End of day adjournment debate (Commons) on UK Steel Industry - Sep 14

Jessica Morden (Newport East) (Lab)

I am grateful to have the opportunity tonight to talk about some of the challenges and the opportunities facing our steel sector, both as co-chair of the all-party parliamentary group on steel and metal related industries along with the hon. Member for Scunthorpe (Holly Mumby-Croft) and the secretary, my hon. Friend the Member for Aberavon (Stephen Kinnock), and on behalf of my constituents who work in Tata’s Llanwern site and Liberty Steel in Newport East.

I pay tribute to all those who work in the UK steel industry. They are a dedicated and highly skilled workforce, making world-class products.

Holly Mumby-Croft (Scunthorpe) (Con)

I am proud to have spent eight hours in our local steelworks in Scunthorpe in the recess. Choosing to do it on the hottest day of the year was perhaps not my finest move, but I agree with the hon. Member that our steelworkers are incredibly hard-working, dedicated people, and it is hot and difficult work. I hope that she will join me this evening in calling for the Minister to consider setting targets for the amount of UK steel used in public projects; for steel specifications to be published using UK norms; for the long overdue steel public procurement pipeline to be published consistently; to push for other Departments to sign the UK steel charter and for Government-linked projects such as HS2—

Madam Deputy Speaker (Dame Rosie Winterton)

Order. I suspect that there might be quite a few interventions in the debate. It is only half an hour, and it is the debate of the hon. Member for Newport East (Jessica Morden). I hope that any interventions will be short.

Jessica Morden

I thank the hon. Member for Scunthorpe for her intervention and wholeheartedly agree with what she said. I will go on to say more about that later.

Our steelmakers have a pride in and passion for making steel, despite the sacrifices they have made in difficult times—and there have been some. During the pandemic, some steelworkers have had to be furloughed as demand has dropped.

Ruth Jones (Newport West) (Lab)

I commend my hon. Friend and neighbour for bringing this important debate to the Chamber tonight. Does she agree that the UK Government must do all they can to ensure that the jobs of steelworkers across the UK are protected as we come out of the furlough scheme?

Jessica Morden

That is important for so many sectors and jobs, including the steel industry in our city.

Jim Shannon (Strangford) (DUP)

I congratulate the hon. Lady on bringing the debate to the Chamber. This will be a short intervention. Is she aware that Northern Ireland has a strong steel industry based on many individual contractors and that consideration must also be given to supporting the subsidiary jobs and industry throughout the United Kingdom? It is not just Wales; it is Northern Ireland, Scotland and England.

Jessica Morden

It is the UK steel industry. The hon. Member makes an important point, and I hope the Minister will address it later.

Some steelworkers have had to be furloughed as demand dropped in their parts of the business, but others have continued to make the essential steel we have needed in this crisis for the beds in the Nightingale hospitals, the urgent hospital extensions, the food and drink industry and more. As hon. Members here tonight with an interest in steel know—I am pleased to see so many here tonight at this late hour, including on the Front Bench—steel is everywhere and fundamental to our lives. Steel must play a crucial part in the UK’s post-pandemic recovery. Our plants stand ready to play their part in that with the right Government support, and that is what we ask for tonight.

Like almost every other sector of the economy, the UK steel industry has been hard hit by the pandemic, with steel producers reporting that orders have fallen by around 50% since March. At the start of the pandemic, the Chancellor promised the British public that they would not face the crisis alone and that the Government would undertake unprecedented measures for unprecedented times. However, as of today, only one company has received vital emergency funding. There has been much talk of Project Birch, but little news. I know that the Government have been in ongoing talks with steel companies in the last month about liquidity support.

Mark Tami (Alyn and Deeside) (Lab)

The issue is that the steel industry was not in a great place before covid, and the danger is that if we get steel being dumped by China or other countries, then we really are on the brink.

Jessica Morden

I absolutely agree and will come on to say more about that later. I know that hon. Members would appreciate an update from the Minister about how that is going and the plan to secure jobs and the future of our plants.

