Manchester Steel Ltd. (Closure)

Clause 1 – in the House of Commons at 11:15 pm on 5th June 1985.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Major.]

Photo of Mr Robert Litherland Mr Robert Litherland , Manchester Central 11:40 pm, 5th June 1985

I have chosen this subject for the Adjournment debate to give some of the facts about the context within which the Manchester Steel closure decision should be seen. Why is the closure of Manchester Steel Ltd. so exceptional? It is not just another isolated set of redundancies, because we have had such closures and redundancies in the past. The gradual decline in manufacturing goes back over a long period to the mid-1960s. In recent years the position has deteriorated rapidly, to such an extent that east Manchester has been ravaged by closures and redundancies.

How dramatically the situation has changed. East Manchester, once the workshop of the world with its expanding and prosperous light and heavy engineering industry, coal mining, chemical firms and textiles businesses, is barely recognisable now, with its deserted factories bearing witness to the changed fortunes of that part of Manchester.

In 1978, manufacturing employment accounted for some 63 per cent, of jobs in the area. Since then, job losses in manufacturing in east Manchester have become far more dramatic. Between 1979 and 1983, 12 firms employing more than 100 people have closed. They include Laurence Scott with 650 employees; Richard Johnson and Nephew with 610 employees; Easicut tools with 350 employees; Walkden and Makin with 270 and more recently GEC Switchgear has announced that it will be shedding about 270 jobs from its Openshaw factory.

Between 1971 and 1985, 20,000 jobs have been lost in east Manchester and the redundancies between 1981 and 1984 account for about 4,500 jobs. With such job losses the social impact has been catastrophic. Until 1980, unemployment in that part of the city compared with the national average. The effect of the closures and redundancies in east Manchester has resulted in the unemployment rate almost doubling between 1980 and 1981.

The environmental consequences of those changes can be seen in the vacant, under-used land and buildings and the unattractive image that that gives the area. Nearly one quarter of the industrial land in east Manchester is now vacant. Manchester city council, through its east Manchester initiative, has taken steps to try to remedy the situation and to date some £8 million has been spent on acquiring land and buildings to carry out demolition, but more funding will be required by the city council. It has pressed the case for funds to be made available on a more regularly programmed basis, arguing that £10 million is needed over the next three years to reclaim derelict land and buildings.

Every closure adds to the enormity of the problem, and now we have Manchester Steel. It is part of the process of losing manufacturing in east Manchester. It is another nail in the coffin of this once vibrant working area and another attack on workers who have the skill and the will to work, but who are having their pride torn from them by a notice of closure which says that they are expendable and are no longer required. To add insult to injury, the decision to close Manchester Steel was taken in secret, behind closed doors in a foreign country. The company was owned by Elkem of Norway and discussions had been taking place for nine months and the news broke through a leak of information.

In 1982, the unions and the management, assisted by the city council, had combined to save the firm. The workers were left in the dark about what was taking place. Their thanks was no consultation but merely a statement of the cold hard facts that Manchester Steel in my constituency and the Bidston plants on Merseyside were to close. Elkem acted in a dishonourable and underhand way.

What about the Government's attitude? Hiding behind the smokescreen of commercial confidentiality and not being prepared to intervene in a free market commercial transaction, they did nothing. In doing nothing, the Government acquiesced to the takeover by Allied Steel and Wire, which is owned by British Steel and GKN.

We have the ridiculous situation of workers paying their taxes, and money from those taxes being allocated to Allied Steel which uses it to allow foreign firms to sell their steel involvement in the United Kingdom, and the plants are shut. How nice and convenient for the Government and their rationalisation programme.

When a deputation from Manchester Steel met the Under-Secretary of State for Trade and Industry, he professed not to know that negotiations for the takeover were under way. Yet the takeover was being considered by the Commission of the European Community. A press release of 20 May said:

The Commission has authorised Allied Steel and Wire Holdings Ltd … to acquire the entire share capital of Manchester Steel Ltd … under article 66 of the ECSC Treaty." In a conversation with Mr. Keith Donoghue, who made the decision on Manchester Steel, the local MEP, Mr. Eddy Newman, was told that those consulted included the Department of Trade and Industry, which not only gave its authorisation, but pointed out to the ECSC that the takeover would suit the development of the steel industry. Who is running this country? Are diktats coming from the European Community?

To the workers, terminology such as "rationalisation" means extinction. They can see the effects on the lives of their families, on the suppliers to Manchester Steel, on services dependent on the purchasing power of the money earned by Manchester Steel workers, on the local shops, pubs and clubs and on home service suppliers. They recognise that the closure creates fears for job security elsewhere.

