mrs Gillan. I want to start on a conciliatory note and very much congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty) on securing this debate. I have spoken a number of times on this issue. I congratulate Members of all parties on the work they have done, including the Minister who has been working in very difficult circumstances. However, without recycling too many of the arguments, it is important that we focus on what we can do as a result of the Brexit vote. It is important to point out, as my hon. Friend the Member for Motherwell and Wishaw (Marion Fellows) did, that we voted differently in Scotland and are looking to protect Scotland’s place in Europe. Our First Minister, Nicola Sturgeon, and the Scottish steel taskforce have been working very hard on that, and I pay tribute to all the steelworkers across the country who have lost their jobs as a result of the challenges facing the industry.

Some Members have picked up on the issue of pensions. We have seen various businesses, including the likes of BHS, do significant damage to our reputation as a country in terms of what they have done with pensions. It is very important that the steelworkers have their pensions protected and that in any negotiations the Government are a great champion of that.

I want to bust a couple of myths that the hon. Member for Cardiff South and Penarth mentioned. My hon. Friend the Member for Motherwell and Wishaw rebutted the comment on the Aberdeen western peripheral route, but it is important to remember, as the hon. Gentleman and other Labour Members will, the tragedy of the closure of Ravenscraig and what that did. I hope the hon. Gentleman will recognise the shoulders on which he stands and the work done by Labour members in Scotland, by the SNP and those across the political spectrum who fought to keep that plant open, but were not successful. That plant, until it was closed in 1992 by a Conservative Government, was the largest hot strip steel mill in western Europe. It is because of that closure that we are not able to produce the kind of steel that we would like to. That is a great tragedy. I hope the hon. Gentleman recognises that.

As I said, I want to be conciliatory in this debate because a huge amount of work has been done. For us in Scotland, there was concern about the potential closure of the Dalzell and Clydebridge plants, which was going to cost us more than 270 jobs. However, the Scottish Government established the Scottish steel taskforce, which brought together people from across sectors: local authorities, trade unions, the UK Government, Scottish Enterprise and more. It is also important to note the involvement and engagement that the Scottish Government had with the unions from an early stage, by contrast, I am afraid to say, with the UK Government. The First Minister said at the time of the sale to Liberty House, which is to be congratulated on its involvement and enthusiasm in taking over the steel plants in Scotland, that if there was any learning and experience that we could share with Port Talbot, we would be happy to do so. I hope the hon. Member for Aberavon (Stephen Kinnock), who has been a significant champion for his constituency, will take up that offer.

The hon. Member for Llanelli (Nia Griffith) spoke about energy prices and the impact on her constituency. The hon. Member for Strangford (Jim Shannon), who is a regular feature and I believe one of the greatest contributors in Westminster Hall debates, spoke passionately. Although he does not have a steel industry in his constituency, he wants to offer support and takes a glass-half-full approach. It is important that we take such an approach. There are many issues and challenges and it will be interesting to hear the Minister’s view. We do not know how long she may have left in her current role, but how does she see the negotiations with Europe going for the UK and what kind of trade agreements can we expect to see? As we know, the pound has fallen, which means that UK steel will be cheaper to foreign buyers, and that could boost demand. On the other hand, a lower pound means that imports will be more expensive. Imported coal and iron ore are used in some of Tata’s UK operations, so that is a concern. I would be particularly interested to hear the Minister’s thoughts on what will be done in that regard.

[Jonathan Edwards]

I am very interested in the point that, theoretically, the fall in sterling in normal economic times would help exports. The big issue is uncertainty—uncertainty in economics is toxic. Surely now we need an urgent statement from the Government that we will go for EEA status, to preserve our status within the single market. That would be one way of securing investment in steel.

[Hannah Bardell]

I could not agree more with the hon. Gentleman. He will know that joining the EEA and taking on those agreements would also include accepting the free movement of people. Most of us in the Opposition parties would agree that that would be positive, but, as we know, there are many on the Government Benches who disagree. This is a time of great uncertainty. It is simply unacceptable that there was no plan—as we read in the newspapers, things were thought about but not written down—and I think that everybody in British industry will be looking at that situation in shock.

