EU Referendum: UK Steel Industry

Stephen Doughty Excerpts

Wednesday 13th July 2016 Westminster Hall

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I beg to move,

That this House has considered the implications for the UK steel industry of the outcome of the EU referendum.

It is a pleasure to serve under your chairmanship, Mrs Gillan. A number of Welsh Members are here today and, especially as you were previously the Secretary of State for Wales, I know you will take a keen interest in this debate.

Many of us have debated this subject in Westminster Hall and in the main Chamber many times, and we have tabled many questions. I lose track of the number of times that my colleagues and I have faced the Minister, but the facts remain the same. The steel industry faces immense challenges. There is a bright future for the industry, its workforce, its products and its role in our economy, but only if the Government take decisive action to respond to the challenges that the industry faces, which is even more important in the aftermath of the EU referendum. I argued a few weeks before the referendum that a vote to leave the EU would be a body blow to the industry, and I am sorry to say that the information I have had from producers, from UK Steel, from the Community union and from many others involved in the industry is that all the referendum has resulted in is yet more uncertainty and challenges for an industry that already faces significant difficulties.

The crucial question that I want the Minister to answer today, and indeed that many of my colleagues will be addressing, is this: what will the Government do differently—not only from their approach before the referendum, but in light of that decision—to offset the additional uncertainties, risks and challenges now facing the industry?

[John Healey (Wentworth and Dearne) (Lab)]

I congratulate my hon. Friend on securing this debate. He poses a question about the additional uncertainty and the Government action that is required. Is he aware that, as part of the reaction to the uncertainty, south Yorkshire-based Speciality Steels will be sold, fast-tracked and separately, despite the pause on the sale of Tata’s main strip business? He will have seen Monday’s written statement from the Secretary of State for Business, Innovation and Skills, which made no mention of whether the Government are willing to help on financing, energy costs or research and development support. One of the things we require from the Minister today is surely a commitment that the Government will stand by the pledges they have made to support steelworkers, steel communities and the future of steelmaking, including in south Yorkshire at Rotherham and Stocksbridge.

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[Stephen Doughty]

My right hon. Friend makes a crucial point. The industry, its workers and all of us want to hear categorical assurances from the Minister today about action. We do not want to hear more platitudes and warm words. Particularly with the uncertainty, there is a real danger that the answer to our many questions will be, “We don’t know. Wait for the new Prime Minister and the new Government.” Well, the steel industry cannot afford to wait. It could not afford to wait before, and we now need real assurances. This is a matter of national significance.

[Nick Thomas-Symonds (Torfaen) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Gillan. I warmly congratulate my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) on securing this debate. He is rightly talking about securing concrete action from the Government. Does he agree that one idea would be for the Government to redouble their efforts to ensure that British steel is used in procurement projects, both in the supply chain and in headline contracts?

[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.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

One of the unilateral cost increases for the industry was the carbon price floor, which was a unilateral tax introduced by the British Government without any foresight. They then had to request permission from the EU to try to provide a compensation scheme. Post-Brexit, will the Government reconsider that measure in the immediate future to give more space to the steel industry on costs?

[Stephen Doughty]

I absolutely agree. Given that the facts of our relationship have changed so substantially, what people want to know today is what completely new and different things the Government are willing to do with the levers they control, to respond to the wider uncertainty being created.

That is even more important because in a post-Brexit Britain the self-sufficiency and security of the steel supply is of even greater strategic and economic importance for our construction industry, our defence industry and all the other parts of our economy in which the steel industry and other foundation industries play such a crucial role. In any circumstances, the steel industry is of national importance, but with Britain going alone that will be even more the case, which is why we need that action.

I have already mentioned procurement. I am still deeply disappointed that we do not seem to have seen anything concrete. We have heard a lot of good words about the guidance that has been issued to Departments, but I have yet to see any concrete projects to provide certainty to the industry. When I asked the Minister for Defence Procurement shortly after we returned from the referendum recess, there were a lot of warm words but no clarity on which defence, construction or infra- structure projects are to enjoy increased supply of UK steel. Indeed, this is not just a responsibility of the UK Government. As we have discussed in this place before, it is deeply disappointing that the Aberdeen bypass, for example, is being produced using Turkish steel. This is the responsibility of all the devolved Administrations, as well as the UK Government.