More families will go on to supplementary and housing benefit, and there will be more mental strain from unemployment. I was told that there were four suicides after the closure of Richard Johnson and Nephew, which had been in existence for 200 years before it was bought by a South African consortium and closed within 18 months. The locks were on the gates when the workers returned to the plant.

There will be family breakdowns and more referrals to health and welfare services. Because of what is happening to the workers and their families and to the area where they live, they will fight the closure to the bitter end. I know these workers and I represent the area. They have my fullest support and they are supported by their union and the community, which is sick and tired of the relentless attack on its living standards. The workers have the support of all Labour Members in the Manchester area. I received a letter today from my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) expressing his support. In addition, my hon. Friend the Member for Birkenhead (Mr. Field) will be speaking in the debate.

I have spoken of the local interest, but what about the national interest? In their submission to the Office of Fair Trading the solicitors acting for the Amalgamated Association of Wiredrawers and Kindred Workers state:

There are a number of reasons why our clients believe that this transaction would be against the national interest. In effect it would concentrate the production of 5·5 to 13·5 mm rod in the hands of one company alone in the United Kingdom. It should be noted also that Manchester Steel is the sole manufacturer, in the country, of 100 to 110 mm concast billet for re-rolling, in the main. These observations touch the surface only of a potentially serious situation and it is our clients' wish, through us, to forumulate a detailed complaint supported by evidence. The evidence is that Manchester Steel is the only independent manufacturer of 100 mm billet selling its products on the market, as British Steel at Scunthorpe ceased production of 100 mm billet about two months ago. There is an increasing demand for this product but also a shortage. If manufacture was in the hands of Allied Steel alone, the re-rollers would have to purchase from that company or import the product, so Allied Steel would be in a position to control both the supply and the price. We believe that the matter should be referred to the Monopolies and Mergers Commission, because if Manchester Steel ceased production Allied Steel would become the major source of supply.

Many independent wiredrawers obtain their rod requirements from Manchester Steel. Closure would mean that they would have to purchase their requirements from Allied Steel and would have to pay "the price". The alternative for both wiredrawers and reinforcement engineers would be imports.

The Manchester and Bidston rolling mills are flexible and produce small quantities with relatively short lead times, an essential service to many of the small independent wiredrawers. That facility to the market would be lost if Manchester Steel was closed. Allied Steel is not geared to that degree of flexibility. Furthermore, its own downstream interests are in direct competition with the small independent companies to which I have referred.

The Manchester Steel plants are modern. A great deal of finance was put into refurbishing the plant in my constituency. The company has flexible working practices. Closure would leave less flexible plant to meet the market requirements.

The United Kingdom generates about 8 million tonnes of scrap per year, of which 4 million tonnes are exported, mainly to Spain. The scrap, converted to steel, is then exported to other countries, including the United Kingdom. If Manchester Steel closes, it is likely that much of the 500,000 tonnes of scrap used by that company would be exported and that some would return to this country as the finished product.

I believe that the observations made by the unions should receive consideration by the Monopolies and Mergers Commission. We insist upon that. The Government's replies to my questions are just not good enough. When I talk about the future of Manchester Steel I receive the bland reply that it is up to the new lords and masters of the company to make the decisions. What part do the Government play? The diktats seem to come from Europe or from high finance somewhere while the Government just stand back and wash their hands of the problem as though they had no moral obligations in the matter.

The Government have a moral obligation to be helpful should any interest be shown by an organisation wishing to acquire Manchester Steel. It is understood that members of senior management of the company were instructed not to look for a bid in the open market. It would be in the interest of the nation in general and of east Manchester in particular if Manchester Steel survived. We want the Government to act before the situation becomes irretrievable.

When we talk about closures and so on, we are talking not simply about statistics and percentages: we are talking about people, human beings, whose only crime is a desire to work. The workers believe that Elkem has sold them out and that the Government have betrayed them. They are left wondering to whom to turn and what hope there is for them and their families. Most of them are youngsters with mortgages and other commitments. They see ahead a path of hopelessness. We want the Government now to say exactly where they stand on this issue and whether they have become allied to the takeover and closure of Manchester Steel.

Photo of Frank Field Frank Field , Birkenhead 11:56 pm, 5th June 1985

I thank my hon. Friend the Member for Manchester, Central (Mr. Litherland) for initiating this debate and for permitting me to intervene. I do so because, as he explained, Manchester Steel also owned a plant in Birkenhead.

