UK Steel Sector: Supply Chains

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I beg to move,

That this House has considered the UK steel sector and its supply chains.

It is a pleasure to serve under your chairship, Sir Graham. Hon. Members taking part in the debate today will recognise that this is not the first time that we have sought assurances from the UK Government that they are sincerely committed to supporting the British steel industry. Indeed, by my calculations, since 2015 Labour MPs have secured 19 debates and urgent questions on steel, made 51 speeches on steel, asked 54 oral questions on steel, and intervened on or responded to Ministers 103 times on the future of our steel industry. A pessimist may ask, “What’s the point?”. After all that pressure, the British steel industry still faces a range of serious challenges, and the UK Government are continually failing to provide the necessary level of support to allow the UK steel sector to compete.

In spite of those powerful headwinds, I am optimistic about the future of our steel industry, because I believe that covid-19 has completely reset the way in which the British people think about the sort of country they want to live in. The public want a Britain that can stand on its own two feet and that is more resilient to external shocks. The pandemic has exposed the weaknesses and vulnerabilities that lie at the heart of our economy and our society. The pandemic has demonstrated beyond a shadow of a doubt that if we wish to address those weaknesses and vulnerabilities, we must commit to and invest in a renaissance of modern manufacturing in our country.

British manufacturing has been in decline, dropping from 30% of GDP in the 1970s to just 9% today. The UK’s shift towards a city-centric, service-based economy means that it is now the most geographically unequal country in northern Europe. We have the richest area in the whole of northern Europe—London—but also the five least prosperous areas, with west Wales and the valleys the poorest of all.

I should inform all participants that due to a technical problem, all those participating virtually did not catch the first three minutes of the debate. That has now been resolved, but I pass on the apologies of the staff who have been working to resolve the problem.

There are a lot of Back-Bench participants on the call list. If it is possible for them to keep to about five minutes, we should be able to get everybody in.

It is a pleasure to serve under your chairmanship today, Sir Graham. I thank the hon. Member for Aberavon (Stephen Kinnock) for securing this important debate. As I am a fellow steel MP, I agree with him on many of the issues that he has raised this morning.

The steel sector has seen tough times and this Government have been proactive. In Scunthorpe, we put in hundreds of millions of pounds to keep our blast furnaces going. I myself come from a steel family, so I know that when times get tough, it is not only the steelworks that are threatened but the steelworkers— people like my granddad, who worked in Scunthorpe steelworks for 30 years—and the 20,000 supply chain jobs in my area, as well as the towns that grow up around the industry.

Steel is, indeed, a foundation industry that is crucial to national security. Our ability to manufacture and produce steel is critical in ensuring that we are self-reliant and insulated from global steel shortages. The Minister will recognise that there is competition between Governments in providing the best environment for a steel industry to thrive and there is much that we can do to provide a better competitive environment for UK steelmakers.

Rather than continuing to provide support in times of crisis, as this Government have undoubtedly done, we need to continue to look further and harder at long-term steel measures. Indeed, the glaring flaw in the preliminary recommendation by the Trade Remedies Investigations Directorate is that it did not make a sufficient industry-led assessment. Our steelworks produce many products across the categories assessed by TRID. These products are linked back to the production of crude steel and steelworks need a certain base level of production to be profitable. An increase in imports in an unprotected category could affect the viability of another steel product, and there is a real risk that the UK will be increasingly vulnerable to imports if steel safeguards are removed. I urge the Minister to work with her colleagues from the Department for International Trade to prevent that from happening.

We must also address the high cost of energy prices. Our steelworks currently pay almost twice as much for energy as French and German steelworks. On steel procurement, there has been progress and many in the industry have welcomed the overarching principles of the Government’s recent paper. The central tenets, especially on considering the overall social value of procurement and providing more flexibility for decision making, are absolutely right. The procurement of steel from the UK generates social value for our communities. Steel does indeed create well-paid jobs and has a part to play in levelling up areas such as Scunthorpe as manufacturing and logistics powerhouses.

It is always a pleasure to serve under your chairmanship, Sir Graham. I am very frustrated that we are here once again; I hope my speech will explain why. The British steel industry has huge potential, but the long-term failures of the Government to address the underlying issues continues to hold it back. Since I was first elected in 2012, steelworkers in my constituency have faced a seemingly endless cycle of crises with lingering uncertainty, not only for them but for all those throughout Rotherham, where the local economy and people’s livelihoods depend on the sector. That uncertainty has continued with Liberty’s announcement that it is selling its speciality steels division, which includes the narrow strip mill at Brinsworth in my constituency.

Throughout the recent difficulties at Liberty, the Government have promised much but, to date, delivered little in the way of practical support. That cannot continue as the sale progresses. Any sale must safeguard the long-term future of the plant and must hold Sanjeev Gupta true to his word that no plant will close on his watch. Liberty must run a transparent sales process and engage with all concerned parties, including the trade unions. The Government must carefully scrutinise any deal and ensure that it includes clear safeguards for the future of both the plant and the steel jobs. They are crucial assets to our economy and they cannot be lost as the result of a fire sale to secure finances for GFG’s other businesses.

While the sale of speciality steel is concerning, Liberty’s ongoing commitment to its Aldwarke plant in Rotherham is encouraging. The plant can lead the way in our drive to decarbonise our steel industry. Decarbonisation presents challenges but also offers huge opportunities to grow our economy and create new green jobs, but that would take sustained support from the Government and a viable long-term plan—something that, to date, has been lacking.

It is a pleasure to serve under your chairmanship, Sir Graham. I thank my hon. Friend the Member for Aberavon (Stephen Kinnock) for securing this important debate, and I draw attention to my entry in the Register of Members’ Financial Interests.

British steel was once the envy of the world. From Newport to north Lanarkshire, steel making supported hundreds of thousands of jobs and inspired a fierce and well-earned pride in all involved. In January 1980, the Thatcher Government provoked a strike at the British Steel Corporation—the first national strike in the industry for more than 50 years—to break the union and pave the way for privatisation and under-investment. We are paying the price for that today, as the future of the industry hangs in the balance. Unable to compete on the international stage, the economic output of British steel fell by a staggering 30% in 2016 alone, and last year the Government’s brazen refusal to step in and save the Orb steelworks in Newport led to the historic site closing after 122 years in operation.

Now, the crisis at Liberty Steel threatens not only the livelihoods of the steelworkers themselves but those of more than 3,000 workers in the wider supply chain. Some argue that the British steel industry is doomed to terminal decline—just another in a long line of industries sacrificed to deindustrialisation. I could not disagree more. If we made the right investment now, I believe we can not only secure work for generations to come but re-establish the UK as a world leader in sustainable steel production. Technological advances, such as direct reduced iron technology and hydrogen power, have the potential to transform the industry. It currently accounts for about a quarter of all UK industrial emissions, but it can be part of the green industrial revolution and once again become a force to be reckoned with.

None of that is possible without direct Government support. There have been many encouraging steps so far, such as the re-establishment of the UK Steel Council, the creation of the £250 million clean steel fund and the commitment to founding two industrial clusters by the mid-2020s. Very good, but I fear that we are failing to go far or fast enough in decarbonising the sector. Hydrogen-based steel making is already being piloted in at least 23 sites across Europe, so the UK risks being left far behind by our European neighbours. Whether it is Scunthorpe or Port Talbot, these are the very communities that the Government promised to level up, yet they will be the ones that pay the price.

I congratulate my hon. Friend the Member for Aberavon (Stephen Kinnock) on securing this debate and on his excellent analysis of the challenges facing the steel industry. He, the hon. