UK Steel Sector: Supply Chains

Stephen Kinnock Excerpts

Wednesday 9th June 2021 Westminster Hall

[Stephen Kinnock (Aberavon) (Lab)]

I beg to move,

That this House has considered the UK steel sector and its supply chains.

It is a pleasure to serve under your chairship, Sir Graham. Hon. Members taking part in the debate today will recognise that this is not the first time that we have sought assurances from the UK Government that they are sincerely committed to supporting the British steel industry. Indeed, by my calculations, since 2015 Labour MPs have secured 19 debates and urgent questions on steel, made 51 speeches on steel, asked 54 oral questions on steel, and intervened on or responded to Ministers 103 times on the future of our steel industry. A pessimist may ask, “What’s the point?”. After all that pressure, the British steel industry still faces a range of serious challenges, and the UK Government are continually failing to provide the necessary level of support to allow the UK steel sector to compete.

In spite of those powerful headwinds, I am optimistic about the future of our steel industry, because I believe that covid-19 has completely reset the way in which the British people think about the sort of country they want to live in. The public want a Britain that can stand on its own two feet and that is more resilient to external shocks. The pandemic has exposed the weaknesses and vulnerabilities that lie at the heart of our economy and our society. The pandemic has demonstrated beyond a shadow of a doubt that if we wish to address those weaknesses and vulnerabilities, we must commit to and invest in a renaissance of modern manufacturing in our country.

British manufacturing has been in decline, dropping from 30% of GDP in the 1970s to just 9% today. The UK’s shift towards a city-centric, service-based economy means that it is now the most geographically unequal country in northern Europe. We have the richest area in the whole of northern Europe—London—but also the five least prosperous areas, with west Wales and the valleys the poorest of all.

Today, our country stands at a fork in the road, and the choice is clear. Are we going to continue to allow our manufacturing sector to wither away, constantly eroded by the sort of policies that have come to define the last decade and which are advocated in the book of the Secretary of State for Business, Energy and Industrial Strategy, “Britannia Unchained”: “Let the market rip. Let the City of London call the shots. Let globalisation and deindustrialisation ride roughshod over our communities.”? Or are we going to truly understand the pandemic as a clear and unambiguous warning that we cannot go back to business as usual and that we must strive for real enduring change; that we must stand on our own two feet by reducing our dangerous over-reliance on imports from China; that it is time to recognise that the collapse of British manufacturing is the primary cause of the grotesque inequality that exists between the wealthiest and the poorest regions of our country; and that a modern manufacturing renaissance is our only route towards a fair and just transition to a cleaner, greener future?

Our manufacturing base can be rebuilt only if it is based on a strong and healthy steel industry, because steel is a vital foundational industry that is critical for our security, prosperity and green resilience. Our economic and national security are underpinned by steel. Every military vehicle, major infrastructure project and power station requires steel. In a world where strategic competition between democracies and dictatorships is intensifying on an almost daily basis, it is crucial that as much of that steel as possible is produced here in the UK.

Our prosperity as a nation is also dependent on steel as a vital foundational industry that feeds into our entire manufacturing sector. Steel jobs are good jobs that pay an average annual salary of £36,000, which is 36% higher than the Welsh average, and the Port Talbot steelworks in my Aberavon constituency provides 4,000 such jobs, alongside thousands more through the supply chains.

Home-grown steel is also the only route to tackling climate change. Steel will play a critical role in greening our economy by building the electric cars of the future and providing vital components for solar, wind and tidal power. Moreover, British production processes have half the carbon footprint of China’s far less decarbonised steel industry, and shipping steel from the other side of the world is obviously more carbon intensive.

Whether we look at the British steel industry through the prism of our national security, regional prosperity or planetary sustainability, we draw the same conclusion: there can be no sustainable post-pandemic economic recovery without a strong and healthy steel industry. The arguments are compelling, irrefutable and over-whelming, so it is difficult to understand why the UK Government have been so slow to act, but the pandemic has put rocket boosters on the need for a modern manufacturing renaissance underpinned by the rebirth of our steel industry.

The Government must now take the following steps. First, they must reject the recommendation of the Trade Remedies Investigations Directorate regarding steel safeguards, and must ensure that all 19 of the safeguards remain in place. Those trade defence measures were put in place to guard against import surges caused by President Trump’s section 232 tariffs, and it is essential that they are retained until such time as the section 232 tariffs are dropped by the Biden Administration. The TRID’s recommendations are tantamount to dismantling the flood defences just as the tidal wave is about to hit. Will the Minister assure us that she has made the position of the steel industry, steel unions and steel MPs clear to her colleagues in the Department for International Trade?

Secondly, the Government must as a matter of urgency address the issue of our industrial energy crisis. British steelmakers pay 86% more than their German competitors and 62% more than the French. Over the past five years, that disparity has cost the UK steel industry an additional £254 million. Those additional costs represent funds that should and would have been directed towards critical capital investment, including decarbonisation projects. Will the Minister please assure us today that her Department is truly committed to tackling the root causes of the UK’s astronomical industrial energy prices, and can she set out her urgent action plan for doing so?

