Steel Industry

Debate between Vince Cable and Andy Sawford

Wednesday 14th January 2015 Commons Chamber

[Vince Cable]

I thank the hon. Gentleman for the embellishment of the detail.

I hope it is accepted that the situation with the numbers and the trends arose under both previous sets of Governments and under both nationalisation and privatisation. Let me try to get to the bottom of the underlying problems with the industry, which are serious. The first problem is structural, and has absolutely nothing to do with decisions by industry or Government; it has to do with the nature of demand.

Technology is changing. If the Eiffel tower were rebuilt now, a third of the amount of steel that was used for its original construction would be required. Construction techniques and materials have changed. Even in industries in which steel has a major market and is a major success, such as the automobile and aerospace industries, it is already being driven out at the margin by composites. Let me give a little example. In my constituency, I am trying to bring about the restoration of a pedestrian bridge over an expressway. It is a steel bridge, but if Transport for London proceeds with the project, it will be replaced by a plastic bridge at a small fraction of the cost, and composite materials will be used. Technology, about which we can do little except to encourage it in an innovative context, is a key driver in the steel industry, in respect of both production and employment.

The second problem originated with the banking and financial crisis, which resulted in a massive cut in infrastructure spending. That cut was initiated in 2009, although, admittedly, the present Government have continued restrictions on capital expenditure. The contraction of capital spending and the ending of private finance initiative projects also contributed to the drying up of a great deal of infrastructure demand.

Thirdly and crucially, the steel industry exports more than it imports. That is a rather obvious point, but the hon. Member for Hartlepool did not refer to it. He talked entirely about import competition. What he did not mention was that for Tata and the other steelmakers, export markets are critical. A key export market is the European Union, and in the European Union there is a serious problem of excess capacity. Many steel plants in France, for example, have been mothballed. Anyone who tries to compete in the European market will be operating on very fine margins, and that is a serious problem for all the producers in Europe.

[Andy Sawford]

Roy Rickhuss, the general secretary of the Community union, along with steelworkers in my constituency and throughout the country, will be watching this debate. Fourteen minutes into it, the Secretary of State is still being entirely negative about our brilliant steel industry, about all its opportunities for the future, and about the solutions that we need from the Government to the problems that he is describing.

[Vince Cable]

In the remaining part of my speech, I shall explain exactly how we will deal with the problems faced by the steel companies, but it is right to be realistic about those problems. The companies are losing money, and we shall need to understand why they are losing money before we embark on policy action.

Fourthly, there is the fundamental problem of competition and high-productivity competitors. It is all very well to complain about unfair competition, and there may be some, but the most productive steel plants in the world are in Japan, Korea and, potentially, China. For decades there has been massive under-investment in the British steel industry. Tata has invested in blast furnaces in south Wales, but there has nevertheless been chronic under-investment, which is why there is a productivity issue in relation to overseas competition.