As a Welsh MP I would do this, but I mentioned the support that the Welsh Government have been providing. Quite rightly, everybody is concerned about the Tata situation in particular, which I know my hon. Friend the Member for Aberavon will speak on, but the Welsh Government have made it absolutely clear that they are committed to supporting the sales process and the communities involved, and that they will continue to put every resource they can to that purpose. As far as I understand, their offer of support definitely remains on the table, but obviously there needs to be clarity on the bidders and the plans coming forward. I would be very interested to hear what discussions the Minister and her officials have had with the Welsh Government over the last few days.

There is a crucial broader point to make. We have seen discussions going on with the steel council and the various working groups, but I am concerned and would be interested to hear the Minister clarify whether those discussions and that dialogue have continued, whether the steel council and the working groups have met and whether her officials have continued working on it, or whether everybody’s attention has simply been diverted by the implications of the referendum and the switch in Prime Minister and Government. We cannot afford to be diverted. Diversion of attention for a few weeks or a month could be absolutely devastating. I would like some assurances from the Minister about what is happening.

I want to allow as much time as possible for other Members to speak, because I know many want to. Let me end by saying that we have all made the arguments before and we know what they are: they are on energy, trade terms, procurement and the wider business conditions. We have seen progress on some of those areas from the Minister—I acknowledge that—but not enough. This decision is so fundamental in changing the terms for this business and its future that we need to know what is happening that is new, that is different and that will give that certainty, reassurance and hope to the industry for the months and years ahead. As I said, this industry has a future. It can play a vital strategic role in post-Brexit Britain, but it will only do that if we see decisive Government intervention to ensure that it survives and is able to compete on a global stage. I thank you, Mrs Gillan, and every Member who has attended today to show their support.

[Several hon. Members rose—]

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[Marion Fellows (Motherwell and Wishaw) (SNP)]

Thank you, Mrs Gillan. It is a pleasure to serve under your chairmanship. I thank the hon. Member for Cardiff South and Penarth (Stephen Doughty) and congratulate him on securing this debate. I am sorry if I repeat anything but, as he said, we have all been repeating and repeating ourselves about the state of the British steel industry, certainly since I came to Parliament.

We have had good news in Scotland: we had a Scottish steel taskforce and the former Tata plants are now in the hands of Liberty Steel, which at the moment is recruiting for new workers. That is a fairly good news story from Scotland, but it is only thanks to the fact that the Scottish Government have put steel at the heart of their industrial strategy and have an industrial plan.

The situation we now face is probably one of the most difficult in our post-war history, and what we do now will have serious consequences for our future. The pound is plummeting and investment is going elsewhere. The experiment with an EU referendum to satisfy Tory Back Benchers has completely backfired and it is now apparent that there is no plan—not only no industrial strategy, but no plan for going forward with Europe. Where will the UK be in terms of its European status? Will we completely Brexit? Will we be part of the European Free Trade Association? What will happen? We do not know, but I know that there is a serious plan in Scotland and the First Minister is working tirelessly with her Cabinet and with Scottish officials to speak to European partners because, as we all know, Scotland voted to stay in and we want to be in Europe—we are European to our very core.

I want to completely refute what has been said about the Aberdeen western peripheral route. I can inform the Chamber that the subcontract for steel reinforcement was recently awarded to BRC, which is situated just outside my constituency and which is the UK’s largest supplier of steel reinforcement. The steel for that contract is produced in Newport; some of it requires cutting, and that process is undertaken in Newhouse, which has a postal address in Motherwell but unfortunately is not in my constituency—it is in the constituency of Airdrie and Shotts. Indeed, all steel for the Aberdeen western peripheral route project has so far been procured and processed from suppliers based in the UK. More generally, more than £350 million in subcontracts has been awarded for the Aberdeen western peripheral route project, of which £115 million has been sourced in Scotland itself.

[Stephen Doughty]

I find that information very helpful, but will the hon. Lady say where the steel was actually manufactured—not where it was processed but where it was actually created?

[Marion Fellows]

Let me say that we do not manufacture steel in Scotland, but that goes back to when the Tories closed Ravenscraig in 1992. We roll steel in Scotland; we deal with plate. [Interruption.] The hon. Gentleman is chuntering from a sedentary position; I hope I can continue.

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[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Gillan, in this debate on an incredibly important subject. I congratulate my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) and all my hon. Friends who have spoken in the debate. They have represented their constituents superbly over the last weeks, months and—in some cases—years to try to protect the vitally important strategic industry of steel.

