UK Steel Industry

Tom Blenkinsop Excerpts

Wednesday 15th July 2015 Westminster Hall

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

I beg to move,

That this House has considered the future of the UK steel industry.

I am grateful for the opportunity to introduce this important debate, and I am grateful to hon. Members for attending. I welcome the Minister to her new role. She has already surpassed her predecessor, the right hon. Member for West Suffolk (Matthew Hancock), by attending this debate. She should not worry because I will be positive and compliment her, and hopefully she will compliment the all-party group on steel and metal-related industries by providing good answers to our questions.

The steel industry is a vital strategic foundation for the UK. Steel is fundamental to strategic sectors such as automotive, construction and energy. Being infinitely recyclable, steel is perfectly suited to sustainability. Like those of many hon. Members here, my constituency has a great and proud history rooted in the production of steel and associated products, and I hope that steel will play a strong role in the future of my area and my country.

The manufacturing of steel products makes a significant contribution to the British economy. Exports of British steel were worth £4.9 billion in 2013 and contributed £2.4 billion to the UK’s balance of trade. The sector’s overall contribution to the UK economy is worth some £9.5 billion a year. It underpins many other economic activities and will continue to do so for the foreseeable future. The industry provides jobs for thousands of people and supports domestic businesses and employment in the supply chain, with associated knock-on benefits for the national economy generated by tax revenues.

During the previous Parliament, the Government said that they would take swift and robust action by introducing compensation payments in relation to the EU emissions trading scheme in 2013, carbon price support in 2014 and making a commitment to commence payments in relation to renewables levies later this year and next year, but the industry faces a number of urgent and critical challenges today if it is to succeed tomorrow. The need for major ongoing investment will continue, and a meaningful partnership between the industry and the Government is required to overcome those challenges.

The changing nature of the economy means that the UK now imports more of the steel it consumes, largely in the shape of finished goods. In 1970, 90% of the steel consumed in the UK came from domestic production; that share is now less than 20%, with consumption broadly the same. That has compelled the UK metals sector to become increasingly export focused, which exposes us to shifting wider demand patterns and movement in exchange risks, as we have seen recently. Meanwhile, the UK remains open to imported steel material from as far away as China.

The UK steel sector continues to suffer an ongoing economic crisis. The service sector-led economic recovery has left steel-consuming sectors, such as construction, between 5% and 10% below 2007 levels; and recovering activity in such sectors has been less steel-intensive. UK steel demand in 2015 is forecast to be 75% of pre-recession levels, compared with 94% in Germany and 180% in China. Such demand levels are a real problem for a capital-intensive business such as steel.

High levels of steel imports are another challenge faced by the industry. Members of the APPG, of which I am chair, are increasingly concerned about the dramatic increase in UK steel imports, most notably from China. Steel imports from China have doubled in the first four months of 2015 compared with the same period last year.

[Andy McDonald (Middlesbrough) (Lab)]

Does my hon. Friend agree that the Government should adopt the charter for sustainable British steel and bring that standard into their procurement practices? That would help to tackle some of the import problems that he outlines.

[Tom Blenkinsop]

My hon. Friend makes an excellent point, which both the APPG and EEF, the manufacturers’ organisation, have been making for some time. I hope the Minister will respond on that.

Compared with the same period last year, some products are registering truly staggering increases in imports of between 1,000% and 3,000%. The primary cause of those increases is the slowdown in Chinese construction activity, which has prompted certain Chinese producers to seek new markets in which to dump excess production. Those producers have come to the UK because they are already accredited under the British accreditation scheme to sell in far eastern markets such as Hong Kong and Singapore, which use the same accreditation scheme.

The APPG is committed to free trade, but what we are currently experiencing with some steel products cannot be considered free trade. The Government need to take a more proactive approach in such cases—some would say that they need to adopt industrial activism—and I welcome the news that, in last week’s European Commission anti-dumping committee, the Government voted in favour of maintaining anti-dumping duties on wire rod. The Minister heard my colleagues on that issue and took action. In a short period of time, she has been an infinitely better Minister than her predecessor. I will keep praising her in the hope that we get even better answers as the debate continues.

Loss of sales of the magnitude we are seeing now is unsustainable in the longer term for the one remaining British producer of rebar, Celsa, which is based in the constituency of my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). The argument is not about creating barriers but about ensuring a level playing field not only in this case but in future anti-dumping cases, such as those on reinforcing steel bar, grain-oriented electrical steels and cold-rolled steels, which are all at various stages of investigation by the European Commission anti-dumping committee.

