Sector Deal for Steel

Simon Clarke Excerpts

Tuesday 19th December 2017 Westminster Hall

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

It is a pleasure to serve under your chairmanship, Sir Henry. I was pleased to support the debate application from the hon. Member for Aberavon (Stephen Kinnock), with whom I serve on the all-party group on steel and metal related industries. He is a great advocate of the steel industry and was absolutely right to call for this debate. I am grateful to the Backbench Business Committee for granting it.

Steel is part of the DNA of Teesside, and I represent the hugely impressive British Steel special profiles business at Skinningrove in my constituency. I visited the plant in my first month as an MP to meet managing director Peter Gate and see the operations for myself. It transformed whatever preconceptions I held about what a modern steelworks looks like. Simultaneously combining vast power with infinite precision, the special profiles unit has the machining capability required to manufacture special profiles. Those include unique reserved profiles that have been designed for individual customer needs and open roll profiles, which are available to all customers. Key products include bulb flats, track shoe profiles, crane rail profiles and mining components. Perhaps the most significant profiles made by British Steel at Skinningrove are those produced for the manufacture of forklift trucks, which include mast profiles, carriage bar profiles and flats for manufacturing the fork arms themselves.

The special profiles unit is co-located on the same site as Caterpillar, which is its largest single customer and is also a major employer in my constituency. These companies are great sources of not just jobs, but skilled jobs, and jobs that pay well above the median salary for people on Teesside. They are valued highly in East Cleveland, and we should celebrate that achievement.

In 2016, Caterpillar at Skinningrove passed the amazing milestone of 20 million track shoes produced at its plant, all made using profiles made by British Steel. British Steel special profiles also supplies Caterpillar operations in Brazil, the United States and China. It is a great example of how the UK steel industry remains such an asset to our economy and to our country’s standing as an industrial power.

Since my election, I have pledged my support for whatever can be done to help with what is perhaps British Steel’s foremost challenge: the cost of energy. British Steel special profiles is seeking redesignation from a high-voltage status business to extra-high-voltage status, which it calculates would reduce its energy costs by some £265,000 a year, and I have held talks with Ofgem about how that might be secured. The problem is not so much the cost of redesignation, which is estimated to be around £1 million, but the fact that British Steel would likely have to take on responsibility for the ongoing upkeep of what is already considered an unreliable electricity connection and for maintaining the easements and wayleaves across properties owned by some potentially difficult third parties. Whatever support the Department for Business, Energy and Industrial Strategy can offer British Steel on that issue would be invaluable, and I hope the Minister and her officials will follow up on that.

The purpose of this debate is to discuss the wider outlook for the steel sector. I know that the Minister, with whom I am in regular contact regarding such diverse issues as carbon capture and storage and the case for onshore wind, is absolutely committed to making a success of our industrial strategy. We have a friend in her as we seek to deliver a framework within which UK steel can thrive.

This is a critical issue for Teesside. I want to emphasise that UK Steel, the body that represents the industry, wants to convey the positivity and the optimism that also characterises this moment. This is as much about future opportunities as it is about the consolidation of existing strengths. The Government’s study on the future of the industry projects a £3.8 billion opportunity in steel demand by 2030, as the hon. Member for Aberavon said, which will need to be met by imports if we do not get this opportunity right.

With the right strategy, UK Steel estimates that the gross value added of the industry can increase from £1.2 billion today to £3 billion. That goes to the heart of the issue. Steel is an enabling technology, underpinning so many other parts of our economy. The sector places a premium upon innovation, which is what will be required if we are to continue to offer high-end products that our rivals in the world cannot easily match. That means investing not only in physical facilities but in R and D and training and skills, particularly of the next generation.

I often hear from my local employers that a big challenge on Teesside is how we address the age profile of our skilled workers, many of whom were trained in the ’70s and ’80s by the big industrial conglomerates that have predominated and contracted throughout the course of my lifetime. Those workers are now approaching retirement age. It is vital that we ensure that our education and apprenticeship models are fit for purpose, to supply young people with the skills and inspiration they need to grasp the opportunities that we all hope will be created for them. Contrary to what the hon. Gentleman said, the SSI Task Force in Redcar has had considerable success. I praise also the huge potential of the South Tees mayoral development corporation. We all know the consequences that were felt in Redcar and that obviously had massive impacts also in Middlesbrough South and East Cleveland, but real, constructive action, money and hope are now flowing into our area. It is very important that we get that part of the equation on the record as well.

The key elements of the deal are clear. As the hon. Gentleman set out, that includes investment, boosting production capability, creating more jobs, employing and training more apprentices and working with the Government to create a future steel challenge fund, drawing together partners from the automotive, construction and renewables sectors. It is also vital that the Government play their part in ensuring that UK steel has the best possible chance to compete in relation to procurement options. I have already spoken to Defence Ministers about giving maximum notice when it comes to contracts for warships.

If the vision is to be realised, we need to ensure that maximum support is given regarding the cost of energy. We all know that the UK’s energy mix is undergoing a profound revolution. It is right that that is happening, so that we can not only future-proof our security of supply, but meet our carbon commitments. The market-led “test and learn” electricity strategy, set in motion under the coalition Government, has yielded startling and exciting advances in terms of moving renewable energy closer and closer to the point at which it will become competitive on a subsidy-free basis. That is great news, but our forward thinking on this issue has left the industry exposed to a competitiveness challenge. The simple fact is that it is difficult for our industry to compete when its energy costs are 55% higher than those of Germany and 51% higher than those of France. We are looking for bridging solutions that lower costs in the short to medium term while we wait for longer-term solutions to take effect. That is in effect the same principle as the Government have already accepted vis-à-vis renewable energy, so I hope that the Minister can consider it seriously, while acknowledging that this is in no way easy or straightforward.

I want to touch on the other levers within the Government’s grasp. They include supporting the proposed future challenges fund, looking at whether new plant and machinery can be exempted from business rates and ensuring that we get our post-Brexit trade framework spot on, because getting the right framework for trade remedies will be critical if we are to deal with the outrageous dumping of steel by the Chinese that has taken place recently. I urge every hon. Member present to join me after the Christmas recess in the debates on the Taxation (Cross-border Trade) Bill, which will be the vehicle for getting that right.

I thank the Minister for her time today and thank the hon. Member for Aberavon for calling the debate. Let us move forward together, as one, with a positive mindset towards delivering the right deal for our steel sector.