Steel Industry: Contribution to the UK Economy

Nusrat Ghani Excerpts

Wednesday 25th January 2023 Westminster Hall

[Bill Esterson (Sefton Central) (Lab)]

As always, Mr Pritchard, it is a pleasure to see you in the Chair. My hon. Friend the Member for Newport East (Jessica Morden) has set out a fantastically well-crafted case for the UK steel industry. The sense of the whole debate has been about the strategically important role that steel has to play in the UK—it is probably fair to say that everybody who has spoken has accepted that point, and indeed made that point. I dare say that in a few minutes’ time, the Minister will do so as well.

The economic and national security value of steel made in the UK is incredibly important. We have seen in recent times why it is so important that we have strong domestic supply chains in our core industries—that has been underlined by Putin’s invasion—and steel is at the forefront of the issue. Throughout the debate, a number of Members have made the case that it is dangerous to rely on imports, as well as for the importance of demonstrating confidence in the steel industry and a long-term commitment to it, the key role it has in the transition to low carbon, and its importance to regional economic success, jobs and communities.

My hon. Friend the Member for Rotherham (Sarah Champion) rightly spoke about the 185 workers whose jobs are at risk in her constituency alone, out of 440 redundancies at Liberty. Can we honestly see a future for this country where steel for civil aircraft made by Boeing and Airbus is not being produced by Liberty Steel? This issue is strategically important for our domestic supply chains, and Liberty is producing that steel for incredibly important customers. The impact on the workers, the families and the communities is a point that my hon. Friend made extremely strongly.

My hon. Friend the Member for Llanelli (Dame Nia Griffith) reminded us about the last-minute U-turn—it was so late that I think it was a last-second U-turn—on tariffs last summer. I am afraid that that U-turn is typical of what we have seen over 13 years of this Government when it comes to the steel industry. It is typical of their approach to many other aspects of the economy as well.

That is not the only late response we have seen. We saw it with SSI and the blast furnace in Redcar, which at that time was one of the leading examples of carbon capture, utilisation and storage in the steel industry anywhere in the world. The Government did not intervene, and by the time Ministers became increasingly involved, talking to the steel industry and unions in 2016, it was too late.

I know that the Minister has met the steel unions, but I hope she will impress on her boss, the Business Secretary, the importance of talking to the trade unions in the steel industry. As this is a strategically important industry, there should be interest at Cabinet level, as well as at the Minister of State level. I hope I am right in thinking that she is the Minister of State; otherwise, I have just promoted her.

[The Minister for Industry and Investment Security (Ms Nusrat Ghani)]

Well, you have just demoted me.

[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.

--- Later in debate ---

[The Minister for Industry and Investment Security (Ms Nusrat Ghani)]

It is a pleasure to serve under your chairmanship, Mr Pritchard. I congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate and raising the incredibly important issue of the contribution that the steel industry makes to the UK economy. We seem to be spending a lot of time with each other, and I want to put on the record that, while we are from different political parties, we are all aligned on doing what we can for the sector.

I am slightly anxious that everyone keeps pointing out that I am the 12th or 13th Minister—I am not sure if that is the kiss of death or not. As well as getting through my speech, I want to respond to all the contributions because I know how important that is for all the MPs who need to go home to their constituencies this weekend and explain what they have done on behalf of the steel sector.

I thank the hon. Member for Rotherham (Sarah Champion)—life comes at you fast when your own Select Committee report is read out to you in a debate. I thank the hon. Member for Neath (Christina Rees) for setting out the importance of the steel sector to the Welsh economy; the hon. Member for Cardiff South and Penarth (Stephen Doughty), whose points I will respond to very shortly; and the hon. Members for Llanelli (Dame Nia Griffith), for Westmorland and Lonsdale (Tim Farron) and for Strangford (Jim Shannon). I will cover the Northern Ireland protocol briefly, if time allows.