The UK steel sector employs about 32,000 people directly and 41,000 more through supply chains. It is estimated that these jobs pay 28% higher than the average salary. In steel strongholds like south Wales and Yorkshire, this increases to about 46% higher than the average wage. These are better-paid jobs in communities that really need them. The impact of the pandemic on our steel industry has consequences not only on a local level but on a national level. UK steel contributes a combined £5.5 billion to the UK economy and £3.2 billion to mitigating the national trade deficit through exports produced. That is because steel is a foundation industry for many other sectors: engineering, construction, transport and renewable energy, to name just a few. Steel forms the backbone of our manufacturing sector, and the industry stands ready to supply the world-class steel that will help us to build back better. This is the key message of the “Britain, we need our steel” campaign, which has been launched by the Community, Unite and GMB trade unions, to which I pay I tribute for the work they do to stand up for our steel industry in this country. I hope that all hon. Members here tonight will be actively supporting this campaign.

We need the Government to ensure that all Government Departments now sign up to the UK steel charter. I am pleased that the Welsh Government were one of the first signatories. This would commit the Government to prioritise UK steel in procurement for infrastructure projects. Back in June, the Prime Minister said that the Government will

“do absolutely everything we can…to ensure that UK steel manufacturers are at the front of the queue for the great projects that we are going to construct.”—[Official Report, 24 June 2020; Vol. 677, c. 1311.]

We will hold the Prime Minister to that.

Getting procurement right is key. There are concerns, which some of my constituents share, that any benefits from HS2 will not be greatly felt in our communities in south Wales or, indeed, those outside striking distance of the proposed route. The APPG’s “Steel 2020” report argued that Government procurement and other incentives should be used to increase domestic steel content in manufacturing and construction, as there is clearly a market opportunity. A study of future demand by the Department for Business, Energy and Industrial Strategy shows that UK consumption will climb from 9.5 million tonnes of steel to 11 million tonnes by 2030—a £4 billion a year opportunity for UK producers if the right measures are in place. Currently, less than 50% of steel used in Government-funded projects is British-made. This simply must change going forward: there is much, much more to do. Phases 1 and 2 of the HS2 project combined will require 2 million tonnes of steel, including for tracks, train components, bridges, tunnels, gantries, wire and more. UK steel producers could and should provide 90% of the steel needed for HS2. This is steel that should be made here and not imported.

The broader steps for the UK Government are set out in the UK Steel paper, “Covid-19—Restart and Recovery”. Will the Minister tell us what steps the Government are taking to ensure that all major infrastructure projects set minimum targets for UK steel content, and that all Government-funded projects establish a clear preference for sourcing steel from domestic producers? Will he outline the actions that he has undertaken to encourage all Government Departments to sign up to the steel charter? The Government must do what they can to create the right environment for UK steelmakers in the long term, including a UK sector deal to sit alongside the existing deals for manufacturing industries such as aerospace, construction and automotive, all of which are inherently linked to steel.

Matt Western (Warwick and Leamington) (Lab)

My hon. Friend is making some very important points. On the automotive sector in particular, we need to concentrate on the supply of electrical steels from the Orb plant, which is of course mothballed. I understand that with £50 million of investment support from the Government, it could be resurrected in a matter of months.

Jessica Morden

My hon. Friend makes an important point about the Orb steelworks, which closed recently. I will expand on that at the end of my speech, if that is okay.

Change is needed to help UK businesses compete internationally, particularly on energy costs, which I and other colleagues on the APGG have been banging the drum on for a number of years now. This significant challenge for UK steel producers has not gone away. British steel producers pay the highest electricity prices in Europe—80% more for energy than their French counterparts and 62% more than German companies. This creates an enormous additional cost burden on the UK steel sector every year and hampers productivity. Will the Minister update the House on what the Department is doing to extend the indirect carbon price compensation scheme for energy-intensive industries, which is currently due to expire at the end of the year?

In response to parliamentary questions, Ministers have said that the ability of industries to compete across Europe and globally is a priority. It is now time to back up those words with action. It is vital to the sector to maintain current trade flows with key markets. A central concern for the steel industry as we get closer to January is trade with Europe.

Stephen Kinnock (Aberavon) (Lab)

My hon. Friend is making a powerful speech. On the issue of safeguards to ensure that we can continue to sell our steel into the EU, does she agree that the UK Government should now be making a unilateral offer to suspend all trade dumping measures against EU steel coming into this country, so that we can unlock the stalemate around the trade defence measures?

Jessica Morden

I do indeed. I believe that would be a generous offer to unblock the current stalemate. On the treatment of EU exports and EU safeguards, an estimated 70% of UK steel exports—some 2.6 million tonnes a year—go to EU countries. That is 1,400 trucks and six trains a week, making it the largest export market for steel. As UK Steel has highlighted, it is crucial for our industry that the UK Government demonstrate as early as possible that they are taking steps to positively resolve the issue with UK trading partners. What progress has the Minister made on EU and UK steel safeguards? An update from him on that is urgently needed tonight.

