UK Steel Strategy

Lord Sharpe of Epsom Excerpts

Monday 23rd March 2026 Lords Chamber

Britain needs a steel industry for our national security, economic security and national interest. We need to ensure that Britain remains an internationally competitive steel-making nation not just because our past was built on steel, but because our future depends on it. I commend this Statement to the House”.

[Lord Sharpe of Epsom (Con)]

My Lords, only last year Ministers were forced to rush through the Steel Industry (Special Measures) Act, which was an emergency nationalisation of British Steel in an industry that they had helped to destabilise. That Act told us everything we need to know—socialists must seize the means of production because they are utterly incapable of creating, maintaining or managing it. Unfortunately, this strategy is a testament to that.

Since the intervention at British Steel, the National Audit Office has now reported on the actual cost. The taxpayer has been paying £1.28 million to British Steel every single day. This strategy was meant to be published last year but has been delayed many times because the Government have said that they needed to get it right. What they needed, it appears, was time to construct a protectionist nightmare—a scheme that throws up tariff walls of potentially up to 50% and showers subsidies on a narrow set of domestic producers, while leaving the downstream industries that depend on affordable steel to fend for themselves.

The Government tell us that this strategy is necessary because British steel producers face crippling energy costs and unsustainable labour costs. Whose fault is that? This Government have driven energy costs higher through the contradictions of their own net-zero agenda. This Government have loaded employers with higher national insurance contributions and the cumulative regulatory burden and costs of the Employment Rights Act. They now arrive with subsidies, presenting themselves as the saviours of the very sector they have helped to cripple.

We have seen this pattern before. It is the logic of the youth jobs subsidy: the Government manufacture hostile conditions then spend taxpayers’ money papering over the consequences of their own failure while the underlying damage festers untouched. It is always the taxpayer who must bear the full weight of this Government’s incompetence. Even after subsidy, the UK’s energy prices in the steel sector will be almost two and a half times those of the US, 15% above France and 25% above Germany. There was no mention at all of any Asian producers in the steel strategy. I wonder why.

On net zero, the Government cannot have it both ways. They have banned new domestic coking coal production in the name of environmental responsibility, but the United Kingdom now imports coking coal from abroad: 47% comes from the United States and 38% from the European Union. We are not, therefore, reducing emissions. We are offshoring them, and paying a premium to do so, while simultaneously claiming to be building a strong domestic primary steel industry on the very raw material that we have made it illegal to produce ourselves.

We are told that this strategy is a response to global overcapacity and that the world is awash with cheap foreign steel, undercutting our producers at every turn. I invite the Government to explain precisely what they mean, because some might recognise what they describe as overcapacity as competitive pricing. Cheap steel is not a threat to the British economy; it is a benefit to it. Lower input costs for our manufacturers, our construction firms and our aerospace and automotive sectors mean that those businesses can invest, grow and employ more people.

The Government propose to eliminate that benefit artificially in order to protect a narrow band of domestic producers, and the bill, as ever, falls to the taxpayer. We have already seen £377 million consumed by the emergency nationalisation of British Steel in under a year. Now, the Government are announcing another £2.5 billion. The consequences of this decision will be felt most immediately by the industries that depend on steel as an input. Consider, for example, the automotive sector. There is, on average, 900 kilograms of steel in every vehicle manufactured in this country. The sector supports over 150,000 jobs and is already under severe pressure. When President Trump imposed 25% tariffs on passenger vehicles, UK car exports to the United States fell 55.4% year on year.

Construction tells a similar story. It is the largest single consumer of steel in the United Kingdom, accounting for about 53% of all domestic steel demand, and it is already suffering its fourth consecutive quarter of falling output. I ask the Minister directly: have the Government assessed the cost that these tariffs will impose on the construction sector? If they have, that assessment is conspicuously absent from the strategy.

There is a deeper contradiction that the Government must answer. They offer two arguments for these tariffs. The first is overcapacity: too much foreign steel flooding the market, creating supply so abundant that it undercuts our producers at every turn. The second is national security: we are dangerously exposed to unstable foreign supply and cannot afford dependence on it. But these two arguments cannot coexist: if the world is drowning in cheap steel then supply is, by definition, abundant; if foreign supply is genuinely precarious and could be disrupted then the overcapacity does not exist. Which is it? Is there too much steel in the world, or too little? Until the Government can answer that question honestly, this strategy has no coherent foundation whatever.

The national security argument also deserves further scrutiny on its own terms. The Government’s own data reveals that direct defence procurement requires around 36,000 tonnes of steel per year. Total domestic steel demand runs between 9 million and 11 million tonnes. Defence procurement represents less than 1% of total demand. The notion that we require up to 50% import tariffs and billions in state subsidy to secure that supply is a protectionist canard. Genuine strategic resilience is achieved through diversification—sourcing from the widest possible range of allies and partners. A supply chain built across allied democracies will be far more resistant to even the most radical geopolitical events.

If the Government wish to understand how world-class industries are built, they need look no further than some of our own. Financial services, life sciences and Scotch whisky between them are worth tens of billions in exports and, in many cases, are the envy of the world. Not one of them was built through the protectionism of the state. They were built through open markets, accumulated capital and the freedom to compete.

