UK Steel Industry

Stephen Kinnock Excerpts

Thursday 17th September 2015 Commons Chamber

[Stephen Kinnock (Aberavon) (Lab)]

I congratulate my hon. Friend the Member for Redcar (Anna Turley) on securing this vital debate today, and I also thank the Backbench Business Committee. Before I get on to the substance of my speech, I want to pay tribute to three gentlemen who are sitting in the Gallery. Roy Rickhuss is the general secretary of the Community union, and he is here with Alan Coombs and Dave Bowyer. Those three men are fighting with passion and dedication to secure a sustainable future for the British steel industry and I pay tribute to their professionalism and dedication today.

The UK steel industry and its associated metals sector comprise more than 24,000 enterprises and were worth more than £45.5 billion to the UK economy in 2012. The sector’s exports account for 150% of UK demand and steel is a driver of productivity that, along with other UK foundation industries, is characterised by sector productivity of 136%. I think the Minister will agree that steel has a clear strategic, economic and defence value to the country and is invaluable in driving sustainable productivity growth.

A foundation industry feeds into the supply chain of multiple other industries. From automotive to locomotive and aeronautical to power generation, from transmission to construction and from white goods to consumer electronics, the steel industry is at the heart of the British economy. It is no exaggeration to say that the quality of our national infrastructure and the future of the British economy go hand-in-hand with the future of the steel industry.

The steel industry and its associated metals sectors are also a vital source of employment, accounting as they do for 330,000 jobs in the UK. In fact, three UK jobs rely on every job in the steel industry and those jobs are likely to be found outside London and the south-east, in regions where such jobs are desperately needed. Those jobs are exactly the type that we all want to see: highly skilled, with high value added, relatively high wages and a vocational field, with the potential for development and fulfilling career paths. In fact, it seems to me that the steel industry is a model of precisely the type of industry that all in this House should wish to promote if we are truly serious about wishing to create an export-led recovery, about solving the productivity puzzle and about rebalancing the British economy away from its dangerous overreliance on the services sector and towards a far more resilient manufacturing base. The Chancellor of the Exchequer, no less, has set a target of doubling exports by 2020. It is crystal clear that he will never achieve that target unless the country has a vibrant and sustainable steel industry.

The steel industry is also crucial to our prestige as a nation. Without a steel industry, would we even qualify as a leading industrialised economy? What would the loss of this strategic industry mean to our membership of the G8, for example?

I rise today not only to remind this House of the central role that the steel industry plays in our national economy and security. This industry also shapes the social economic landscape in my constituency of Aberavon. The Tata steelworks in Port Talbot is one of the largest in Europe; it is essential to the UK’s manufacturing sector and the beating heart of our community. As the Minister will know, as she visited the steelworks only weeks ago, the Port Talbot plant is a beacon of British-made manufacturing. She will be in no doubt about the dedication and professionalism of its 3,000 workers.

As I have mentioned, this is a highly skilled, specialised workforce, and this high-risk, high-skill work results in some of the highest-quality steel in the world. The super bainite steel produced at the Port Talbot works, for example, is used by the Ministry of Defence for such crucial projects as reinforcing the armoured vehicles that were used until recently in Afghanistan. I am deeply proud of the fact that this ultra-specialised type of steel has saved lives in war zones and is made by my constituents.

The steel industry has a proud past and a vitally important present, and it should also have a truly promising future. It is therefore with deep regret that I rise today to make a speech that I hoped I would never have to make. I believe that the steel industry is on the brink of collapse. This is not rhetoric; it is reality. For a number of reasons, as other hon. Members have said, the industry is now caught in a perfect storm. Let me briefly outline those reasons.

First, cheap Chinese steel is distorting the market. For the first six months of 2015 the amount of Chinese steel imported into the UK increased by 120%, relative to the same period in 2015. The fact is that the global steel market is now comprehensively saturated by Chinese steel, and the impact is impossible to exaggerate. It is literally squeezing British steel out of the global market and is the primary cause of the parlous state in which the British steel industry currently finds itself.

Secondly, the pound is stronger than it has been for many years. Some 40% of total steel sales are exported to the EU, and for every sale in euro, Tata Steel now receives 20% less in sterling than it did just 18 months ago.

Thirdly, there is the high cost of production here in the UK, which can be attributed largely to the crippling costs of energy bills. Steelmaking is an energy-intensive activity, and the cost of energy in the UK is twice as high as in any other EU country, despite the fact that those countries face precisely the same regulatory costs charged at EU level, such as the EU emissions trading system. UK energy costs are a massive barrier to companies that wish to invest in the future of their business and the skills of their workers.

The net result of this perfect storm is that Tata Steel is facing a deficit of just over £250 million for the year 2014-15, reflecting substantial year-on-year losses since 2011-12. Despite this, Tata Steel has invested £1.4 billion since it acquired its UK business from Corus in April 2007. I would like to place on the record my recognition of the fact that Tata Steel is facing an extremely challenging macroeconomic and market picture, and I believe that it is striving to address the issues as best it can.

It is now essential that the Government give Tata Steel all the support and assistance they possibly can. If they fail in their duty to do so, the consequences of such inaction will be catastrophic. The action that the Government can and must take urgently is as follows. First, the Minister must accelerate the full implementation of the energy-intensive industries package. The steel industry must be either exempted from the renewables obligation or shifted to a compensation model. In order for that to happen, the Government must instruct the European Commission to give top priority to reviewing the state aid question in this context. That may well mean a reprioritisation of current cases, for example on nuclear power. If that is necessary, so be it. It is essential that the case of steel is fast-tracked now and placed at the top of the pile of British cases that are currently sitting in the European Commission’s in-tray.