The steel industry is not all doom and gloom. An industry that remains innovative in which people continue to invest will create direct jobs, skills and broader regional economic growth. The steel industry has the potential to enjoy a long, sustainable, innovative and productive future. Earlier this month, for example, BOC, the biggest industrial gas company in the UK, signed a 15-year agreement to supply industrial gases to Sahaviriya Steel Industries UK, a major integrated iron and steel manufacturing facility based on Teesside in the constituency of my hon. Friend the Member for Redcar (Anna Turley) at the Teesside Cast Products site. The agreement is one of the largest gas contracts ever awarded in the UK. There has since been a turnaround, and the agreement represents a huge vote of confidence in the long-term sustainability of steelmaking on Teesside and the wider UK.

Another example, again from Teesside, is the cluster of energy-intensive industries in the Tees valley that recently set out a bold plan for the UK to lead the world in combining a growing industrial base with substantial reductions in carbon emissions. What is planned will be Europe’s first industrial carbon capture and storage network. CCS is a group of proven technologies that can capture, transport and permanently store up to 90% of carbon dioxide emissions produced by burning fossil fuels, thereby preventing them from entering the atmosphere. To date, the focus in the UK has been on commercialising CCS for electricity generation. Teesside Collective is an important departure; its premise is that a range of industries will be able to capture their emissions, plug them into a shared pipeline network and send them for permanent storage under the North sea. CCS is significant for the steel industry, as an energy-intensive industry, because the EU emissions trading system is likely to remain the primary driver of reducing industrial emissions up to 2030. Following the agreement of a new EU climate change package in 2014, sectors within the EU ETS will collectively need to reduce emissions by 43% between 2005 and 2030. Such reductions may be hard to achieve for sectors such a steel, but that type of programme offers a high-tech solution.

Projects such as the Teesside Collective may be crucial for the long-term future of the steel industry, and I welcome the support that the project has received from the Department of Energy and Climate Change. It is vital that the Government are proactive in supporting the steel industry. Such support does not have to consist of intervention similar to that in Italy, where the largest steelworks is in the process of being nationalised—incidentally, it is one of the worst-polluting steelworks in the EU. Government support could take the form of policies such as competitive energy prices and business rates. Following the review that ended in June, a swift, positive response is now required.

[Mark Tami (Alyn and Deeside) (Lab)]

My hon. Friend has talked a lot about energy prices, which are a problem. If energy costs move against a plant, it does not matter how efficient the plant is; it will be difficult for it to compete against foreign competition.

[Tom Blenkinsop]

My hon. Friend is correct.

[Stephen Kinnock (Aberavon) (Lab)]

My hon. Friend mentioned business rates. As we know, the lack of investment in machinery and technology is a major reason for the United Kingdom’s productivity crisis. The steelworks at Port Talbot in my constituency invested £185 million in a new blast furnace, which led to a £400,000 increase in business rates. Does he agree that we need to have a business rates holiday until the review is completed at the end of 2015? It is urgent that we increase competitiveness and productivity.

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[Tom Blenkinsop]

I thank my hon. Friend for that question. He makes an excellent point. To encourage further investment, which we have seen in Port Talbot and across the steel industry in certain areas, we need a response from Government about business rates, so that there is no deterrent to further plant and infrastructure investment by the private sector.

Further integration into industrial policy and essential long-term national infrastructure subjects that are actually followed through would give companies the green light to invest. At present, too many infrastructure projects fail to incorporate British-made products into their design. Government can promote procurement strategies that support domestic manufacturers, encouraging innovation and job creation by signing up to the UK Steel charter for sustainable British steel.

My final points relate to the people involved in the UK steel industry. At the end of May, we stood on the brink of the first national strike in the steel industry for over 30 years. That action, which included a 24-hour stoppage, was threatened after Tata Steel decided to axe the final salary benefits of the British Steel pension scheme. It was only avoided following an 11th-hour deal between unions and Tata Steel after Government advisers and the Advisory, Conciliation and Arbitration Service were called in. Under the modified scheme, steelworkers who are given approval to retire at 60 instead of 65 years of age will receive new ex-gratia payments from October 2020. Today, the ballot of union members over whether to accept changes to their pension scheme closed, and employees at the Tata Steel works in Scunthorpe and other places are expected to deliver a massive vote of confidence for the proposed changes to the British Steel pension scheme. That demonstrates how constructive and positive industrial relations can be. We want to maintain that and we have maintained it for over three decades. I hope the Minister takes that point back to her ministerial colleagues, especially in light of today’s news.