I wish to underline many of the points that my hon. Friend made, particularly the fact that Manchester and Birkenhead already suffer from massively high unemployment. In Bidston, in my constituency, the unemployment rate is in excess of 40 per cent. The mill in Birkenhead, like the one in Manchester, has turned the corner financially.

We are talking also about a takeover in both areas by a company, the main aim of which is to destroy rather than to promote jobs. We are speaking of a takeover bid of a company which, with full union support, has seen a major programme of modernisation and reform.

While I do not wish to deflect thought from the main thrust of my hon. Friend's main comments—particularly when he asked what the Government proposed to do in the present situation — I must comment on the role that Elkem has played in these proceedings. My hon. Friend noted that the negotiations to sell the company and to destroy so many jobs had been going on in secret for nine months.

This Norwegian company not only prides itself on having good industrial relations but it usually talks of worker involvement. However, when we consider Elkem's involvement in this matter, we see that it is not just a question of what is left to be desired but that practically everything is left to be desired about its behaviour. Elkem has behaved badly. It now has a moral responsibility to use its influence to ensure that as many jobs as possible, in Manchester and Birkenhead, are saved.

This is in some respects an unusual Adjournment debate. A number of Back-Bench Members are present, as are two Ministers. I am sure that the Parliamentary Under-Secretary of State for Energy, who has taken a close interest in the future of the steel mill at Bidston, will be interested in what his hon. Friend the Parliamentary Under-Secretary of State for Trade and Industry has to say in replying to the debate.

12 midnight

Photo of Mr John Butcher Mr John Butcher , Coventry South West

First, I thank the hon. Member for Manchester, Central (Mr. Litherland) raising this question. He has every right to do so, bearing in mind the dramatic impact that this closure is having upon his constituency and the unhappy history of unemployment in this sector of Manchester, to which he so vividly referred.

The hon. Member for Birkenhead (Mr. Field) drew attention to the fact that this is an unusual Adjournment debate because an unusually large number cf hon. Members are present. I acknowledge also the interest of my hon. Friend the Member for Bury, North (Mr. Burt) as the secretary of the north-west group of Conservative Members of Parliament. He has pursued his inquiries in correspondence with my hon. Friend the Minister of State. I hope to be able to answer all of the questions that have been asked.

As a matter of general principle, the Government recognise that the manufacturing sector in the United Kingdom produces a far higher proportion of internationally tradable goods than does the service sector. For that reason, I join the hon. Member for Manchester, Central in stating that we believe that this country's manufacturing sector is our prime generator of wealth and that this will always be the case. Therefore, we share he hon. Gentleman's concern that skills in the manufacturing sector should be used to the fullest possible extent. However, we are faced with some excruciating dilemmas in the steel industry, not only on a United Kingdom but on a European basis. I should therefore like to deal with that area of influence, because it is possible that the hon. Gentleman has confused one or two matters in that area.

I was able recently to gauge the depth of feeling of the hon. Gentleman and his constituents when I met a delegation of representatives of the work force from Manchester Steel. It was led by the hon. Members for Manchester, Central and for Birkenhead, whose constituency includes Manchester Steel's other plant at Bidston.

I propose to respond to the points that have been made under two broad headings: first, to make clear the Government's position on the proposed closure of Manchester Steel and to set it in the wider context of the problems faced by the steel industry, outlined by the hon. Member for Manchester, Central, and, secondly, to draw attention to the steps which the Government are taking to encourage job opportunities in Manchester.

I fully recognise the disappointment and frustration which must have been caused by the closure announce-ment, because the company had survived an earlier threat of closure in 1982. Manchester Steel remained in business at that time largely because the work force agreed to a cost reduction programme. That made their pain, in the light of the recent announcement, that much more difficult to bear.

Considerable improvements were made, but regrettably they have not been sufficient to persuade Elkem to retain the production facilities at Manchester and Bidston in the face of stagnant markets.

Many of the problems of the industry which existed in 1982 still remain. Depressed demand for steel products continues and substantial overcapacity exists, with consequential effects on efficiency and profitability. Other parts of the steel industry face the same difficulties, both here and throughout Europe.