I also congratulate the trade unions on their work representing their members and the communities that they live in, in these incredibly difficult times. We have seen examples of the benefits of partnership working between local politicians, the devolved Governments, local Government and the representatives of working people in those communities.

[Stephen Doughty]

My hon. Friend is absolutely right to pay tribute to the trade unions and all those who have worked in partnership. Will he join me in paying tribute to the work of the Daily Mirror and its “Save our Steel” campaign? It has kept a focus on the issue, even today in the midst of everything else that is going on, to make sure that we all pay attention to what is happening in the steel industry.

[Bill Esterson]

My hon. Friend is quite right to draw attention to the fine work of the Daily Mirror. Its campaign has raised awareness among the wider public of just how important steel is to the whole country.

We express regret that the Government did not act in a stronger way to try to save Redcar and that there was not greater engagement earlier on Redcar and elsewhere, but we have to focus on where the steel industry is and what can be done now, not least given the challenges following the vote to leave the European Union.

Steel has faced a profound crisis for quite some time. Plants that had been in profitable production for decades have closed. In Redcar, that brought to an end a century or more of steelmaking on the site. For other plants, the potential changes of ownership have been the source of considerable uncertainty and, of course, Brexit has piled uncertainty on top of what was already a very worrying situation.

Britain’s relationship to the EU and the rest of the world is now more unsettled than it has been for many generations. We have seen the immediate impact of the vote not just in the steel industry, but in this industry we have seen the planned sale of the Port Talbot steelworks put on hold. An estimated 15,000 jobs are directly at stake, with another 40,000 immediately affected through the supply chain. Then there are the risks, which my hon. Friends have raised, from the impact on the British Steel pension fund—that threatens the prosperity of more than 130,000 workers, and of course there is the threatened loss of a vital strategic industry. The time is now for decisive Government action to secure as much stability and certainty as possible.

Before the leave vote, the Government had started to act and to recognise, quite rightly, the strategic importance of the steel industry in this country. That recognition had included the potential for the Government to take a stake in the Port Talbot works—the Business Secretary had dropped his previous opposition to responsible ownership and had, at last, understood the importance of Government intervention in industry. As part of any deal, however, he was proposing to switch the indexing of British Steel pensions from the retail prices index measure of inflation to the far lower consumer prices index measure. Over time that would have amounted to a 15% cut in pensions being paid, and, as well as affecting the prosperity of British Steel pensioners, it suggested opening the door to similar pension raids in other sectors.

The proposal has quite rightly been resisted by the unions and also, notably, by other Government Departments. Addressing the crisis in steel at the expense of pensioners is simply not acceptable. Supporting our steel industry will require the Government to follow best practice from north America and Europe, and to develop an effective industrial strategy to support the industry. It will require willingness from the Government to support the pension fund.

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[Anna Soubry]

I think we are all becoming demob happy. We are looking forward to next week when we will have a short break, but we will all continue, as we always do, to work for our constituents in the so-called recess. I think that other people sometimes forget that.

[Stephen Doughty]

The Minister is making some good jokes; however, this is a very serious point. Although we are about to go into a parliamentary recess, it is absolutely crucial that the meetings with the Steel Council and the working groups continue and that the work with the officials goes on. We cannot afford to let weeks go by in the summer when the industry is facing so many challenges.

[Anna Soubry]

I could not agree with the hon. Gentleman more. He is absolutely right, and he needs to know that the Steel Council has been working as if nothing has happened or changed ever since the referendum vote. Indeed, the UK Metals Council is meeting now—that is where I would have been had he not secured this debate. Everyone involved in the sector needs to understand that the work of the Government, Ministers and my officials has continued through this recent period and, without doubt, will continue through the summer. If I stay in my job, he can be assured that I will continue to do everything I can to work for the best interests of our steel industry; if I have a successor, that person will do exactly the same. The officials, of course, do not change. Furthermore, the determination will be as instilled in the new Prime Minister as it has been in our outgoing Prime Minister.

To deal quickly with procurement, we changed the rules, and we were the first member state of the EU to do that, commendably so. However, Opposition Members make a good point about the need now to ensure real evidence that those rules are working. We need good reporting, so that we can come back to say that we are absolutely certain that the new procurement rules are producing the results we want.