The hon. Member for Rotherham (Sarah Champion) spoke about action on cheap, dumped steel and what can be done on tariffs, which a number of other hon. Members also raised. The hon. Lady also raised the issue of pension liabilities and her concerns for her constituents.

It would be remiss of me not to pay tribute to the work done by the unions and the devolved Administrations. Many workers are looking on, wondering what is going to happen to their jobs. At a time such as this, it is very important that we find consensus where we can. There will be differences of opinions and policies across the House, but we must work together to find consensus and to secure these jobs for Britain—to find a long-term economic and industrial plan, and to make sure that we secure as many jobs as possible.

--- Later in debate ---

[Bill Esterson]

Absolutely. Any money taken away from pensioners affects the rest of the economy, including other businesses and the livelihoods of many other people. My hon. Friend is quite right that those considerations need to be carefully taken into account.

In his excellent speech, my hon. Friend the Member for Cardiff South and Penarth said that the vote to leave the European Union has been a body blow that has put uncertainty on top of the existing difficulties. I will remind the Minister of some of my hon. Friend’s questions. He wanted to know what the Government will do differently now and made the point that time is of the essence—the steel industry simply cannot wait for the new Prime Minister to take time to act. As my hon. Friend said, the Government need to continue working, and to step up that work, with local MPs, the devolved Assembly, local government and the unions. They need to move away from the laissez-faire approach we have seen in previous times. When my hon. Friend was making that point, the Minister was waving her hand dismissively, as she is sometimes wont to do. That is simply not the response that is needed on this critical issue.

My hon. Friend also said that access to the single market is essential. We heard in an intervention about the importance for Members of all parties of retaining that access. That is true not just for steel but for businesses in many other industries, too—not least those that are part of the steel supply chain, whether in manufacturing, construction or defence. We need to know what the options are for retaining that support. What action will the Government take to ensure that the supply chain will continue to be supported by UK steel production? What action will they take to ensure that raw material prices are not adversely affected, and that there is not the impact that my hon. Friend talked about?

My hon. Friend mentioned exchange rates and said that the benefits will be offset by import costs. He and a number of my hon. Friends mentioned energy costs. My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) talked about the impact of the carbon price floor changes. We heard about the impact of business rates and the need for action on energy costs more generally. Will the Minister tell us exactly what she or her potential successor will do to take action on those points?

On the issue of procurement, the steel for the Aberdeen bypass—it was a £12 million contract—was made in Turkey, not Scotland or elsewhere in the UK.

[Jonathan Edwards]

I was not going to make any tribal statements, but the Western Mail, the national paper of Wales, last month exposed the fact that the Welsh Government have been using rebar steel from Germany for a road project—the Eastern Bay link road in Cardiff—less than a mile from where rebar is produced by Celsa in the Cardiff South and Penarth constituency.

[Bill Esterson]

That is the first I have heard of that.

[Jonathan Edwards]

You should read the Western Mail.

[Bill Esterson]

Unfortunately, the Western Mail does not find its way to Merseyside very often.

[Jonathan Edwards]

It is a fine paper.

[Bill Esterson]

I am sure it is a fine paper.

My hon. Friend the Member for Cardiff South and Penarth asked about the Steel Council. Will the Minister confirm what discussions are taking place and what work it is continuing to do after the Brexit vote? It has a critical role in the next few weeks and months.

I am conscious that the Minister has a lot to respond to, but I want to reiterate the importance of what my hon. Friend said. Government action is needed now. The steel industry, the workers, the supply chain, the businesses directly affected and the rest of the economy cannot wait weeks or months for action. Steel is crucial to our economy, our strategic needs and our communities. The Minister or her successor needs to make sure the Government do whatever it takes to save our steel.