The Government have set a target of 50% steel production. Can the Minister commit today to providing the House with regular updates on progress toward that target? Will the Government tell us what the exit strategy from public subsidy is and when private sector investment is expected to replace it? What does the future of British steel-making actually look like, and who will build it? Any new entrant to the British steel market today will still face high and rising electricity costs, banned domestic coking coal, import quotas raising the cost of scrap metal inputs and a market dominated by subsidised incumbents with the full backing of the state.

This side of the House is not indifferent to the communities whose livelihoods depend on steel, nor to the genuine strategic importance of manufacturing in this country. But we do British industry no favours by raising input costs for every sector that depends on steel, and we do this country no favours by abandoning the open, competitive, capital-generating approach that made us a strong economy in exchange for a protectionism that serves the few at the expense of the many.

[Lord Fox (LD)]

My Lords, I thank the Minister for the Statement and welcome that there is a strategy here, although, as the noble Lord, Lord Sharpe, said, we were expecting it for some time. However, given what is happening in the world, reading this document conjures the image of someone trying to put up a tent in a howling blizzard, and at the heart of the blizzard are the energy market ructions caused by the Iran conflict.

The UK’s industrial energy costs were already at least twice those of the EU and four times those of the USA. The noble Lord, Lord Sharpe, and I have different multiples, but they are all very large. It is not clear to me whether these distortions that are already there in the UK energy pricing system will increase the gap as a result of the Iran issue as it bites. I doubt the gaps will narrow.

As the strategy sets out, the British industry supercharger scheme helps those companies that benefit from it. However, the steel industry comprises very many businesses, large and small, that do not qualify for the supercharger, although some may qualify for the British industrial competitiveness scheme—BICS. Can the Minister say how many steel-related businesses will benefit from BICS? However, BICS does not kick in until 2027. Given what is happening internationally, will the Minister undertake to speak with her Treasury colleagues about bringing forward the implementation of BICS? In any case, we should note that while the supercharger scheme exempts recipients from network charges, BICS does not, and those network charges are set to increase by a staggering 60%.

These are just a few of the reasons why, unless the Government revisit the energy costs issue, the steel strategy will quite simply be blown away.

Among the more eye-catching and concerning parts of the strategy are the new trade measures to introduce tariff-rate quotas and the possibility of, in future, raising most favoured nation—MFN—applied tariffs to 50%. Late last year, the Trade Remedies Authority ran its rule over imports of rebar from Vietnam and made recommendations to the Secretary of State. This was an entirely appropriate use of that body; indeed, it is what the body was created to do. Having worked on the Trade Act, which established the TRA, at the start of this decade, I see that it clearly has an important role, particularly given the wider scope of the potential actions set out in the strategy. But I do not see any reference in the strategy to the role of the TRA. Have the Government asked the TRA for its recommendations? When could we expect its report? It seems inappropriate to act without that authority.

Next, in his answer to questions in the Commons, the Secretary of State confirmed that there has been discussion with his EU counterparts and that the discussion would continue when they meet at the WTO. Can the Minister confirm that for the purposes of these discussions, steel’s treatment in the TCA—the trade and co-operation agreement with the EU—is equivalent to its treatment in an FTA; in other words, from a WTO perspective, is the TCA equal to an FTA? Furthermore, can the Minister say how, for the purposes of these discussions, the Government are treating the MoU with the USA regarding steel? I assume it does not have the status of an FTA, so how will this modify what we can legally do under the WTO with the United States?

I turn to the local impact of this strategy, which means that there remain question marks for a lot of our communities. My honourable friend in the Commons, David Chadwick MP, spoke very forcefully about the importance of steel to Wales and its economy. He also reinforced the need for faster action in ensuring that the electricity used, for example, to power the arc furnaces is green energy. I strongly commend his comments.

In geographical terms, I would like to highlight the South Yorkshire area, including Sheffield, where there is a host of important steel businesses. It is not just down to the headline firms; there are many other important businesses further down the supply chain that make up this vital steel ecosystem. These kinds of ecosystems are echoed all over the country. The Statement says the defence growth deal will be established in five areas, including South Yorkshire, as part of the defence industrial strategy. Can the Minister tell us when full details will be published? When will a defence growth deal be operational?

To support the effectiveness of a growth deal, a colleague of mine from Sheffield Council, with a strong steel background, suggests that a defence manufacturing supply chain database be built to include the hundreds of thousands of smaller tier 2 and tier 3 suppliers that are critical to our sovereign capability. In this way, the whole sector can be explicitly brought into the realm of the defence growth deal. Noble Lords will be surprised, I think, to know that there is no such survey and no such data available.

I was able to see how the Aerospace Growth Partnership worked effectively with its supply chain, and perhaps the Minister might like to look at how that operated and try to put the same principles into practice for steel. We on these Benches share the Government’s ambitions for a robust and growing steel sector, and we believe that this strategy makes some steps in the right direction. However, the already significant headwinds just got a whole lot worse. That is why success will depend on further action on energy, clarity on tariffs and a truly inclusive growth strategy.