UK Steel Sector: Supply Chains

Seema Malhotra Excerpts

Wednesday 9th June 2021 Westminster Hall

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Sir Graham. May I begin by thanking my hon. Friend the Member for Aberavon (Stephen Kinnock) for securing this important debate and for his powerful opening speech on the future of this vital foundation industry, which is important to our history and our economy? I congratulate him and colleagues across the House on their work through the all-party parliamentary group for steel and metal related industries.

I also congratulate all hon. Members who have spoken powerfully in the debate, including my hon. Friends the Members for Neath (Christina Rees), for Birkenhead (Mick Whitley), for Newport West (Ruth Jones), for Newport East (Jessica Morden), for Rotherham (Sarah Champion)—particularly on working with Liberty Steel on the sale of the Stocksbridge and Brinsworth plants—and for Alyn and Deeside (Mark Tami), as well as the hon. Member for Strangford (Jim Shannon) and the hon. Member for Motherwell and Wishaw (Marion Fellows), who made a powerful speech.

UK steel is at a turning point. A lack of strategic focus from successive Conservative Governments has inevitably resulted in reduced resilience against external shocks and fierce international competition. Our shared goal must be a sustainable future for UK steel and its supply chains, and we need the Government leadership that that demands. Steelmaking must decarbonise, and the long-term future of the industry is in supporting green jobs at the core of low-carbon economy. Steelmaking is a highly-skilled industry and a national asset, and it has a clear opportunity for continued growth, with procurement policies that could also help to increase the contribution of UK steel to UK manufacturing, products and infrastructure.

Currently, 60% of steels are imported, and there is no assessment of the carbon footprint of those imports. Across the UK, there are around 1,100 businesses in steel and around 75,000 jobs, whether directly supported or in the supply chain. Those jobs are at the centre of our economies. In my speech, I will say a few words about supporting our steel industry today, about the need for a vision and plan for the future, and about ensuring a fair and just transition.

The Labour party and the UK steel industry have been united in rejecting the recent draft recommendations of the Trade Remedies Investigations Directorate to remove almost half the safeguard measures currently protecting UK steel producers from the surges in imports that threaten the sector. We hope that the Trade Remedies Authority will listen to the reasoned explanations as to why all current safeguards must stay in place beyond their June expiry date, not least in the light of the other huge pressures faced by the industry at this difficult time.

UK Steel’s criticisms of those recommendations have highlighted a failure to recognise the interconnectedness of the steel industry. One part of the supply chain cannot be damaged without damaging the industry as a whole. As an example, Celsa Steel UK has 28 product categories, with much interconnection between them, but 10 of those have been affected by the revocation of safeguards, while 18 have not—a situation that is inexplicable to Celsa and others. UK Steel has put together significant evidence to challenge the data used by TRID in producing its recommendations. I would be grateful for the Minister’s assessment of that industry evidence.

The process has exposed a worrying gap in Ministers’ ability to act in the national interest, and has illustrated the flaws that the Labour party warned about during the process to establish the UK’s post-Brexit trade remedies regime. We also warned about the lack of representation of UK producers in unions such as Unite and Community, and the risk that it would exacerbate those failings. Worryingly, the current legislation does not allow the Secretary of State to retain existing safeguards or introduce new ones against the advice of the Trade Remedies Authority, even if to do so would be overwhelmingly in the public interest.

The fate of large parts of the steel industry and of thousands of jobs currently lies in the hands not of elected representatives, but of an unelected body that cannot be overruled. Even if the TRA reverses the original recommendations this month, we cannot find ourselves in this position again. We are therefore willing to work constructively on a cross-party basis to amend the trade remedies legislation to allow for a wider range of public interest tests to be applied in these decisions. In the interim, we call on the Government to do everything necessary and permissible within the law to extend all the current steel safeguards. The Minister must also make those intentions public at the earliest opportunity to provide the UK steel industry with the certainty that it badly needs.

We urgently need a truly ambitious vision for the sector that puts the UK at the cutting edge of green steel-making technology, and we need a plan to go with it. We need to see better progress on the industrial decarbonisation strategy and the acceleration of the clean steel fund. That £250 million fund was announced in 2019, but the spend from it is not set to start until 2023. I would be grateful for clarity from the Minister about why there is a delay.

The UK seeks to decarbonise by 2050, but blast-furnace investments operate on a 20 to 25-year timescale, so we need a clean steel innovation programme now. As the Materials Processing Institute highlights, delaying until 2024 shows a lack of co-ordination between the Government’s timetable and the reality of the industry’s investment cycles.