There is also a lack of clarity about what is happening in the US-UK free trade agreement negotiations on the removal of section 232 tariffs on steel projects. Since 2018, UK steel exports to the US have fallen by 32%, so can the Minister update us on those talks too?

Finally, do we want to be a country that manufactures goods or one that just imports them? The Government’s strategy must address the present and future needs of the industry. That means providing the UK steel industry with the vital liquidity support that it needs to protect businesses.

Miriam Cates (Penistone and Stocksbridge) (Con)

The hon. Lady is absolutely right to say that steel has a future in the UK. I recently visited Stocksbridge steelworks in my constituency, and some of its work is absolutely cutting-edge and high-tech. Steel is not just an industry of the past and our heritage; it is vital for our future, our research and development, and all that makes Britain a great trading nation.

Jessica Morden

I thank the hon. Member for that intervention and agree entirely.

There are significant opportunities for UK steel as we begin to build back greener. The Prime Minister spoke earlier this year of a new age of opportunity in making the UK a world leader in, for example, electric vehicles. Steel will also play a vital role in the production of other green technologies, such as wind turbines, rail electrification, renewable projects, solar panels and more. If the Prime Minister wishes for the UK to be a world leader in those things, we must have an industrial strategy that puts steel at its centre.

Before its tragic closure earlier this year, Tata’s Orb steelworks in Newport was the only manufacturer of electrical steel in the UK. With the right strategy and the right investment, Orb could and should have played an instrumental part in a move to electric vehicles. We need vision from the Government to work with the industry to do that. While it may be too late for Orb, it is not too late for the Government to produce a Budget that incentivises automotive demand, so that the plants at Llanwern, with world-class steel for the automotive sector, can get involved. Steel that is manufactured in Britain also enjoys a significantly lower carbon footprint than imported steel. Not only does imported steel take more carbon dioxide than sourcing a tonne of steel domestically, but steel produced in Britain is subject to higher environmental standards than steel produced abroad.

Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)

I absolutely agree with that point. Does my hon. Friend agree that offshoring carbon emissions to China, Turkey and Iran is exactly the way we do not want to go, when we can make that steel in this country in green ways?

Jessica Morden

My hon. Friend is absolutely right, and I agree entirely.

It is also vital that the Government recognise developments such as Liberty’s Greensteel hub in Newport, which uses renewable and low-carbon energy to recycle scrap steel to meet the challenges of decarbonisation and growing consumption of steel globally.

Steel can play a vital part in rebuilding Britain after the pandemic. Despite the significant challenges posed by coronavirus, the Government have a unique opportunity to create a 21st-century manufacturing sector that has a revitalised steel sector at its core, so that we can build back. However, the Government must act—something that they have been slow to do in the past. I look forward to the Minister’s comments tonight.

10.59 pm

The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)

I congratulate the hon. Member for Newport East (Jessica Morden) on securing this evening’s debate. She has been a passionate advocate for the UK steel industry, including in her role as co-chair of the all-party group on steel and metal-related industries. Clearly, this sector is important to the United Kingdom and testament to that is the number of colleagues who are present in the Chamber at 11 pm on a Monday night. One colleague who is unable to intervene or speak tonight is my hon. Friend the Member for Corby (Tom Pursglove). Although he cannot make his voice heard in this place, he certainly does on behalf of his constituents who work in the important steel industry in his constituency.

This debate represents a welcome opportunity to discuss the UK steel sector, which will continue to play a critical role as a foundation industry as we secure our economic recovery and long-term prosperity following the impact of the coronavirus. Madam Deputy Speaker, you will know that the steel sector provides well-paid, highly skilled jobs, as we have just heard from the hon. Lady. It also plays a key role in critical UK supply chains across many important parts of the UK economy, including automotive construction, power generation and, of course, defence.

Earlier this year, we welcomed the acquisition of British Steel by Jingye following a period of insolvency.

Holly Mumby-Croft

Will my hon. Friend give way?

Nadhim Zahawi

Very briefly, because I have a lot to get through tonight.

Holly Mumby-Croft

I just want to say that the constituents in Scunthorpe regularly mention to me the support that they receive from the Government. Does my hon. Friend agree that support for other steel plants such as Celsa is vital?

