Steel Industry

Nic Dakin Excerpts

Thursday 3rd November 2016 Westminster Hall

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

I beg to move,

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

I draw the House’s attention to my entry in the Register of Members’ Financial Interests as a member of the Community trade union. I thank my hon. Friend the Member for Redcar (Anna Turley) for co-sponsoring the debate, which is much needed to get the steel industry crisis back on the national agenda.

The steel industry is not a dead or dying industry. That is something I and colleagues here today have repeated throughout the crisis and prior to it. I know everyone here understands the importance of the industry, but some confusion persists, so I hope colleagues will understand if I reiterate why the steel industry is particularly significant to the UK.

Fundamentally, steel is a strategic and foundational industry. If the Government want to rebalance the economy away from London and to build our manufacturing sector, they simply must support the steel sector. The products of our steel industry supply the booming automotive manufacturing industry and the aerospace manufacturing industry, among others. A successful steel industry helps those industries and a weak one damages them. As well as being the foundation for other industries, steel is strategically important because it allows us to retain the capacity to build infrastructure projects, from Trident to transport to energy. It means our security, our ability to compete and our ability to keep the lights on are not dependent on other countries.

As an aside, look at the problems the French Government are having in building the Flamanville EPR nuclear reactor. In the summer, France’s nuclear safety authority found weaknesses in what I believe is Japanese-made steel in the reactor, which further delayed the project and raised safety concerns. British steel, such as that made at the main competitor to that manufacturer, Sheffield Forgemasters, is more reliable, and I hope it will be used in the similar Hinkley Point C EPR reactors. That is a simple example of the importance of using high-quality steel for infrastructure and why choosing to use British steel for such projects is not just the patriotic choice, but the best choice.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate my hon. Friend on securing this important debate. Does he agree that if we really are concerned about taking back control, we need control of our steel industry, so that our infrastructure is built with UK steel?

[Tom Blenkinsop]

I thank my hon. Friend for raising that point. There have been warm and welcome words from the Government about an industrial strategy. The Opposition have been talking about that for the past six years, but be that as it may, the Government are there and we want to work with them over the next few months to form that industrial strategy. There are immediate issues that need to be resolved, hopefully in the autumn statement, and there are further long-term issues in relation to an industrial strategy, how we form that strategy by sector and how the steel sector needs specific treatment in order to go forward.

The other aspect of the steel industry’s significance is the jobs it provides, the communities it forms and has formed, and the culture of which I am proudly a part. More than 30,000 people work in the steel industry, from watermen to control panel engineers and from craft workers to lab technicians. What is important is not only the numbers but where in the country those jobs are, because as well as adjusting the mix of our economy to include more manufacturing, a long-term aspiration of successive Governments has been to rebalance the economy away from London. The UK steel industry supplies more than 10,000 jobs in Yorkshire and the Humber, 8,500 in Wales, 4,000 in the west midlands, 2,000 in my own region, the north-east, and at least 1,000 in Scotland. Those regions are desperate for jobs and investment, and they have been the worst hit by the decline in manufacturing and domestic industry.

Simply put, if the Prime Minister is serious about spreading opportunity around our nation, she cannot abandon the steel industry. Steelworkers across the UK are not asking for charity, merely for access to a level playing field on which to compete with steelmakers from across the world, but in a number of ways, UK steel is fighting an uphill battle. The trade tariffs that protect American steel producers from Chinese steel are many times those in place to protect British producers. Despite limited Government assistance, energy for British steel producers remains more expensive than for our European competitors, and Government-led infrastructure projects, most recently Trident, continue to use foreign-made steel instead of British alternatives.

Where our industry can compete and has been leading the world is in our people and our skills. It is difficult to estimate the value of the institutional knowledge and experience in Port Talbot, Stocksbridge, Skinningrove or Sheerness, but it has helped those communities to stay afloat and their steelworks to function. The Materials Processing Institute in Teesside is producing world-leading research, and has received visits from German, Slovak and Swedish Government representatives who wish to draw on our expertise in this country.

It is testament to the combination of those institutional skills, the experience of steel communities around the country and the cutting-edge research of institutes such as the MPI that the productivity of the steel industry has consistently improved over the last decades. It is for those reasons that the UK steel industry should be seen as an opportunity—a reservoir of potential—rather than, as it is sometimes called, a burden on a modern economy.

