UK Steel Industry

Part of the debate – in Westminster Hall at 5:48 pm on 9th July 2019.

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Photo of Andrew Stephenson Andrew Stephenson Assistant Whip, Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 5:48 pm, 9th July 2019

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate Nic Dakin on securing the debate and the opportunity to bring everyone together on a cross-party basis to discuss this topic. As a number of his colleagues said, he is an energetic and passionate advocate for the UK steel industry and for his constituents. I am pleased that so many Members were able to attend and speak. It is clear that there is a shared understanding of the important role the steel sector plays in our communities and of its critical place as a foundation industry in the national economy. I also acknowledge that, for the first time in my memory, I am joined in Westminster Hall by a Secretary of State. I had better watch what I say.

While everyone acknowledges there are considerable challenges, we believe that great opportunities remain for the industry to secure a successful, sustainable future at the centre of British manufacturing. The announcement on 22 May that British Steel was entering insolvency has caused great concern for its employees and their families and for contractors, suppliers and customers. I understand just how important steelmaking is to the whole town of Scunthorpe and the wider area, beyond the many people with direct links to British Steel. I saw that first hand the day after the insolvency was announced, when I visited Scunthorpe with my right hon. Friend to discuss with workers, trade union officials and management.

The Government worked intensively with British Steel, Greybull Capital and lenders to seek possible solutions to the financial challenges facing the company. That included the support we provided to help it meet its environmental obligations. We also provided the official receiver with an indemnity to ensure operations could continue while they carry out the insolvency process.

We are determined that we will leave no stone unturned in our efforts to secure a suitable buyer for British Steel, safeguarding jobs across the whole of the business, and many people have spoken passionately today about the need to find a solution for the whole business. We want to keep steel coming off the production line. The official receiver has confirmed that the level of interest shown to date is encouraging, and he is in intensive discussions with the potential new owners who have submitted the strongest bids for the whole business.

Clearly, the sales process is being run by the official receiver and his special managers, who are independent of Government. However, in parallel to those commercial negotiations, the Secretary of State is in discussion with the leading bidders to better understand their proposed business plans and explore how we can support them to realise their vision for the company. Each one of British Steel’s sites has a proud record of steelmaking excellence, and the Government are determined to do all we can to ensure that that continues.

I must also pay tribute to British Steel workers, who have responded to the uncertainty with the best response possible—by producing record levels of steel and continuing to supply its customers and to win new orders. I am grateful to the hon. Member for Scunthorpe for his tireless commitment to working with Government and other stakeholders to help secure the future of the business, both in his role as a local MP and as a member of the British Steel support group, convened by my right hon. Friend. I also pay tribute to my hon. Friends the Members for Middlesbrough South and East Cleveland (Mr Clarke) and for Brigg and Goole (Andrew Percy) and Anna Turley for the positive role they have played on the British Steel support group since it was established in May.

As the hon. Members for Newport East (Jessica Morden) and for Motherwell and Wishaw (Marion Fellows) said, steel is a foundation industry. It is important for any modern economy and plays a key role in many critical UK supply chains, including construction, automotive, defence and power generation. I have spoken to business leaders right across the manufacturing sector, who value having this expertise and capability here in the UK, and who—like all of us—want to see an innovative and sustainable steel sector that is able to compete with the best in the world.

The steel sector provides well-paid and skilled jobs in this country. The passion I have seen in Scunthorpe is replicated right across the industry, and I want to see the sector thrive and reward the staff, whose expertise and commitment is second to none. The Government have been working with the sector and trade unions to secure its future through difficult times, and we remain committed to working closely with the sector.

Since I took on this job, I have met UK Steel, Community, Tata and Liberty to understand their plans for the future and to explore the support they need to maximise the opportunities that are open to the sector. We are under no illusions that many challenges lie ahead for UK steel producers, but we should not forget, as the Opposition Front Bench spokesperson, Gill Furniss, said, that there are also many opportunities for them in the UK. We have been encouraging the UK steel sector to strengthen its engagement with all existing and potential domestic steel consumers. That will help the sector benefit from the additional £3.8 billion a year by 2030 of high-value market opportunities identified in the research we published in December 2017, and it means that demand is forecast to increase by 3.1% a year in value terms.