Nadhim Zahawi

It certainly is and I hope that I can cover that in the time that I have left to me.

Both officials and Ministers invested considerable time and effort in closing the deal with Jingye and the planned £1.2 billion investment that will go into the operations of British Steel. I hope the hon. Lady agrees that this represents a huge vote of confidence in the UK steel industry and the high-quality steel produced here in the United Kingdom. Notwithstanding this positive outcome for British Steel prior to the pandemic, the global steel industry was already facing significant headwinds. This included demand slowing across developed economies and persistent global excess production capacity, which depresses prices and harms the profitability of UK steel producers.

In the past few days, Tata Steel has published its accounts, which show a challenging position across its UK and European operations. While it is not appropriate for Ministers to comment on the performance of individual companies, I wish to reassure the hon. Lady that we continue to work very closely with the entire UK steel sector and the trade unions, and that we understand the challenges facing the industry in the UK.

While the coronavirus has come at a challenging time for the industry, we have been working intensively over this period to ensure that the UK steel industry has been able to access the support that it needs since the start of the covid-19 pandemic The Government have set out a far-reaching package of support to protect jobs, incomes and businesses across every part of the economy. Those working in the steel industry have been among the 9.6 million individuals across the country who have been able to access the job retention scheme. The scheme has protected people’s livelihoods in the industry and ensured that steel manufacturers have been able to retain high-skilled staff while managing the impact of reduced demand caused by the pandemic.

Importantly, we have worked closely with the steel industry representatives over this period to ensure that the furlough scheme—the job retention scheme—was sufficiently flexible to accommodate some of the real key asks from the industry and from the unions to meet the changing requirements of the industry as the wider situation evolved. I have been engaging personally on a regular basis with companies, trade associations, and, of course, the trade unions to gather their feedback. Direct input from the steel sector has helped to shape a number of our covid-19 support schemes. The coronavirus large business loan interruption scheme, the tax deferrals and the trade credit reinsurance scheme, which we launched with £10 billion, clearly came through as a result of that particular engagement with the industry. They were developed rapidly in response to that particular challenge faced by companies in the industry.

In addition to those far-reaching economy-wide schemes, we have committed to consider bespoke support on a last-resort basis where a viable company of strategic importance has exhausted all other options available to it. The House will be aware—the hon. Member for Newport East mentioned it—that such circumstances apply to Celsa Steel, which is a critical supplier to our construction industry. Government support in that case secured over 1,000 jobs, including 800 positions at the company’s principal site in south Wales. Commercial confidentiality prevents me from setting out further details on that case, or indeed from commenting on any discussions we have had with individual steel companies over this period. However, I hope that hon. Members agree that that is a clear signal from the Government of our continued commitment to the UK steel industry and the 30,000 individuals who are employed in the sector.

Stephen Kinnock

The support to Celsa was absolutely welcome and we certainly appreciate that, but what about Tata Steel? The Minister says he is looking for strategic importance and a viable business that will play a critical role in the future of our manufacturing sector. Surely, Tata Steel qualifies on all three counts?

Nadhim Zahawi

The hon. Gentleman will know, because he is deeply involved with Tata Steel in his constituency, that that is absolutely right with regard to the strategic importance of Tata Steel. I hope he will forgive the fact that I will be unable to go any further at this stage because of the need to protect commercial confidentiality. Suffice to say that he is absolutely right that it ticks all those boxes.

As we transition from managing the immediate challenges presented by covid-19 to securing the long-term recovery of the UK economy, we will continue to work with representatives of the steel industry, the unions and the devolved Administrations to address the strategic challenges faced by the sector. We are committed to working collectively with those partners to shape a steel industry that is sustainable, productive and innovative. To that end, we are taking action in key areas. I want to outline a few of the priorities for UK steel companies, including on energy prices, procurement, research and innovation, and international trade.

Jacob Young (Redcar) (Con)

On energy pricing, it obviously still remains an inhibitor to our steel industry and to bringing steelmaking back to Teesside. What steps are the Government taking to improve innovation in the energy sector to bring about cleaner steelmaking?

Nadhim Zahawi

My hon. Friend’s timing is impeccable, because I am just about to come on to our focus on energy and the clean steel fund. As we set out our focus on the recovery, our objective is both to boost the sector’s short-term competitiveness and to support the longer-term transformational investment that colleagues have spoken about that will drive productivity and efficiency, and support our net zero goals.