We should be wary of how quickly that reservoir can evaporate. A steel or metals industry cannot be created from scratch overnight. The average age of a steelworker is growing, and the current crisis means fewer young people are coming into the industry. Without a secure future, the skills developed over decades could be lost. Those skills are not important only for the steel industry. I recently met representatives from Metalysis—a company that uses an innovative process developed at Cambridge University to produce metal powders and alloys that will be vital for 3D printing—who emphasised to me the importance of those skills grown in the steel industry for their business. To allow that experience and research reservoir to dry up with the decline of the steel industry would not merely affect the future of steel in the UK, but would cut off our competitive advantage for the metals sector.

Rather than let that advantage disappear, we should build on that potential by creating a steel sector catapult and a metal materials strategy, through which knowledge can be shared, built upon and turned into results for British industry. I hope the Government will work with MPI and members of the all-party parliamentary group on steel and metal related industries to fashion a new bid for that catapult. That is something the Government could commit to today that would show that they are serious about the future of the industry. I hope the Minister will remark on that later.

Steel in the UK is not an odd nostalgia but a viable industry with a future. It does not need charity but access to a level playing field on which to compete. If given that access, it is reasonable to believe the industry could be the world leader it already is. There are immediate challenges, though. The five asks on energy costs, business rates, Chinese dumping and procurement have still not been fully delivered on by the Government, and they demand the Government’s immediate attention. They can be acted on now and the solutions announced in the autumn statement.

The drop in sterling and the change in global steel price is not a solid foundation on which to build the steel industry’s future. The Government must not believe that their short-term work is done. They must take action, with long-term milestones and with a long-term view, so that not only people in the House know where they stand, but investors in the industry know exactly what the 20 or 30-year view is, and associated industries that rely on steel know exactly what to expect.

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[Mr Peter Bone (Wellingborough) (Con)]

It is a great pleasure to follow the hon. Member for Penistone and Stocksbridge (Angela Smith), whose speech was very good—for at least the first two thirds. It was a very good speech and she made a strong case for the special steel produced in her constituency. I also liked the plug at PMQs for the Prime Minister to do her best when she goes to India. Years ago, I was on the Select Committee on Trade and Industry and I remember a huge business tycoon from India. I asked him, “What is the one thing we could do to boost trade between our two countries?” He said, “Pull out of the EU.” At that time, of course, nobody ever thought that would happen, but now he will get his wish. Absolutely, too, on shale gas, that makes obvious sense.

I also congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop). I always think that Westminster Hall is where we have the best debates. We do not get the party-politics nonsense that we sometimes have in the main Chamber. The way in which he made his speech will allow the Minister to deal with it in a very grown-up fashion. It was also particularly courageous to make the points he did against his party’s current policy in some regard. I will return that, I hope, and say some of the things that I think have gone slightly wrong in the debate on steel.

My interest is also connected with that of my right hon. Friend—sorry, my hon. Friend the Member for Corby (Tom Pursglove); he should be right honourable. My constituency abuts his, and a lot of my constituents work in and supply goods and services to the Corby area. I suppose I should also declare that I spent 13 years in south Wales and regularly played cricket close to the steelworks—off my bowling, the ball quite often landed in the steelworks.

As all hon. Members here will probably say, British steel has a future. Not only that; it has to have a future. It is a strategic industry. There have been two Governments recently—the one under David Cameron, and the new Government, under the new Prime Minister—and there has clearly been a shift in emphasis. What I would criticise about the previous Government is the slowness with which they did things. Very early on, when there was clearly a lot of working together and establishing things that needed to be done, such as reforming business rates and dealing with energy costs, the previous Government said, “Let’s deal with Chinese dumping.” But we did not seem to be getting there as quickly as we should have. With the new Government, things have moved on a lot.

Let me deal with the thing about free trade, the Chinese and dumping. Yes, a lot of us believe in free trade because we think it benefits everyone, but free trade does not mean that one country can dump its products in another country. Countries cannot sell their products below cost or with huge subsidies. The reason it is done, of course, is that with things such as steel, there are large fixed assets. The marginal cost of producing the steel and selling it at a loss allows those fixed assets to be kept. That is exactly what the Chinese are doing, which is why we should impose severe tariffs—not for protectionism, but because they are dumping. As any free trader will say, dumping is absolutely not allowed. I listened to the arguments about how dumping would work or did not work in the EU. I think my views on the EU are pretty clear, but we are where we are now and we must look at the advantages.