Thirdly, we need a patriotic procurement policy. It is absurd and inexcusable that the Ministry of Defence is buying Type 26 frigates for the Royal Navy that are built with Swedish steel. We need procurement that gives the right weighting to local value. Let us look at big opportunities such as High Speed 2, with 2 million tonnes of steel. How much of that steel is going to be British? Can the Minister assure us today that every Government Department and HS2 will be signed up to the steel charter by the end of this calendar year?

Fourthly, we need a Government who are truly committed to rebuilding our manufacturing base, and who believe in partnering with industry to do so. Some say that steel is a sunset industry, but nothing could be further from the truth—it is at the cutting edge of innovation. Indeed, the vast majority of the alloys that are used in steel these days did not even exist 10 years ago. It is absurd to have a Government who have utterly failed to support the Orb plant in Newport—I look to my hon. Friend the Member for Newport East (Jessica Morden)—which could play a major role in electric vehicles.

It seems that the left hand does not know what the right hand is doing, which is precisely why co-ordinating forums such as the Industrial Strategy Council are so important. Can the Minister please explain why the Industrial Strategy Council has been closed down by the Business Secretary, and can she please tell us whether she thinks that decision will be a help or hindrance to the future of the British steel industry?

British steelworkers are a strong, proud community of men and women who make the best steel that money can buy. They are certainly not looking for anybody’s charity, special treatment or favours. They are simply seeking the opportunity to compete without having one hand tied behind their back. They are simply asking for a level playing field. Since 2010, successive Conservative Governments have let them down by leaving the flood gates open to heavily subsidised imports from China; by failing to close the energy price gap; by declining to develop a patriotic procurement policy; and by failing to grasp the vital role that a home-grown steel industry must play in driving the green industrial revolution forward.

Receiving a fair day’s pay for a fair day’s work is as important to steelworkers as it is to every other working person across the length and breadth of our country. However, working people are motivated by far more than money. Above all, they are driven by the sense of pride and dignity that their work gives them, and steelworkers are certainly not an exception to that rule.

Steelworkers do long shifts in challenging conditions because they want to make a contribution. They are fiercely proud of the fact that steel is the basis of the houses we live in, the offices we work in and the cars we drive. They are steelworkers because they want to do their bit for their country, for their communities, and for their families. They are steelworkers because they want to be part of something bigger, but they cannot do this alone.

They need a Government who will back them to the hilt; a Government who will put policies in place that attract investment, rather than drive it away; a Government who truly believe that a country should be able to stand on its own two feet. Our steelworkers need a Government who are genuinely committed to reversing the decline of manufacturing in this country. They need a Government who are truly invested in swinging the pendulum from cities to towns, and from London and the south-east to the rest of the country. Britain needs its steel, and our steelworkers need a Government who are on their side.

[Sir Graham Brady (in the Chair)]

I should inform all participants that due to a technical problem, all those participating virtually did not catch the first three minutes of the debate. That has now been resolved, but I pass on the apologies of the staff who have been working to resolve the problem.

There are a lot of Back-Bench participants on the call list. If it is possible for them to keep to about five minutes, we should be able to get everybody in.

--- Later in debate ---

[Stephen Kinnock]

I thank all hon. Members present for a really constructive and useful debate.

I thank the Minister for her response, but there is a chasm between the rhetoric that the Government are deploying and the tangible actions that we need to see. Safeguards are now of the utmost urgency, but we are in an absurd situation whereby the Secretary of State for International Trade is not being given the option of modifying the recommendations that we have discussed; it is simply, “Take it or leave it”. If the decision is to reject the recommendations in their entirety, all the safeguards will fall. That would lead to a massive import surge, which could be crippling for our industry. I urge the Minister to go back to the Department for International Trade with the greatest urgency. The recommendations appear to be based on a fundamental misunderstanding about how the steel industry actually works, as the hon. Member for Scunthorpe (Holly Mumby-Croft) so eloquently set out.

On procurement, we need concrete actions. We need targets for how much of the steel in public infrastructure projects should be British steel, and we need clear supply chain plans so that procurers are obliged to set out precisely how they will maximise the input of British steel. We have been calling for this for years, and we need to see specific actions.

On price disparity, we should be looking at the French-German model for network cost reductions, increasing the renewable levy exemptions and providing exemptions from capacity market costs. Again, those are all things that we have been calling for over several years.

Finally, on the green transition, a recent report by a think-tank, the Energy and Climate Intelligence Unit, showed that there are 23 hydrogen steel projects happening across the European Union, but absolutely none in this country. It feels as though we could be behind the curve in that regard. Politics is about choices, and I urge the Government to make choices that actually favour our British steel industry.

Motion lapsed (Standing Order No. 10(6)).