Steel Industry

Lord Bhattacharyya Excerpts

Tuesday 25th April 2017 Lords Chamber

[Lord Bhattacharyya (Lab)]

My Lords, I declare my interest as chairman of WMG at the University of Warwick. When I started my engineering career back in the 1960s, British steel was respected around the globe. From Bessemer’s processes to Goodeve’s BISRA stainless steel, Britain was the home of global steel innovation.

However, no other nation has treated its steel industry the way that we have since. We did not just throw the baby out with the bath-water, we threw away the bath, the taps, the pipes and sewers. First, we had three decades of contradictory, inconsistent and underfinanced industrial strategies, then three decades of no strategy at all. That left us exposed so that the steel crisis hurt British producers more than our competitors. It is a global crisis. There are over 200 anti-dumping measures listed at the WTO against one country alone. We are at 30% global overcapacity and flat demand, yet steel capacity is increasing by more than 5% a year.

The world steel market is clearly distorted. So local action to ensure a level playing field for British producers is essential. I quote a former steel-worker on what must be done. He said that the Government needed to take “three tangible steps”: first,

“ensure low exchange and interest rates”;

secondly, reduce the “excess costs” that British steel faced versus its European competitors; and, thirdly, take,

“urgent, quick action to bring in anti-dumping measures”.—[Official Report, Commons, 21/10/1998; col. 1201.]

Perhaps President Trump has been listening. The insightful former steel-worker was the Minister, speaking in 2001.

More than 15 years later, we still need urgent action. Ministers described their own business rates policy as “bizarre” two whole years ago, but we still have not heard what will change. The Government said before the previous election that British steel-makers pay twice as much in energy costs as German firms, yet last month, we heard that action on the renewables obligation still needs European approval. In strategic industries, when times are tough, the Government need to offer fast relief. If European agreement is needed, why is steel a low priority in our Brexit negotiations?

I hope that I did not embarrass the Minister by citing his speech. I am delighted that he has been appointed to his job: we need Ministers with passion for their brief. Perhaps I may make amends by telling him that he has an ally in No. 10. The Prime Minister’s chief of staff wrote last year:

“We do not have to accept ‘dumping’”,


and has called our energy policy,

“a monstrous act of self-harm”.

He seems keen to deliver the urgent action that the Minister wanted.

If we are to do more than just slow steel’s decline, our industrial strategy must look well past the current crisis. Since the end of the war, British steel has suffered from underinvestment and instability. We have created a short-term, inward-looking industry. In the 1970s, we spent about the same on R&D as France and Germany, but we did not implement the results. By 1980, we had the lowest proportion of continuous casting of any major steel producer. Under Governments of all parties, steel was left exposed and uncompetitive.

Even now, producers struggle with that legacy, whether on pensions—although we hope that that is now sorted out—or on business rates, energy costs or weak infrastructure. Tata Steel invested more than £1.5 billion since buying Corus. I was heavily instrumental in that. Much of it has gone to correcting the errors of the past. When Tata felt that it had to close last year, it was because it was losing £1 million a day. It knew that much more investment was needed. All it was offered by the Treasury was tea and sympathy. However, there has been some change in attitude in the past year.

That is why our steel industry has declined to the point where Canada, Poland and Belgium all produced more than us last year. This is not a case of a productivity gap—British steel workers are productive and flexible. It is very seldom that they have gone on strike. It is a lack of long-termism, investment and innovation which fetters them.

To put that right, we need to do three things. First, we need to focus on future market requirements. Total steel demand is stagnant, but demand for specialised and advanced, lightweight, high-strength steel will only increase. Further, as a mature market, we can anticipate future trends in reuse, recycling and steel waste. Excellence here will encourage foreign investment as carbon emissions come under greater pressure.

Secondly, we need better infrastructure and procurement. Port Talbot’s lack of proper port facilities hampers its exports, but there is little help for steel producers on future procurement by the Government. Finally, we need to do more to make our innovations impactful. We are doing globally significant materials research in the UK, and we need it to reach the market. The promised steel sector strategy should support investment in steel recycling, advanced materials and improved production processes. The research being done now shows that there are opportunities.

At WMG last month, one of our PhD students won the American Association for Iron & Steel Technology prize for best metallurgy paper by a student, for a paper given on peritectic steel. I would explain what peritectic steel is, but I am sure there is no need. The Economist noted last month that WMG’s research on belt casting and advanced materials could reduce energy used in steel production by one-third. We rightly hear of the need for more diversity in British science and technology; both the research projects that I mention are by women. As the Economist says, this kind of innovation is why producers are considering a new steel plant in the UK.

We need immediate action on this crisis. We also need to support long-term investment, anticipate future needs, increase the commercial impact of our material innovation, and protect our steel market against dumping. That is a huge problem, not just here but anywhere in the world. That is why Trump has just introduced anti-dumping measures. We have had enough White Papers; perhaps it is time for a little bit of white heat. To put this right, we must look at the future market requirements: steel demand is stagnant, but demand for specialised and advanced, lightweight, high-strength steel will only increase. Further, as a mature market we can anticipate future trends in reuse, recycling and steel waste. Excellence here will encourage foreign investment as carbon emissions come under greater pressure. Furthermore, we need better infrastructure and procurement. Now that the problem at Port Talbot has been solved, with the unions and owners agreeing on a 10-year strategy, the lack of Port Talbot’s facilities hampers exports, while there is little help to steel producers on future procurement by government.

Finally, we have to do more to make our innovation impactful. We rightly hear of the need for more diversity in British science and technology, so it is worth saying that both research projects that I mentioned are by women. That is the kind of innovation that we need, and perhaps that is why the Government should spend more time not on talking but on white heat.