Let us look at the single market argument. I have only been in Parliament for 11 years. Before that, I was in the manufacturing business. Of course, exporters want to have something that other people want, and they want to be able to sell it. If a tariff exists, and the exporter pays the tariff and sells the product, that is fine, but it is better not to have the tariff in the first place. The exporter wants free trade access to their customers, which is not the same as a single market. If we did not have that, and there were world trade rules, exporters would pay a tariff. But let us look at what has happened since we have come out—since the referendum.

[Nic Dakin]

We have not come out yet.

[Mr Bone]

No, unfortunately we have not.

Since the referendum, sterling has fallen by, say, 17%. That makes exports to the EU 17% cheaper and exports into the UK from around the world 17% more expensive. Therefore, a small tariff is irrelevant because we have already had a huge dividend from Brexit. There has been a lot of confused talk around the subject. I absolutely agree with putting tariffs on China—and other countries, if they are dumping—but I do not agree with the idea that somehow there will be a huge problem if we have world trade rules because 50% of exports go to the EU. Clearly we have benefited enormously from the devaluation of sterling. I know that a lot of people want to speak today, but we must look at two issues: the benefit of sterling and the fact that we can absolutely believe in free trade while absolutely having tariffs on dumped goods. That is rather important.

Finally—I really do appreciate that there is a time pressure—I agree entirely with having British steel for British goods. Rushden Lakes is a large development in my constituency, and all the steel there is British. Today, the Government announced a new prison for Wellingborough—I apologise that I must leave the debate temporarily to deal with a matter to do with that prison —which is an opportunity to use British steel. There is a great opportunity for us in the future. The work of the all-party parliamentary group and other hon. Members here today has kept British steel on the agenda. I think the new Government have listened, and I am really very positive about the future of steel.

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[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Betts. I am delighted to follow the Chair of the Business, Energy and Industrial Strategy Committee, my hon. Friend the Member for Hartlepool (Mr Wright), who put forward such a comprehensive case, after so many excellent contributions already to this debate. I want to begin by paying tribute to everyone working in our steel industry and its supply chain. They make a massive contribution to the UK economy and to communities such as mine in Scunthorpe, where I live.

In September 2015, when I asked the then Prime Minister to call a steel summit, many on the Government Benches were sceptical of the need. By the time the summit took place in Rotherham, however, it was crystal clear even to them that the steel industry was in crisis. Now, just over a year on from the summit and the collapse of SSI on Teesside, a further 6,000 jobs have already been lost from the industry. There remains, therefore, a pressing need for Government action.

The long products business, centred on Scunthorpe, was taken over by Greybull Capital and relaunched as British Steel in June 2016. It is to the enormous credit of the workforce and management that the business is operating at a surplus. The leadership shown by Community, Unite and the other trade unions, alongside the management team, has been crucial to that success, but they would say with one voice that there is still much to do to deliver the sustainable future that everyone wants to see. I welcome the sense of greater certainty for Scunthorpe expressed by the hon. Member for Corby (Tom Pursglove). This is just another chapter and we need support from the Government. We do not need the Government to assume that everything is okay now.

The Government have a crucial role in helping to deliver. They can set the climate and the context for delivering the level playing field that our steel industry needs to prosper. There is a real, palpable concern that, as my hon. Friend the Member for Hartlepool said, the Government’s eye is once again off the steel ball as it grapples with Brexit and other issues. As a result of the immense popular pressure exerted by steel unions, steelmakers and MPs for steelmaking constituencies, the Government set up several working groups on the key issues of concern after the summit in Rotherham, but there is yet to be any real traction as an outcome of that work. There is now a Department with “industrial strategy” in its name, and we have yet to see whether that is anything more than a welcome strapline. The Government now manage to talk the talk, but we still do not know whether they will walk the walk, as we want them to.

Procurement is a case in point. One of the most tangible outcomes of the Government’s work in the past year was the new procurement guidelines that ensure that social and economic factors can be taken into account in steel procurement. However, the Government appear to have fallen at the first hurdle. The Defence Secretary, a former steel Minister, was happy to cut the first steel, marking the start of the work on Trident submarines, the only problem being that it was French steel. That is not exactly the vote of confidence in UK steelmakers that we all want. When I asked the Prime Minister in one of her first outings at the Dispatch Box whether UK steel would be used in Trident’s successor submarines, she said that

“where British steel is good value, we would want it to be used.”—[Official Report, 18 July 2016; Vol. 613, c. 566.]

I tell the Prime Minister, the House, and the public that British steel is good value. It is the best value.