The Minister has been asked to intervene in that spirit on several occasions since the beginning of this Parliament. Her answer has been, “It’s complicated”. We on the Opposition side of the House truly understand that Brussels is a complicated place but, with all due respect, those complications need to be overcome rapidly and effectively. The concerns about state aid must be resolved within the next month, so that the British steel industry can receive immediate respite from the crippling energy costs that it currently faces. The Government’s insistence on rigidly following every letter of EU state aid rules is killing the steel industry and forcing UK steel producers to compete on a playing field that is neither fair nor even.

Secondly, a further element of relief on the cost of doing business would be the removal of plant and machinery from the business rates valuation process for manufacturing. Tata Steel recently invested £185 million in the construction of a new blast furnace in the Port Talbot steelworks and was promptly clobbered with a £400,000 increase in its business rates bill. That is patently absurd. If we are to tackle the productivity puzzle by driving a manufacturing renaissance, surely we should be encouraging investment, not disincentivising it in that way.

We recognise that exempting the steel industry from the renewables obligation and removing plant and machinery from business rates will incur a cost to the Exchequer. However, we also know that the collapse of the steel industry would lead to the loss of tens of thousands of jobs, and the resulting cost to the Exchequer would be exponentially greater. Therefore, I urge the Minister and her colleagues to see that a failure to provide the urgent support to the UK steel industry that is now required would be a classic and tragic case of a false economy.

Thirdly, it is essential that the Government do more to support industry positions on anti-dumping cases. I am a firm believer in the importance and value of free trade, but I believe even more passionately in the importance and value of fair play. The fact of the matter is that the US and Chinese Governments are simply not playing fair. There are myriad examples of how tariff and non-tariff barriers are being deployed by Washington and Beijing in order to prevent the fair access of British steel to the Chinese and US markets. That has to stop. I urge the Minister to adopt a more aggressive posture in Brussels, Beijing and Washington. She must stand up for steel and secure a fair deal.

Fourthly, I would like to pick up on a point made by my hon. Friend the Member for Redcar about the use of Teesside steel in wind turbines. I would like to contrast that with the regrettable lack of support that the Scottish Government have shown over the Forth road bridge. I understand that the general secretary of Community union has today written to Nicola Sturgeon and Carwyn Jones requesting a meeting to explore the support mechanisms that the devolved Governments can and must provide.

It is 10 minutes to midnight for the steel industry. The future of this vital foundation industry is hanging by a thread. Steel producers and workers need the full support of the Government, and they need it now.

--- Later in debate ---

[Anna Turley]

I want briefly to say a huge thank you to everybody who has participated in the debate. As a new Member, I have been moved by the passion, commitment, diligence and depth of knowledge, and by the willingness of people to work together to do something that is in the interests of all our constituents. We have heard powerful voices from around the country—from Scotland, Wales and across England—come together to fight for jobs, opportunities and the British economy.

I thank the Minister. I appreciate her commitment to hold the summit. We will, of course, continue to press her for action on the specific matters that we have put before her. I look forward to meeting her after the debate. There was no need for her to list all the activities that she has undertaken as Minister, because she has been a breath of fresh air. I hope that she has felt the strength of feeling from colleagues on the Opposition Benches, because we appreciate her constructiveness and willingness to engage. She said, to use her words, that she gets it. We get that she gets it and we look forward to working with her on the delivery.

I thank the Minister for the tone that she used when talking about the issues with SSI in my constituency. It is a delicate situation and we have been dealing with it for days, weeks and months. I want to put it on the record that I object to the comments of the Under-Secretary of State for Communities and Local Government, the hon. Member for Stockton South (James Wharton), regarding today’s debate. Trust me, if anyone wanted to showboat, we could have done so. We have worked hard and constructively behind the scenes, and have tried not to put any pressure on anybody who is involved in the situation because we understand how delicate it is. Today is about bringing the issues to the fore and making sure that there is action to back up the work that is being done behind the scenes. I make no apology for bringing the debate to the House today. I am proud to have done so and to have worked with my colleagues on it.

The Minister said that the Chancellor’s plans have to be fiscally neutral. As my hon. Friend the Member for Middlesbrough (Andy McDonald) said, sometimes money is no object. In a crisis such as this, I beseech the Chancellor and the Government to—

[Stephen Kinnock]

Be bold.

[Anna Turley]

As my hon. Friend says, they should be bold and look at everything that they can do. It is in their hands to see where the money can be found. We have heard the strength of the feeling today—the money must be found and action must be taken.

I thank everybody who has contributed. When my hon. Friend the Member for Middlesbrough was speaking so passionately about the history and heritage of steelmaking on Teesside, I remembered a word that is held dear on Teesside: “Erimus”, which means, “We shall be”. That word came about on Teesside when steelmaking was coming to the fore, and our whole area was built upon it. It is about our destiny and our future. I do not want steelmaking to be about our past; I want it to be our future, so please tell us once again that it will be.

Question put and agreed to.

Resolved,

That this House recognises the unprecedented gravity of the challenges currently facing the UK steel industry; and calls on the Government to hold a top-level summit with the key players from the steel industry to seek meaningful and urgent solutions to the crisis.