Although we accept that it is necessary that UK steel continues using coking coal for the next decade until technology is in place to provide for decarbonised steel, with the right strategy, investment in renewable technologies can create three times as many jobs as those in fossil fuel industries—jobs that are long term, highly skilled and high wage. Hydrogen could also play a huge part. Trials of direct reduced iron technology are already happening in Germany, Sweden and China. The Government should act quickly to prevent the UK from being left behind with this technology too.

As the price of energy hinders progress, we need a clear industrial plan. We have heard how the gap between German and UK electricity prices is placing an extra £54 million a year additional cost on the UK steel sector. As the sector seeks to decarbonise, the price disparity is a major barrier to transitioning. All low-carbon options available are much more energy intensive. The Government have always said that the EU is a barrier to action. Now that we have left, they must take decisive action to address that price disparity.

We also need a plan for capital investment for future productivity. Plants that I have visited have demonstrated that they have a set of clear transformation business plans ready, with detailed assessments of returns on investment and alignments of goals with national priorities. In the short term, the challenge of working capital also remains. Viable businesses with multi-year order books, such as Stocksbridge, need urgent support to be able to purchase the supplies they need and get the products that are demanded by their customers into production now.

Priorities for a fair and responsible transition to low-carbon steel making must include long-term planning, as the Centre for Sustainable Work and Employment Futures, Community union and Prospect have begun to outline. Protecting jobs and steel communities also means that transition must seek to retain our capabilities and high skills, include retraining and avoid hard redundancies.

Our manufacturing renaissance, infrastructure and green economic recovery depend on steel. In 2015, the Business, Innovation and Skills Committee argued that the relative decline of UK steel production was partly down to the fact that other European countries have better valued their domestic steel industry. That has to change. Labour is determined to safeguard the UK’s steel industry, and with industry operating on the basis of lengthy investment cycles, the future of industry is dependent on investment now to support our green transition. We need a strong steel industry fit for the 21st century that can compete on a level playing field, with the capability to make a full range of steels over the long term.

The Government have said that they are committed to supporting and securing a future for UK steel, but recent events do not back that up. It is vital that the Government do more now to bring forward a long-term plan to support our proud British steel sector and the UK manufacturers that are their customers. We must secure this industry in our national interest, to protect jobs, livelihoods and our economy.

--- Later in debate ---

[Amanda Solloway]

I will, of course, pass on the hon. Gentleman’s question.

I will move on to Liberty Steel. The hon. Member for Newport East rightly highlighted its importance to many Members and their constituents, and its recent financial difficulties, which were also raised by the hon. Member for Rotherham. As the Secretary of State reaffirmed to the Business, Energy and Industrial Strategy Committee in an oral evidence session, we continue to monitor the situation closely and engage with the company, trade unions, local MPs and the wider steel industry. Liberty is important.

[Seema Malhotra]

Does the Minister appreciate that there is a need to work to support plants that are viable—such as Stocksbridge and Brinsworth, which purchase their supplies from Rotherham—and provide the working capital that is needed for orders that are there and products that are there to be made?

[Amanda Solloway]

I thank the hon. Member for her contribution. Again, I will pass that on, with the passion that she has shown, to the relevant places.

I return to Liberty Steel. We continue to monitor the situation closely and to engage with the company, trade unions, local MPs and the wider steel industry. Liberty is an important supplier of steel and provides highly skilled jobs. The Government believe that Liberty sites can be viable and we remain hopeful that the commercial issues can be resolved to ensure future success.

It is, however, first and foremost the company’s responsibility to manage commercial decisions for the future of the organisation, and we welcome the dedicated efforts being made by Liberty to find solutions. I hope that I have reassured hon. Members, who have displayed sincere empathy for our steel sector today, that the Government are working tirelessly with the industry to secure its future through difficult times.

Focusing specifically on Tata Steel—I know that that is of great interest to the hon. Member for Aberavon, and I have saved discussion of it for my summing up—I can assure Members that the Government will continue to work closely with the company and the unions as they shape the business strategy to support the future of high-quality steelmaking in Port Talbot.

I have set out a wide range of actions that demonstrate that the Government fully understand the vital role that steel plays for communities, for our economy and as a foundation supplier for our manufacturing base. UK industry will continue to need high-quality steel, and British steel is among the best steel in the world. As we level up our country, we are actively considering where there is scope to go further to support our steel industry.

We are committed to sustainable decarbonisation, decarbonising a globally competitive future steel industry in the United Kingdom, and I look forward to working with Members towards achieving that goal.