British Steel - Statement

– in the House of Lords at 3:43 pm on 24th July 2019.

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Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 3:43 pm, 24th July 2019

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer to an Urgent Question given by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:

“As honourable Members will recall, I made a Statement to the House a few hours after British Steel entered insolvency on 22 May. This was and still is an uncertain time for the British Steel workforce, their families and communities, for the customers and suppliers of the business, and for everyone who believes, as I do, in the importance of excellent steel-making and manufacturing in the UK.

In my Statement, I said that, although the independent official receiver is solely responsible for the operation and sale of the British Steel business, I would, personally and on behalf of the Government, do everything I possibly can within my powers to help secure a good future for the whole of British Steel’s operations.

Following a visit to the Scunthorpe plant the following day and to Skinningrove and Lackenby on Teesside the day after with local MPs, including the honourable Lady, we formed a British Steel support group to work together immediately and actively to pursue that aim. I chaired that group, with the Industry Minister, and it has included the British Steel management; the trade unions Community, Unite and the GMB; the Mayor of Tees Valley and the leader of North Lincolnshire Council and their officers; the chairs of the Humber, Greater Lincolnshire and Tees Valley LEPs; UK Steel; the national manufacturers’ association Make UK, on behalf of suppliers and customers; the Federation of Small Businesses; government officials and other local MPs, including the honourable Member for Redcar, my honourable friends the Member for Middlesbrough South and East Cleveland and the Member for Brigg and Goole, and the honourable Member for Scunthorpe. The support group has met eight times now, usually in Doncaster, and sub-groups on the supply chain have met separately, as have local partners.

I pay tribute to the hard work, dedication and tenacity of the group, and the extraordinary commitment of the workforce who, during this time, have performed magnificently, not only to continue but to increase steel production.

Often in insolvencies, customer orders can dry up, suppliers withdraw their services and the workforce drifts away, precipitating a rapid failure. In this instance, the opposite has been the case. The confidence that the support group has built, coupled with a government indemnity to the official receiver, has allowed trading to continue, orders to be won and production to increase. This is without precedent in my experience.

Although all decisions are for the official receiver, I have been active, as Members know, in visiting prospective buyers in many parts of the world to make it clear that the UK Government will, within our legal powers, work with a good long-term owner of these important assets to help them realise their vision for the company.

I am pleased to say that the official receiver has said that he is encouraged by the level of interest in purchasing British Steel and that his special managers, EY, are currently in further discussions with potential buyers. The official receiver has made it clear that, given the complex nature of the operations, any potential sale will take time to deliver.

I said in May that I was determined to see the proud record of steel-making excellence continue. The world needs steel, and British Steel is among the best in the world. To secure that will require, in my experience, the continued active participation of everyone I mentioned earlier, without interruption, during the critical weeks ahead. In particular, whoever stands at this Dispatch Box will need to devote themselves unstintingly to achieve that great outcome for everyone concerned with British Steel, which I believe, though not certain, is within grasp, and that is the flourishing of British Steel’s operations for many years to come”.

My Lords, that concludes the Statement.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords), Shadow Spokesperson (International Trade) 3:48 pm, 24th July 2019

My Lords, I am very grateful to the Minister for repeating the Statement. Everybody will have noticed the very optimistic tone that underlies the words, and I hope very much that that optimism will be delivered in due course. I make it very clear that we support wholeheartedly the efforts being made by the Government and all concerned to make sure that there is a sale of the entirety of British Steel, hopefully to a single purchaser, and that the assets will be allowed to continue to develop. This is not just in general terms but also because, as we have heard before, this is a key element of the industrial strategy. This is our second largest steel-maker and a key supplier to many aspects of what will be required if this country is to flourish.

Will the Minister say a little more about the work that has been done by the British Steel support group, which has been exemplary in bringing together all those concerned to make sure that the best result is achieved? In particular, will he say more about how the confidence that the support group has built has been coupled with the government indemnity to the official receiver? How much and for what purposes has such an indemnity been raised? The Statement goes on to say that this is “without precedent”. If it works, why is it without precedent? Can we have an assurance that this might well be the approach taken by the Government in the future?

I have two other questions. First, can we have a commitment from the Government that the priority is to find a buyer for the whole of British Steel, and that the company will not be broken up if at all possible? Secondly, in addition to the cash presumably reflected in the indemnity, one of the key issues here is that the UK’s steel producers pay up to 50% more for their electricity than their EU competitors. What steps are the Government taking to resolve that issue?

Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, I am very grateful to the noble Lord for his support. As my right honourable friend made clear, he was grateful for the support from all sides. That was the point behind setting up the support group, which, as I made clear in repeating the Statement, has met eight times and will continue to meet. If he listened to the Statement being made in another place, he will have noticed that those meetings have been taking place in Doncaster. The honourable Member for Doncaster even offered her house as a venue for further meetings of that group, which shows that there has been cross-party support from MPs on all sides, as well as from the unions, local authorities, LEPs and others—I need not repeat what was in the Statement.