On energy prices specifically, the ability of our steel industry to compete internationally is a priority for the Government. We remain committed to minimising energy costs for business. Since 2013, the Government have provided £480 million in compensation to the steel sector to make energy costs more competitive. Moreover, we are investing £315 million in the energy transformation fund to help energy-intensive businesses such as steel companies to cut their bills and transition to a low-carbon future.

On innovation, supporting our steel industry in the UK to decarbonise and make the most of clean growth opportunities is a key priority for us. This is part of our wider agenda to put the UK at the forefront of research and innovation in the coming years. Last year, we announced two important new research and innovation programmes, which will help the steel industry in its effort to reduce emissions and support the decarbonisation of the UK economy to achieve our ambitious 2050 net zero target.

Mark Tami

This is all well and good, but the Minister has not addressed the crucial issue of dumping. Even with all these measures in place, if steel is being dumped on this country, it will not take long before it kills our industry.

Nadhim Zahawi

I will come back to anti-dumping at the end of my remarks.

To finish my point on innovation, another £250 million —a quarter of a billion pounds—of clean steel fund will support the sector’s transition to new low-carbon technologies and processes. A £100-million low-carbon hydrogen production fund will support the deployment of low-carbon hydrogen in industry to help decarbonise a range of sectors, including steel.

Stephen Kinnock

Will the Minister give way?

Nadhim Zahawi

I want to make some headway. If there is time at the end, I will come back to the hon. Gentleman.

The hon. Member for Newport East rightly mentioned procurement. It is a priority for the Government to ensure that UK steel producers have the best possible chance of competing for and winning the contracts associated with our domestic infrastructure investment. We have published a steel pipeline on national infrastructure projects worth about £500 million over the next decade. For the first time, we have also published data on public sector steel procurement, which will be refreshed in the coming weeks and on an annual basis thereafter. That information serves as a testament to our ambitious plans for UK-sourced steel within our pipeline of major infrastructure projects. It will also serve as an accountability mechanism. We will work with the sector to achieve this shared aim.

We recently welcomed the commencement of construction work on the largest of these infrastructure projects, which the hon. Lady mentioned—HS2. We are keenly aware of the opportunity it represents for our domestic steel sector. The Department’s steel pipeline update from last year indicated that HS2 will require more than 2 million tonnes of steel over phases 1 and 2.

We are mindful that there are mechanisms by which we can actively support the sector to realise this opportunity and future ones within the parameters of our legal framework. To take just one example, the Department for Business, Energy and Industrial Strategy has signed up to the UK steel charter, which has been mentioned several times tonight. We recognise it as an important initiative, developed by industry, and we are actively encouraging other Departments to sign up. We look forward to making continued progress on the issue of procurement over the coming months.

International trade and EU exit, which were both mentioned in the debate, are huge areas of strategic significance for the UK steel industry. Overcapacity in steel production remains a global systemic challenge for the sector. We continue to work as part of the G20 global forum on steel excess capacity to address this problem. Unfair market-distorting practices have been partly to blame for the situation. We want all countries to act on and implement the recommendations agreed by G20 Ministers, and we will maintain pressure on them to do so.

In preparation for the end of the transition period, the Government have legislated for the full suite of tools permitted under the WTO to address unfair trading practices. We are working closely with the Department for International Trade to ensure that the UK has a suitable trade remedies system in place for the future to maintain the protection of our steel industry. We are also engaging with our European Commission colleagues to discuss how the steel safeguards should operate after the transition period, with the aim of preserving traditional trade flows and providing as much continuity to the industry as possible. We are committed to transitioning the definitive safeguard measures on those steel products and categories where there is a UK interest. We continue to make a strong case to the EU on behalf of the UK steel sector to ensure that appropriate tariff rate quotas are provided to UK exporters as soon as is practicably possible following the end of the transition period.

These are unprecedented times and the challenge for the UK steel industry is big. I have half a minute left, but I will take the hon. Gentleman’s intervention.

Stephen Kinnock

Will the Minister underline our commitment to blast furnaces as a central part of the steel-making process? With the right investment, we can make the transition to hydrogen and so on, but blast furnace production is absolutely central.

Nadhim Zahawi

The hon. Gentleman is absolutely right that we have to make sure that, as a foundation industry, steel continues to innovate. Whether it is electric arc or other emerging technologies, such as hydrogen, which we are seeing the adoption of, we are absolutely committed to that.