Network Rail sources 98% of its steel domestically, or 145,000 tonnes over the next five years, and there is no reason to believe that that will change. High Speed 2 will need 2 million tonnes of steel over the next 10 years —forgive me, Mrs Gillan, but I am a huge supporter of HS2 and I fear our friendship will be wobbling here. I assure you and all hon. Members that I will continue to do everything I can in Government to make the case for wonderful and important infrastructure projects to be brought forward as much as they can be, as it will be a great boost for our economy if we can do that.

I have spoken with steel makers since the referendum, although it was not the result they wanted. It was sad that 69.6% of people in Hartlepool voted out; 60% of people in Cardiff voted in, but in Sheffield, 51% voted out; in Rotherham, 67.9% voted out; even in Neath Port Talbot, 56.8% voted out; and in the constituency represented so ably by the hon. Member for Scunthorpe (Nic Dakin), nearly 70% voted out. We all have a big, big job to do—but we can talk about that on another occasion. Only last week, however, I met British Steel, and things are going well notwithstanding—I do not want to be overly confident, but it is on track to deliver its business plan.

I want to deal with the point made by the right hon. Member for Wentworth and Dearne (John Healey) and by the hon. Member for Rotherham (Sarah Champion). Yesterday, I had a good meeting to discuss—freely—the situation in Stocksbridge and Rotherham. The Secretary of State has written in response to the right hon. Gentleman’s letter, although that reply might not yet have been received. For his and the hon. Lady’s benefit, the Secretary of State wrote:

“To date, no such requests have been made by any of the potential bidders, but we would be willing to consider requests that are made in the future.”

We know that people will be interested in the speciality steels, and rightly so, because it is a cracking business, with huge potential. Hon. Members can be assured that if we get requests to enable those sales to support that side of the sector, we absolutely will do it.

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[Stephen Doughty]

I thank the Minister for some of the things she said, which were confidence-boosting and provide some hopeful direction. We must all want to take her up on her suggestion—whether she is in the role or not—because that is a clear signal to send to her successor, if there is one, to the successor of the Secretary of State for Business, Innovation and Skills, if there is one, and to the new Prime Minister that this issue will not go away. It requires serious, concrete ministerial attention—not just officials—to drive it forward over the weeks and months to come. If we get distracted by everything else going on, the industry will face serious troubles.

I have three points to make, the first about energy costs, which the Minister did not get into in great detail—she is welcome to intervene, if she wants. We heard from my hon. Friend the Member for Aberavon (Stephen Kinnock) that figure of £17 per megawatt-hour differential between the energy costs faced here and across the EU. In particular, that is an issue for companies such as Celsa in my constituency, which operate throughout the European Union and see the energy costs in other countries. Perhaps the Minister will intervene or write to us, but I want to understand whether she would be satisfied for the differential to continue over any length of time.

[Anna Soubry]

I forgot this, but the hon. Gentleman makes a good point. A lot of work is still to be done on energy. A major target and piece of work for the incoming Government is to ensure that the steel industry—indeed, all the manufacturing sector—has a level playing field, and that must be achieved.

[Stephen Doughty]

I thank the Minister for her comments, which I hope she will also express clearly to the Department of Energy and Climate Change, other Departments and the new Prime Minister.

On another fundamental issue, the debate was about the impact of Brexit and the referendum decision on the steel industry, and the Minister and other colleagues who have taken part in the debate today have outlined the potential risks if we do not get the right sort of deal. Access to the single market is crucial. Some have suggested that we should invoke article 50 straightaway and rush into the negotiations, but that would be foolish—I see the Minister nodding. Even some in my own party have suggested that, but it would be wholly wrong. We need to take a very careful approach, for the sake of the industry. The deal has to be the right one; we have to secure access for our exports, and to ensure that we do not end up with punitive shocks, because even if those were only in existence for three or six months in transition from one regime to another, they could be devastating to the industry.

To conclude, I thank all colleagues who have attended today, because it shows the great concern for the steel industry in Parliament. No matter what else is going on and that we are having a change of Prime Minister today; colleagues are still willing to attend and to stand up for constituents and the steel industry throughout the UK. I thank all those in the industry, whether in the trade unions, the management or the industry bodies, who continue to fight the fight and to make the case that steel does have a future, and that the Government need to act to ensure that future.

Question put and agreed to.

Resolved,

That this House has considered the implications for the UK steel industry of the outcome of the EU referendum.