The noble Lord also asked about the indemnity. The important point to remember is that my right honourable friend made it quite clear that he will do whatever he legally can. I cannot give the noble Lord the precise figures on how much has been spent, but, while it is possible for him to do that, he will continue to do so because the consequences of a closure are obviously very great. If we close down a steelworks, we cannot just turn it on again the following Monday. It is lost forever.

Finally, it remains the intention of the official receiver —and we also believe this is the right process—to sell the group as a whole if possible.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy)

My Lords, I associate myself with the comments of the noble Lord, Lord Stevenson, in that we all hope that some resolution can be found and that this business can be sold as a whole. However, this could not come at a worse time for the workers of British Steel and those companies that supply it, because we are seeing a changing of the guard. In this Statement, the Secretary of State makes very clear the level of ongoing activity that is required from government to secure the happy end we all hope for. It is not clear that those coming into the shoes of the Secretary of State have the same agenda. Can the Minister undertake that the Government will provide that unstinting effort that the Secretary of State said is required, and can he tell us a little bit about what planning is in place in the event that this business is not sold? What do the Government plan in terms of funding and rescue efforts for that business?

Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, I will not at this stage speculate on what might happen if the business goes under. We are doing what we can to keep that business. My right honourable friend made it quite clear that he has put a great deal of effort into making sure that it can continue.

To answer one other question put by the noble Lord, Lord Stevenson, relating to energy, we have put almost £300 million into compensation for the whole steel sector, trying to help it make energy costs more competitive. We have also offered support, as the noble Lord knows, on the extra costs for high-energy-using businesses and will continue to do so.

Going back to the question of the noble Lord, Lord Fox, I cannot speculate on what my right honourable friend’s successor might do, should my right honourable friend have a successor—it might still be my right honourable friend; it might still be me. I do not know at this stage, but I think the commitment that the Government have made so far is indicative of the process that we would want to continue.

Photo of Lord Morris of Aberavon Lord Morris of Aberavon Chair, EU Justice Sub-Committee, Chair, EU Justice Sub-Committee

My Lords, the participation of the Secretary of State is most encouraging, and I welcome the news of increased production in these extremely difficult circumstances. On a general point, will the Government bear in mind that one of the hazards of steel production in all parts of the United Kingdom is the high cost of electricity? Will the Government consider what might be done further to ensure that steel is produced economically and on a level playing field?

Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, the noble and learned Lord is quite right to point out that the steel industry and various other industries have high costs relating to energy. That is why I mentioned the almost £300 million that we have offered to the steel sector to try to make energy costs more competitive. It can then look to the future as regards energy reduction, trying to produce the same amount of steel using less energy and—thinking of our zero-carbon targets for 2050—doing it in a greener manner.

Photo of Baroness Redfern Baroness Redfern Conservative

I thank the Minister for his response and for the work being done behind the scenes. Does he agree with me that the new Government need to continue the momentum around the national industrial strategy, and that the recovery of British Steel is a top priority, as it is one of the best companies in the world?

Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I can agree with every word my noble friend says. The Industrial Strategy made it clear how we want to provide support in this area, and again, my right honourable friend made it clear that he hopes to see a steel sector deal in due course, in which the steel industry itself can show how it will invest in the future, supported by the Government.

Photo of Lord Brookman Lord Brookman Labour

My Lords, many Members of this House have had to live with the fact that in their area of work, and in many instances the jobs they had, closures have taken place in the steel industry. It is a shocking state of affairs that still remains. I am pleased with the comments that have come from the Minister this afternoon. However, for goodness sake, this Government—any Government—must ensure that the country has a steel industry for the future.

Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, we are committed to having a steel industry for the future, and the Government have left no stone unturned in their support for the entire industry. We are working with the sector, the unions and with the devolved Administrations to support the steel sector. I could list a whole range of projects that we are involved with. I mentioned the £300 million or so in support for energy under the industrial energy transformation fund; I could go on. We are committed to ensuring that we have a steel industry for the future.

Photo of Earl Attlee Earl Attlee Conservative

My Lords, I too am grateful for the approach of the Government in this matter. However, does the Minister agree that one of the problems that we are experiencing is that high-volume steel is manufactured to well-understood, international engineering standards and therefore is a homogeneous product, and that makes the market exceptionally competitive?

Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

Again, my noble friend is right to point to the competitive nature of the market, and that is true for a great many industries. However, with the industry itself and government working together, we can ensure that we have a competitive part of that industry.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative

My Lords, my noble friend will be aware that we are currently under the state aid regime of the European Union. What will the position be after 31 October, if we crash out without a deal? When might we expect to see the statutory instrument before this House and the other place?

Photo of Lord Henley Lord Henley Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, I cannot speculate on what legislative processes might be necessary. We are committing to get a deal before we leave the Union and we want to make sure that we have a deal that will be good for the whole country, including the steel industry.