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

It is a pleasure to serve under your chairmanship, Mrs Gillan. I do not know whether you have had the great pleasure of chairing a steel debate before, but I know that you have family connections in Wales. The majority of the speakers in this excellent debate are from Wales—a part of the United Kingdom that is very dear to your heart—so welcome to the gang. As you will have gathered, we regularly meet here or in the main Chamber to debate this issue with all its twists and turns. It is fair to say that, the last time we debated this issue, none of us anticipated that the next time that we gathered for a debate it would be on this subject.

I pay huge tribute, as ever, to the hon. Member for Cardiff South and Penarth (Stephen Doughty) for securing this debate. I will not have time to address all of the points that have been raised, but I will try to stick to the actual topic of the debate, which is the effect of Brexit on the steel industry.

It is right, good and fair to say—I am going to be a bit partisan here—that it is very much to the credit of my party that we have avoided the uncertainty that we undoubtedly would have had if we had waited until September to elect a new leader and install a new Prime Minister. That would not have been the best thing for our country or, indeed, our economy and our steel industry. We absolutely need certainty, and my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) did everybody an enormous favour with her greatly courageous decision. We now have a new Prime Minister who can, frankly, get on and do all the things that need to be done to create certainty. She can answer many of the questions that I cannot answer, because this is a matter for the new Prime Minister and her Government.

In the words of the hon. Member for Aberavon (Stephen Kinnock), Brexit is a fact. It might hurt us but, as he rightly said, it is the will of the British people. At least we know where we are on that. We have a big task ahead of us, and I am sure nobody here is under any illusions about the scale of the complexity that we face as we withdraw from the European Union. It will take a number of years and it will be hugely complicated, but we are beginning. We will see stability and confidence return to the economy, and that will have a great impact on our steel industry.

The United Kingdom steel sector exported 6.3 million tonnes of steel last year, 3.3 million tonnes of which went to European Union member states. That is how important the EU is to the exporting of steel. Access to the single market is absolutely critical, not just for steel but for the whole of our economy.

The automotive sector has been a massive success story in recent years. We have exported a huge number of cars—many of which are made with British steel—to EU markets. I went to Nissan only the other week, and I was reminded that 45% of the steel that it uses is made here in Britain. That is the point that the hon. Member for Cardiff South and Penarth was making. I gently say to the Scottish National party and the Scottish Government that it is not just processing that is so important. It is also important that we buy British-made steel—steel that is made in Port Talbot or Scunthorpe, not Turkey.

It is important that we secure tariff-free access to the European market, not just for the steel sector but for the parts of our economy that buy British steel, such as the automotive sector. I have personally spoken to the important people at all the large automotive companies to reassure them and to tell them how critical it is that they keep putting in orders to Port Talbot, and they told me that tariff-free access is important for their sector.

[Jonathan Edwards]

The Minister mentioned the complexities following the referendum result for export strategy. What analysis have the UK Government done to date of the countries that UK-based steel producers export to? How many trade deals are now going to have to be renegotiated so those exports can continue?

[Anna Soubry]

I do not know about the actual figures, but we have looked at that with considerable care, and we will continue to do so. A special unit has been set up, and—if I can put it this way—will be beefed up by the incoming Prime Minister. Those are exactly the sort of issues and complexities that we are going to have to deal with.

Let me make it very clear that, until we actually leave the EU, we are a member of the EU. I think some people think we have left. Well, we have not left. We are still subject to all its rules and regulations—for example, the state aid rules—and we have access to the single market. Those things are incredibly important throughout the process that will now unfold. While we remain a member of the EU, we are subject to the state aid rules, the trade defence measures and so on. What replaces those rules—we may remain subject to them in return for market access—is for the new Prime Minister and her team to negotiate. Whatever my role is—I may end up on the Back Benches—[Hon. Members: “No!”] The worst nightmare of the hon. Member for Hartlepool (Mr Wright), who has been my hon. Friend on many occasions, is that I return to the Back Benches and then end up on his Select Committee.