Of course, I thank the Chair of the Welsh Affairs Committee, my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb). Freeports were in my Maritime 2050 plan—launched when I was previously maritime Minister—which is backed by the Associated British Ports. I am not sure what more I can say, other than I do love freeports and ABP is a pretty good organisation; hopefully, that is enough said.

I thank my hon. Friend the Member for Scunthorpe (Holly Mumby-Croft)—our lady of steel—to whom I am indebted for the support she provides when I constantly ask for bits of information to ensure that my Department is absolutely on the right path in delivering for the steel sector. I also thank the hon. Member for Motherwell and Wishaw (Marion Fellows). I will try my very best to get to the points she raised as well.

As we know, steel contributed £3.8 billion to the UK economy in 2021. It is crucial to many downstream sectors, such as construction, automotive and our green energy revolution, all of which sit in BEIS. I take care of automotive, aviation, maritime and construction, so it is critical to the rest of my brief. The industry provides a critical foundation that underpins our manufacturing, energy and infrastructure sectors, with a proud history forged in our United Kingdom.

In 2021, the steel sector supported 39,000 well-paid jobs in steel production and a further 59,000 jobs across the UK economy. Although my hon. Friend the Member for Scunthorpe does not get political on steel, I thought she landed a good point in saying that jobs and production halved under Labour. However, we are trying to be collective in our support of the steel sector, so I will not dwell on that too much. We know that for many constituencies, steel is the lifeblood of the local economy and a real source of local pride. I pay particular tribute to the hard-working steel workers who have contributed much to our steel industry over the years.

However, as we have heard today, we have to recognise that there are global pressures. The sector is under stress everywhere. This is not just a UK issue; there are global challenges exacerbated by global overcapacity and the need to decarbonise. The hon. Member for Cardiff South and Penarth asked about the oversupply issue. Through the global forum on steel excess capacity, the G20 and other interested nations agreed important policy principles and recommendations to tackle the unfair subsidies that we believe are the cause of overcapacity, and we continue to work together to find solutions to this challenge.

We are disappointed that not all major steelmaking economies are taking part in these discussions, and I call on all players to come back to the table—in particular China, which represents more than half of all steelmaking capacity in the world. There are also great opportunities in how we can use steel as we transition to a zero-emission economy and help our other great industries to transition as well.

Challenges are particularly acute at the moment. Unfortunately, over the past couple of weeks we have learned of the potential redundancies being made at Liberty Steel, including in the constituency of the hon. Member for Newport East. Obviously, these are commercial decisions, and I am working incredibly hard with these businesses and the Department for Work and Pensions to ensure we are doing what we can to support every worker and give them the support they need. We spend most of our time working on that, to ensure they have opportunities to be trained up and get the support they need. There are a lot of challenges that the Government are facing, but it is not just us in the UK.

I want to cover some of the support that the Government have provided, which is substantial and has been in place for some time. More than £800 million has been made available to the steel sector alone since 2013. There has always been a discrepancy between the price of energy here and in Germany, which is quoted quite often, but £800 million is a substantial amount of support. We have created new, competitive funds, with more than £1.5 billion made available. The lead Member for this debate, the hon. Member for Newport East, reported that that funding covers not just steel, but a number of other industries, but I am keen to ensure that the steel sector gets the support it needs. I promised the hon. Lady that I would go through the funds so that she would be able to share that information back home in her constituency.

The hon. Lady mentioned the CCUS infrastructure fund. Each site is at a different stage when it comes to decarbonising, but that is £1 billion. There is funding of £240 million through the net zero hydrogen fund, which I know is important to many Members present; £55 million through the industrial fuel switching fund; £20 million through the Industrial Decarbonisation Research and Innovation Centre, which provides capital funding to projects that support fuel switching to hydrogen on industrial sites; £289 million through the industrial energy transformation fund to help businesses with high energy use, including steel; and £66 million as part of the industrial strategy challenge fund. Those budgets are in place to help the steel sector in the long term. They are not short-term sticking plasters, but substantial amounts of money.

