EU Referendum: UK Steel Industry

Stephen Kinnock Excerpts

Wednesday 13th July 2016 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to serve under your chairmanship, Mrs Gillan. I rise to support the hon. Member for Cardiff South and Penarth (Stephen Doughty) and commend him for the excellent way he introduced this debate on British steel. I wanted to add a contribution from a Member of Parliament from Northern Ireland. We do not have a steel industry in Northern Ireland, but we are very supportive of British steel, what it does, the jobs it creates and the fact that it is British. We are, of course, very much a British part of the United Kingdom of Great Britain and Northern Ireland and wish to continue to be so.

I have a couple of quick comments to make in the short time I have. A collection of economic factors causing negativity in the UK steel market have put increasing pressure on steelworks—I am well aware of that, as are other Members. Demand for steel in the UK has never recovered from the financial crisis of some years ago, remaining 30% lower than pre-2008 levels. Energy costs are a massive issue for us in Northern Ireland, as they are for the British steel industry. Business rates and environmental taxes have squeezed the industry that wee bit more.

We have also had problems with the Chinese steelmakers. It is estimated that they lost millions—indeed, probably billions—of dollars in 2015 as domestic demand slowed but GDP targets remained stubborn. As a result, steel exports from China to Europe have more than doubled since 2013, helping to send the price of the metal down to roughly half of 2011 levels. The EU could have introduced tariffs to address the problem, yet failed to do so. People sometimes say that tariffs are self-defeating, but I do not subscribe to that view. They can encourage our industry, and I believe we should introduce them. The US, for example, has a heavy tariff on Chinese steel imports of a whopping 236%. If the USA can do it, I do not see why we cannot do it here. Perhaps the Minister can explain.

Brexit is now over and the decision has been made. For the record, I was very much in favour of the campaign to leave the EU and I am very pleased that the people of the United Kingdom of Great Britain and Northern Ireland decided to do that. Let us move forward together collectively and positively to see what we can do for British industry. The problems with the EU were real. It would have taken all 28 member states to agree to a tariff, so it was never going to be a possibility.

Let us look at some examples of where problems still exist in Europe. Take Belgium, for example, home to—I say this facetiously—the circus HQ. The EU has called for Belgium to recover €211 million of state aid that was used to prop up the steelmaker Duferco, while an investigation has been launched into Italy’s support for Ilva. The Belgian support was considered illegal because

“you could not find a market investor that would give them the kinds of loans they got from the authorities”.

Belgium and Italy tried to do it, but the EU pulled them back. Now that we are out of Europe, we can be free of the shackles we once wore and move forward. There is an opportunity for the new UK Administration, under a new leader, to make the difference and make changes.

[Stephen Kinnock (Aberavon) (Lab)]

Surely if we stay in the single market in some way, shape or form, we will still be subject to its rules and regulations.

[Jim Shannon]

There is much to be discussed after Brexit, and that is one aspect. I am very keen for the debates to start. Let us move forward and be positive—the glass is half full. We are looking forward to supporting our industry and making sure that we can deliver for it.

Let us be positive and upbeat. We now have the power, at least in principle, for the Government to take the necessary steps to ensure that the 11,000 jobs at Port Talbot in particular are kept safe, as well as those throughout the whole United Kingdom, in Scotland and elsewhere. We have to remain positive and consider the new possibility of offering tailor-made Government support. Steel prices are rising, which means that Tata Steel will be in much less of a hurry to sell up and get out of the UK than it once was.

Let us give credit where credit is due: the Government have worked hard and the Minister has been industrious. She has responded to several debates and made very clear, positive comments. I know she is committed to British steel, but we need to see more practical changes. Although the pressure on Tata to sell has been reduced by the array of slightly more positive factors, it is imperative that the Government have in place the contingency plans needed for all possible outcomes.

It is encouraging to see the Business Secretary take such an active and positive role, but we must remember the livelihoods and families at stake. The deliberations on the issue, and the eventual strategies that are delivered, must deliver a British steel industry that succeeds and is here into the infinite future. We must retain the jobs and our position as a manufacturer.

--- Later in debate ---

[Stephen Kinnock (Aberavon) (Lab)]

I pay tribute to my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) for securing today’s debate. I also pay tribute to the fantastic workforce of steelworkers across the country, many of whom are represented here with us today. It is an honour to have those gentlemen here.

The past few weeks have been characterised by uncertainty, particularly since the referendum result: economic uncertainty with the pound falling, investment put on hold and jobs at risk; party-political uncertainty; and governmental uncertainty and paralysis. That uncertainty has been particularly acute for the steel industry. When Tata announced on Friday that it was putting the sale of Strip Products UK on the back burner as it explored the possibility of forming a joint venture with ThyssenKrupp, the workforce and their families clearly reacted with a degree of scepticism and concern. The announcement compounded existing uncertainties. ThyssenKrupp has long expressed interest in Tata’s Dutch plant, but until last week there was no convincing evidence of any interest in Tata Steel’s UK operations. The central concern around the joint venture proposal, particularly with Britain outside the EU, is that the UK operations, including Port Talbot in my constituency, might not receive the support and investment they require. Clear assurances are required from the Government, Tata and ThyssenKrupp that the mooted joint venture will in no way diminish Port Talbot and the rest of the Strip Products UK division.

The uncertainties of the sale process have been compounded by Brexit and the resulting Whitehall paralysis. What we need now, on the day that a new Prime Minister enters No. 10, is a Government truly committed to the industry and its future. Like the Minister, I was a passionate campaigner for remain, but the British people voted to leave, and we must now deliver on and make the most of the mandate they have given us. To do that, we must urgently clarify the nature of our trading relationship with the EU27. I hope that the incoming Prime Minister will fully engage with the industry and parties on both sides of the House when determining the approach to Brexit negotiations.

The top priority is surely energy costs, which have been cited by leading figures in the industry as the No. 1 challenge facing British steel competitiveness. At present, there is a £17 per megawatt-hour differential between the energy costs for Germany and Britain, and that is after the energy compensation package is taken into account. Energy costs in this country are quite simply astronomical, and the Government should and must act.

At the Steel Council on 8 June, the Secretary of State was receptive to the industry proposals, with the Department for Business, Innovation and Skills and the Department of Energy and Climate Change pledging to come back with “urgency” on energy costs. Well, we are still waiting. Will the Minister do all she can, in whatever time she has left in her post, to expedite the process? What the industry cannot take is more delay and uncertainty. Steel is a foundation industry, critical to the houses in which we live, the offices in which we work, the cars we drive and the bridges we cross. It is the beating heart of economies and communities such as the one that I represent. That is why we need a resilient steel industry that can compete on a level playing field with our global competitors and that serves our entire economy and our communities. The referendum has compounded the existing uncertainties facing our industry, but that means the Government must act decisively and quickly. Brexit is a fact. The will of the British people must be enacted. If the Government act with purpose, we can make sure they work for the steel industry and for our communities.