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

To reinforce the point that my hon. Friend makes extremely well about the history of pragmatism in the industry, is it not symbolic that we were on the verge of the first national steel strike since 1980 and the one before that was about half a century earlier? The industry has a good history of positive industrial relations that can be continued into the future.

[Tom Blenkinsop]

My hon. Friend is correct. The employees in the industry know that things could be shifted at any moment. In a globalised economy where capital can move in seconds, there is an understanding and a traditional trade union ability to get round the table and negotiate. Michael Leahy, the former general secretary of Community, always said that we believe in the force of argument not the argument of force. However, when an employer, or indeed a Government, tries to deny the democratic rights of employees in the workplace, it has to be taken into account. I hope the Minister will take that point back to her ministerial colleagues.

I mention pensions because when we are debating issues such as energy prices, productivity, emissions targets and so on, it is easy to forget that many of the communities we represent have been built from the hard work of steelworkers over generations. In the previous Parliament, I, alongside hon. Members here, pledged to stand up for steel, and that includes defending its workers, who have contributed a huge amount of their lives and expect a decent pension at the end. I do not think that is too much to ask.

The APPG members here have asked to meet the Secretary of State for Business, Innovation and Skills, and I believe that the vice-chair of the group, the hon. Member for Corby (Tom Pursglove), repeated that request in Business, Innovation and Skills questions. We would love to meet the Minister, if an audience with the APPG would be acceptable to her. We have also written to the Select Committees on Business, Innovation and Skills, which my hon. Friend the Member for Hartlepool (Mr Wright) chairs, and on Energy and Climate Change, as well as the Treasury Select Committee, asking them to investigate matters.

[Mr Iain Wright (Hartlepool) (Lab)]

I thank my hon. Friend, the chair of the APPG, for sending the Select Committee that letter. The Committee has not discussed it yet, but may I say on the record that I believe that the steel industry is vital to the future of manufacturing and the prosperity of this country? We must do all we can to ensure that it is innovative, competitive and viable for the long term. I will certainly push that point in the Committee.

[Tom Blenkinsop]

I thank my hon. Friend for that response.

We know that companies in the steel industry have already put in place future budgets for the compensation mechanism that will come through as a result of the Chancellor of the Exchequer’s previous commitments to a compensation mechanism. We need clarity and evidence to show that the Government are acting upon it. We also need the Select Committees to look into business rates, EU ETS decarbonisation, and the future of the industry in relation to skills. We have a workforce who are predominantly in their late 40s and early 50s. The issue might not be the lack of capital; it might be the age profile of the workforce. We need to take that on board and be serious about it.

We also need to look at the time it takes to train someone, whether in the processing or on the craft side. For example, I recently talked to Roy Rickhuss, the general secretary of Community, which is my trade union, and he said that it takes nearly three years to train a waterman who works in a blast furnace. That is probably the most important job in the plant: he is the guy who keeps the molten iron away from the water. Anyone who has ever witnessed a breakout, which is an unfortunate and serious event, knows how dangerous it can be. That job takes two to three years to train for. We need industrial activism, which does not just go to companies as urgent investment and does not just have public funding that supports that investment, but that looks at how we ensure that there is a succession plan for skills in the industry.

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[Tom Blenkinsop]

Thank you, Mr Chope. I really appreciate it.

I thank the Minister for her very positive and warm words about the industry. In the short period of time that she has been in situ, she has demonstrated that she is a far better Minister with responsibility for steel than her predecessor. With her support and advocacy within the chambers of Whitehall, we can get even more positive results.

I will end by talking about the compensation mechanism. That was a specific promise given by the Chancellor. We need to see information and evidence about that. I would like to work with the other members of the all-party group and the Minister in any meetings that we are able to have, whether they are with the Secretary of State for Business, Innovation and Skills or indeed with Treasury Ministers, so that we can get past the difficulties between Departments that the right hon. Lady referred to.

Nevertheless, I warmly welcome the Minister’s words today and I hope that we can build a working relationship in the future.

Question put and agreed to.