It has taken a lot of parliamentary questions to try to establish why UK steel was not used for the hulls. Answers suggest that there was not a viable UK bid, without giving any inkling of what “viable” might look like. It also looks as though the new procurement guidelines were not applied, although the Government say that they would be in future. I welcome the written answer in which the Minister said that, and wish him the best of luck in his role.

In October 2015, Scunthorpe’s plate mill was mothballed and facilities in Scotland were closed. Confidence about procurement lines in relation to successor submarines might have led to a different outcome. That is a reminder, as my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) said earlier, of the need to ensure that the capacity to make the right sort of steel is available in the UK when it is required for large infrastructure projects. That demands a decent timeline of planning and certainty, which we have clearly not had in recent years. The steel sector Catapult is a potential benefit to give us extra traction in that area. I hope the Government will push forward with it and answer the questions raised by my hon. Friend the Member for Redcar (Anna Turley) in her powerful contribution.

The long-awaited announcement about Heathrow was accompanied by a clear statement from Heathrow that it intends to use UK steel in the construction of additional airport capacity. That is the sort of clear, forward-thinking decision making that is in the interests of everyone. It is leadership in action and we want more of that. That is why I welcome the Scunthorpe Telegraph campaign for High Speed 2 to be built with UK, preferably British, steel. The Scunthorpe Telegraph is adding its campaigning voice to mine and those of the Community union and others who have been making these arguments for some time. It is a very welcome move by a strong, campaigning local newspaper. HS2 is a massive public infrastructure project, forecast to require 2 million tonnes of steel, and we know that we have the expertise and the capacity to manufacture the necessary rail, long products and steel plate in British Steel, centred on Scunthorpe.

To be fair about rail procurement, we have the best example of best practice in the way that Network Rail has developed and delivered its procurement practices over the years, but that should not be an exception. It should be a template for others to learn from and aspire to. We also have the capacity to produce the steel needed for North sea wind farms being built as part of the massive Hornsea project. My area is rightly proud of the opportunity that the Humber, as the energy estuary, offers for development and jobs locally. It would be a missed opportunity if Dong were to ship in steel from elsewhere to build that crucial infrastructure. However, I fear that it may, like BAE Systems, dodge the Government’s new procurement guidelines.

When I met Dong representatives recently, I took the opportunity to remind them that it is UK taxpayers who are underwriting the generous contract for difference deal that they have been awarded. It is UK energy bill payers who will pay for the electricity that their wind farms produce. Every effort should therefore be made to ensure that UK steelmakers have the maximum opportunity to provide the steel for that massive infrastructure project. The Government’s new procurement guidelines should be followed for such projects, which benefit from huge Government support, and not only for projects that come directly from the Government. The procurement guidelines should be followed, and companies such as BAE Systems and Dong should not be able to dodge under the bar. I hope that the Minister will respond to that point.

While we consider infrastructure projects, let us not forget that if we develop shale gas extensively in the UK, we should have the procurement policies and practices to ensure that high levels of UK steel content are used. The same arguments apply as for wind and all other forms of energy. Local procurement is also important, which is why it is so positive that a large number of councils—including, to its credit, North Lincolnshire Council—have made a commitment to sustainable steel. I am delighted with the public commitment made by Scunthorpe United—the mighty Iron, currently riding high at the top of League One—to using local steel in the construction of their new football stadium. Procurement is an area in which the Government have taken steps, but they need to do better. We need not just good words on paper, but actions on the ground. The Minister is picking up the baton from a good Minister, the right hon. Member for Broxtowe (Anna Soubry), but the baton is full of words and he needs to turn them into actions.

The forthcoming autumn statement could give us support on business rates, energy costs and grants for energy efficiency. Action on all those things would be beneficial. Let us hope that the new Chancellor takes the opportunity to show his mettle, show he is an iron Chancellor, and make commitments to the steel industry in the autumn statement.

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[The Minister for Climate Change and Industry (Mr Nick Hurd)]

I will certainly do that, Mr Betts. It is a pleasure to serve under your chairmanship and to welcome the new shadow Minister, the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss), to her place.

It has been a really good debate. I know I am meant to say that, but I mean it. Anyone listening to or reading the debate whose livelihood depends directly or indirectly on this critically important sector will be in no doubt about the passion felt for the sector by their elected representatives, on both sides of the House, who have championed their interests, and none more so than the hon. Members for Middlesbrough South and East Cleveland (Tom Blenkinsop) and for Redcar (Anna Turley), who made this debate happen and who have spoken so effectively.