[Sarah Champion]

I recognise and am grateful for all the support the Government have given and will give to steel, but those are like little Lego bricks. There is not the joined-up strategy that we need to have confidence in our industry. Will the Minister please come forward with a proper national plan to save this vital sector?

[Ms Ghani]

We need to put in place all the budgets that are available. I will quickly touch on procurement, which gives confidence in what we are hoping to do in the long-term for the sector; it does put together a plan.

As I said when I was at the APPG earlier, since I have been in post I have been focused on the issues that we are facing right now—with Liberty, for example. I cannot comment on the negotiations because they are live. I said to the APPG that, once we have got over that moment, I hope to sit down, do a refresh and look at everything we can provide the sector in the long term. What is happening in the United States is a game-changer, so we can try to push back on some of the challenges we have had on procurement previously. We can try to see what more we can do.

I am anxious that I have only four minutes left. On the £18 billion of energy relief, Gareth Stace, director general of UK Steel, said that the energy bills discount scheme provides

“important certainty and stability for steel producers’ production costs”.

We have legislated for the full range of tools allowed under the WTO rules so that the UK can tackle the threat of unfair trading practices and injuries.

Furthermore, in financial year 2020-21, the Government procured UK-produced steel worth £268 million for major UK projects—an increase of £160 million on the previous year. When I was the High Speed 2 Minister, before I realised I might get the steel brief, I always used to bang on to HS2 about not procuring more British steel. I hope to go back and reflect on procurement again, especially because it was in the BEIS Committee report—I want to say that before the hon. Member for Rotherham pushes that and reminds me of what I committed to.

About 8.4 million tonnes of steel is required for infrastructure projects in the UK, including 5.5 million tonnes for contracts for difference, which are not always considered public procurement, so there is huge scope for more procurement to take place in the UK. I will try to address that too.

There has been a huge level of engagement. The hon. Member for Sefton Central (Bill Esterson) said that it should be at Secretary of State level, but I have been meeting with the unions. I have kept every appointment that has been asked of me.

[Bill Esterson]

It should be both.

[Ms Ghani]

It is both. The Secretary of State regularly meets the senior members of all the organisations that try to speak to us about steel.

[Bill Esterson]

You haven’t met the unions.

[Ms Ghani]

I was with the unions yesterday and in front of the APPG today.

I am going to run out of time, so I will quickly touch on the carbon border adjustment mechanism. We are aware of the risk of carbon leakage, which a number of Members highlighted, and we have been monitoring the EU CBAM proposal with interest. As I said to the APPG this morning, once the consultation is out, it is absolutely vital that we put in the best submission. I have agreed to come back to the APPG to ensure we do that constructively.

Public procurement is a key focus of mine. I am trying to get over the negotiations at the moment, and I will reflect on what more we can do with procurement. We are looking at the BEIS steel procurement taskforce, and we will also reflect on what is happening in the United States.

On trade, Members know my positions on countries such as China and Russia, as double sanctionees. I know how important it is to ensure we are resilient in the UK. We work very closely with the Department for International Trade to put together the best packages for trade. I absolutely understand the points made about Russia. We are doing everything we can to ensure that that steel is not arriving here, but I will go back and see whether we can push back any further. I will do everything I can to ensure that happens.

My hon. Friend the Member for Scunthorpe was keen to reflect on the steel safeguards. We have agreed an extensive solution to the US section 232 tariffs to significantly increase US market access for UK firms.

I am anxious that I am going to run out of time, so I will respond to Members in writing. I reiterate my commitment to the sector and to appearing in front of the APPG as soon as possible to ensure we are putting together a good package and are able to lobby No. 10 and No. 11 collectively.

[Mark Pritchard (in the Chair)]

I call Jessica Morden to wind up. You have 20 seconds.