Painful measures have had to be taken throughout the EC to stabilise the market, to restructure the industry, and to remove excess capacity. Behind those terms lie the social and human difficulties about which we have heard. This process has been difficult and has resulted in large-scale redundancies both here and on the continent. That point has been raised by my hon. Friend the Member for Wirral, West (Mr. Hunt) who is here this evening. But only by this means can an efficient and profitable industry be re-established, with reasonable hopes of longer-term job security for those remaining in the industry, although that is of no consolation to those who are the casualties of this process. In this context, it is estimated that in Manchester Steel's product area, capacity utilisation is between only 65 and 70 per cent. Much higher levels are needed for sustained profitability and viability.

The Government's position on further restructuring in the steel industry is quite clear. Where private sector firms, such as Allied Steel and Wire and Manchester Steel, are concerned, it is for the firms themselves to decide what rationalisation is necessary and what form it should take. The firms in the industry are best placed to know what measures are needed, and to take decisions based on their commercial judgment. It would be wrong for the Government to second-guess or seek to influence their plans.

The Government were therefore not involved in the commercial negotiations which led up to ASW buying Manchester Steel from Elkem. We were, however, kept in touch with developments on the usual commercially confidential basis by ASW.

There have been some suggestions that ASW is not a genuine private sector company because of the British Steel Corporation's major — now 48 per cent. — shareholding. Let me make it clear tht since ASW was set up as a joint venture between BSC and GKN in 1981, the Government have always regarded it very clearly as a private sector firm. It therefore makes its own commercial decisions without any need for Government approval, just like any other private sector business.

It has been suggested that even if the rolling operations were to close down steelmaking, the steelmaking aspect of Manchester Steel should be kept open because closure could cause problems in the supply of billets to British customers. I understand that ASW has deferred a decision about the future of the Openshaw billet furnace. No doubt it will take into account the market prospects before finalising its decision. But I would emphasise yet again that it is for the company to judge whether the retention of the facilities is viable.

Equally, if other steelmakers or steel buyers of those products wished to make proposals to ASW about supplies of billet, or the possible purchase of either of the steelmaking plants, they are free to do so. This is not a matter for the Government, as the earlier negotiations were not, and it is for ASW to consider any proposals on their commercial merits. I understand that that is its precise attitude.

I turn now to the wider effects of the planned closure of Manchester Steel on the Manchester area, and north-east Manchester in particular. The Government recognise that this area has suffered considerably from the effects of industrial decline in recent years. Government policies as a whole, both in the steel industry and more widely, are designed to re-establish efficient and internationally competitive businesses. But success will not necessarily result in increased job opportunities in the same sectors as those where job losses have occurred in the past.

Against that background, the Government have ensured that considerable resources are directed to the Manchester area to alleviate the worst effects of industrial decline. As the hon. Gentleman will know, the Government made part of Manchester, including the north-east of the city, an assisted area last November. That means that the area now benefits from a number of schemes of support for industry which would not otherwise be available. These include regional selective assistance. Since assisted status was granted, the north-west regional office has received 18 firm inquiries about regional selective assistance from firms in north-east Manchester, of which one is currently at an advanced stage of appraisal. I very much hope that the number of good projects submitted for appraisal will increase.

North-east Manchester is also eligible for derelict land clearance grant, designed to assist the economic recovery of rundown areas by providing resources for clearing derelict sites. The sum of £600,000 was provided in 1984–85 for north-east Manchester to clear sites for industrial or residential development, or to improve housing conditions and community facilities. If the Openshaw plant were to close, it is possible that assistance under that scheme could be provided towards the clearance of the site.

North-east Manchester receives considerable help from the Department of the Environment's inner city policy. Three industrial improvement areas have been designated and the inner urban area of Manchester benefits from partnership area status — the highest designation under the urban programme. Since 1982, that has made available some £4 million of aid for 198 industrial and environmental improvement projects in Manchester.

Manchester is also the focus of one of five city action teams we launched in April. The teams' task will be to look at ways of helping east Manchester, through the combined schemes offered by my Department, the Department of the Environment and the Manpower Services Commission.

Through all these measures, the Government are doing a great deal to help the industrial base of north-east Manchester, and the job prospects of those who live there.

Tonight's debate has raised a number of very broad as well as understandably specific issues. I say to hon. Members on both sides of the House that the Government do not underestimate the social cost of these closures. Neither are we unsympathetic.

We are unanimous in condemning the unwelcome pressures that come from an increase in unemployment in any local community. But I am bound to say that, faced with that, we must look also at those other broader industrial implications. We believe that there is a suite of policies available that will help us to address each side of this particularly difficult equation.

Question put and agreed to.

Adjourned accordingly at ten minutes past Twelve o'clock.