I do not think that I or anyone will ever give the hon. Member for Redcar full satisfaction on an explanation for the past, but she knows from the meeting that she had with me and the Secretary of State that we are determined to do everything we can, on top of the support for the taskforce, to support and engineer a beautiful rebirth of the site to the best of our ability. I repeat my offer to visit at whatever point is appropriate and valuable. The hon. Member for Middlesbrough South and East Cleveland gave a masterful speech. It was extremely well informed and constructive, and contained a good mix of challenge both for his party’s Front Bench and for the Government.

Out of respect for the debate, I am going to resist what was already a weak urge to simply unload a section of prose prepared by civil servants. I will do my best to try to respond to the debate. First, I must do something important, which is to register our complete understanding of the frustration about the uncertainty, which various Members have expressed. That is entirely understandable. I will go further and say that the Government share that frustration, because we are deeply worried, as I will come on to say, about the deep structural difficulties that the sector faces in both the long and short term.

As most Members who know more about this industry than I do will recognise, those underlying issues are extremely complicated, and therefore the solutions that the Government can implement that would have a long-term, sustained impact—that is what we should be about—are not that straightforward. I will be very frank: we are also frustrated about the pace and speed at which decisions are being taken in the private sector. I give full assurance to the Members who probed on that point that, although we might be in a slightly different age, when the steel industry is not necessarily on the front page of the newspapers, the Government are deeply aware that the difficulties have not gone away. We are fully engaged at all levels—ministerial, Secretary of State and official—to stay as close as we can to all the complex conversations that are going on. Our message to everyone is that we are here to support a long-term, sustainable future for the sector.

I refute and push back on the suggestion that underlay a number of speeches: that the Government’s eye is somehow off the ball. That is not true. We absolutely share the view expressed in the debate—I heard the Secretary of State say this directly to the chief executives of the industry—that this is not an industry with a past or a sunset industry, as the hon. Member for Hartlepool (Mr Wright) called it, that we should look at through a lens of nostalgia. We are interested in working together with the sector, stakeholders, the all-party parliamentary group, the Select Committee and everyone else who wants to shape the industry, to present a story around the sector of growth and seizing some of the very real opportunities that are out there. We are entirely sincere in that view and in that determination.

It is worth restating that that is not just because of the importance of the sector, which employs 31,000 people, or because of the huge weight and importance it has to the fundamental identity of many towns across the country represented here today, its value in terms of exports, or the fabulous opportunities that we see for it to be positioned as a dynamic component in an invaluable supply chain, supporting some of the industries where we see big opportunities for growth—the hon. Member for Hartlepool mentioned a couple of those, such as the automotive industry and offshore wind. It is not just for those reasons, but, as the hon. Member for Middlesbrough South and East Cleveland and other Members described, because we see it as a foundation sector underpinning the infrastructure of this country. It is, in that respect, strategic. We are determined—I echo the words of my long-standing hon. Friend the Member for Wellingborough (Mr Bone)—that this sector has got to have a future. We must collectively shape that.

In that context, we totally understand that, even though there may have been some short-term improvement in trading conditions, we cannot be deceived. The Secretary of State and I had a meeting with the chief executives of most of the major companies last week, and they were very clear that trading performance is improving in some ways, but they do not trust that to be sustainable. The overwhelming, crushing issue is that the picture of overcapacity in the industry has not changed, despite some shifts at the margins. Demand remains weak, the volatility of raw material prices is an issue, particularly for coke, prices remain a problem and the spread remains a concern. In conclusion, the situation remains very difficult. We have no illusions about that.

Some of the rhetoric has been: “The Government are all talk. It’s all words.” I am not complacent about this, but I need to state categorically, and to echo the words of my hon. Friend the Member for Corby (Tom Pursglove), that although the work is not done, action has been taken in some critical areas. We are aware that energy costs—specifically industrial electricity costs—remain a significant problem, but since 2013 more than £120 million- worth of public resource has been effectively reallocated to the steel sector to mitigate these problems. To anyone who describes that as limited, I say that my constituents would not consider £120 million to be small change. I know that is appreciated by the industry, and anyone who says that it is just words on this issue is wrong.

[Nic Dakin]

I am not surprised that the Minister pointed to that, but does he accept that the support was very slow in coming? It took about three years from being promised to being delivered. We do not want that sort of sloth from the Minister and the Government now.

[Mr Hurd]

I hope I have never been associated with sloth—my mother might disagree. I do not know the background to it fully enough, but the more substantive point is that, despite that weight of money, more clearly needs to be done. We have not solved the issue. The pace may be important, but the fundamental challenge for us all is that we have not cracked the problem.