The following Answer to an Urgent Question was given in the House of Commons on Wednesday 17 June.
“May I start by giving the apologies of the Minister for Trade, who is in Turkey, negotiating further trade deals for British industry?
On 19 March, the Government set out the UK’s plan to introduce a robust new trade measure from 1 July. It will limit tariff-free steel imports, as compared with the steel safeguard measure. Any imports above the levels in the measure will face a 50% tariff.
Protecting primary steel production is crucial to the UK’s critical national infrastructure and defence. That is why we have published a long-term plan for steel and are introducing a new trade measure countering the unprecedented and damaging effect of global overcapacity. It is simply wrong that only 30% of the steel that we need in the UK is made in the UK.
Steel is essential for advanced manufacturing and engineering, and the interests of the domestic steel sector and downstream industry are best served together. A thriving steel industry strengthens supply chain resilience for downstream businesses and limits their exposure to global supply shocks. We need to balance the need to protect domestic steel-making with maintaining secure, reliable supply chains for downstream businesses.
Imports will remain important. The Government have engaged extensively with businesses across a range of sectors, including manufacturing, when developing this measure. Indeed, last week, I held a round table with downstream industry, together with my honourable friend the Minister for Trade. We, and the Secretary of State, also heard from several colleagues about the concerns of businesses in their constituencies. We are listening carefully to companies throughout the supply chain as we finalise the measure.
We have introduced a transitional arrangement; the new measure will not apply to goods under contract before 14 March 2026 and imported between 1 July and 30 September 2026. We have introduced a carry-over mechanism to give importers more flexibility. We will review the measure after 12 months to ensure that it remains fit for purpose.
We are also engaging intensively with the European Commission on our respective steel measures, and are working to find a bilateral solution that protects vital UK-EU steel trade. This engagement reflects the unique structure of our trading and security relationships and the interconnectedness of our supply chains, but we need to be clear: if we do not act, we will not have steel-making in the UK. The US, Canada, the EU are all acting; we must too”.
My Lords, yesterday there was cross-party concern in the other place, including from government Back-Benchers, that these steel measures risked doing real damage to downstream businesses. Of course, we all want to protect British steel-making, but the Government have designed a regime that risks penalising British manufacturers for importing specialist steels that are not made in this country, or not made here to the grade certification or volume that is required. That is not protecting British industry; it risks pushing value-added manufacturing jobs and contracts overseas.
The Minister in the other place said that this was necessary to respond to overseas tariffs and job losses, but the Government have had plenty of time to reduce the structural costs facing steel and manufacturing businesses, from energy and carbon costs to business rates and employers’ national insurance. Will the Minister therefore accept that the Government need not only emergency tariff measures but a proper, comprehensive steel strategy? Will they now revise the proposed quotas so that specialist steel products desperately needed by downstream manufacturers can be imported tariff-free where there is no realistic UK supply?
My Lords, I thank the noble Lord for that question. While calls for delay are totally understandable, our existing steel safeguard will expire and cannot be extended under WTO rules. Without replacement measures, the UK risks becoming a destination for diverted, subsidised steel, as other jurisdictions act. We have carefully designed the regime and we are consulting extensively with producers and downstream users. Ministers are considering changes based on downstream feedback. We will continue engaging with industry and finalise the measures ahead of implementation on 1 July.
My Lords, in responding to the last point made by the noble Lord, today I forwarded to the Minister a very detailed list of the categorisations of steel that will not be available in the UK but which will be subject to tariffs, and I would appreciate a response on that. Further, he mentioned 1 July. Most of the steel under consideration is imported from the EU, and negotiations are under way with the EU around a mutual tariff system. It is unlikely that those negotiations will be concluded before 1 July. It makes no sense to implement a tariff regime and then come to an agreement with the EU which will necessarily change that regime, so will the Minister go back to his colleagues and suggest that no change is made to the UK tariff regime until the EU agreement has been concluded?
My Lords, I will address the noble Lord’s first point. Following extensive engagement with downstream importers, we have introduced a transitional arrangement, as the noble Lord knows, so that the new tariff will not apply to goods contracted before 14 March and imported between 1 July and 30 September of this year. Quotas will be administered quarterly, with unused allocations carried forward within a quota year to provide greater flexibility.
To address the point about the EU, the United Kingdom and the European Union share a unique trading relationship, with highly integrated steel supply chains that support jobs and industry on both sides. We are, as all noble Lords know, engaging closely with the European Commission to secure a solution that protects the vital EU-UK steel trade. While I cannot comment on live discussions, we have made it clear that restricting UK access to the EU market would disrupt supply chains, increase costs and harm businesses in both the UK and the EU.
My Lords, I note and welcome the recent agreement reached by the Prime Minister and the Prime Minister of India, on the FTA and its commencement date in July. However, there is another issue on the horizon when it comes to steel tariffs, which is the imposition from 1 January next year of the carbon border adjustment mechanism, particularly on steel which is imported into the country, and which relies on coal. Bearing in mind India’s heavy burden on coal manufacturing, will we need to look at the FTA again?
First, I thank the noble Lord for all his work when he was a Minister in having conversations with the Indian Government. We should be celebrating and we should all be delighted that the landmark UK-India trade deal will now finally take effect from 15 July, delivering benefits for businesses and working people across the United Kingdom. This agreement, which is the most comprehensive India has ever concluded, is expected to boost UK GDP by £4.8 billion, increase bilateral trade by around £25.5 billion annually and raise real wages by £2.2 billion. Key sectors will benefit from this substantial tariff reduction, including exports of whisky, automotive products and cosmetics. I will write to the noble Lord on CBAM.
Can the Minister confirm that the Government are consulting on this, and therefore that some of the suggestions made in this House and in the other place can be taken into account by the Government and amendments made? Can he also tell us—despite the rather theatrical intervention from the Front Bench opposite—what would have been the state of the British steel industry if the Government opposite had continued?
I always agree with my noble friend. We have listened carefully to downstream steel users and designed these measures to balance manufacturers’ needs with the imperative to protect domestic steel production. Imports will continue to play an important role, and transitional arrangements will provide flexibility for some of the contracts that I have identified earlier. Delaying implementation would leave the UK exposed to damaging global overcapacity while our international partners act. We will continue to engage closely with the European Union as discussions progress.
My Lords, the French economist Frédéric Bastiat said that the distinguishing feature of a good economist is looking beyond the visible and seeing the secondary consequences. There are some 34,000 people employed in the steel sector in this country; one can argue about whether protectionism will help even them. Let us look at the numbers in the steel-using industries: 183,000 people work in the automotive sector, 452,000 in agriculture and 2.8 million in construction. These sectors either cannot buy the kind of steel they need other than through imports, or cannot get the volume from the UK alone. Will the Minister tell us what assessment has been made of the impact of pushing up the cost of these imports, especially in the north-east and the West Midlands, which are hubs for the aeronautic and automotive sectors?