The construction and automotive sectors offer some of the most significant opportunities, at £2.2 billion and £300 million respectively. Future demand in those sectors is likely to be for higher grade, higher strength steels, combined with innovative production methods. That raises the need to adapt current production, invest in new capital equipment and make a step change in research and development investment. As part of the automotive sector deal, the automotive sector stated its ambition to increase the share of UK content in the automotive supply chain to 50% by 2022. We have also signed a sector deal with the construction sector, and we expect steel to play an increasing part as we seek to substantially boost that sector’s productivity.

I am grateful for the opportunity to reflect on some of the challenges and opportunities that lie ahead for the sector. As we have offered through the Steel Council on a number of occasions, the Government stand ready to facilitate strategic engagement with other sectors, such as the Automotive Council UK and the Construction Industry Council, to ensure that efforts in the steel industry are targeted at the right market opportunities.

Several hon. Members have talked about research and development. Investment levels in the UK have been too low for too long. The research on future opportunities that I referred to earlier states:

“If the UK steel industry wishes to access these opportunities it will require investment to meet the new capability either from completely new mills, upgrades to existing facilities or R&D in products and services.”

As a proportion of value added in the sector, R&D expenditure has been low and below the average level in the manufacturing sector. It is vital that the level of investment is significantly increased, and we are committed to working in partnership with the industry to help to bring that about.

The Government will support the transformation of our foundation industries, including steel, by providing up to £66 million, subject to industry co-funding, through the industrial strategy challenge fund to develop radical new technologies and establish innovation centres of excellence in those sectors. The aim is to kick-start projects to make those sectors internationally competitive, securing more jobs and greater growth by 2025.

Several hon. Members raised the issue of procurement. We are working hard to ensure that UK producers of steel have the best chance of competing for and winning contracts across all Government projects. As a result of EU public procurement rules in place since 2015, which we negotiated and were the first country to implement, the social and economic impact on local communities, rather than just price and other commercial considerations, can be taken into account when the Government procure steel.

I was proud to sign UK Steel’s procurement charter on behalf of my Department to reaffirm our commitment to making sure that UK steel producers get a fair chance to secure public contracts. As the hon. Member for Scunthorpe said, I have written to the other Government Departments that procure steel to encourage them to do the same, on top of their existing obligations.

The charter is one element. For the first time this year, we published information from Departments and their arm’s length bodies on how much steel they have procured over the last financial year and how they have applied the steel procurement guidelines. Departments have confirmed that, where applicable, they have fully complied with the guidance when procuring steel for their major projects.

We have also published an update of the steel pipeline, which signals the upcoming steel requirements of national infrastructure projects. It shows how the Government plan to procure about 3 million tonnes of steel, worth about £500 million, over the next decade for infrastructure projects such as Hinkley Point C and the upgrade of the UK’s motorway network.

On industrial energy prices, which were mentioned by several hon. Members, I recognise the concern in the Chamber. The ability of our steel industry to compete globally and across Europe is a priority for the Government, and we will provide compensation and exemption support to maintain the UK’s reputation as an attractive location for businesses.

I fear I am running out of time, so, on the energy point, I will just say that, as many hon. Members know, we have supplied £295 million in compensation to energy-intensive industries since 2010, including £53 million in 2018. A £315 million industrial energy transformation fund has been announced, which my right hon. Friend the Secretary of State and I are keen to ensure British industry accesses and benefits from.

On international trade, it remains the express ambition of the Government to leave the European Union with a deal, as has been stated by the two candidates running for the leadership of the Conservative party. We will do everything we can to ensure that unfair trade practices do not adversely affect the industry.

I look forward to continuing to work with all hon. Members present to ensure the continued presence of a dynamic, modern and competitive steel industry in the UK. My right hon. Friend and I will continue to work with all hon. Members to secure a good future for British steel. I conclude by once again congratulating the hon. Member for Scunthorpe on securing the debate and giving us an opportunity to air these issues.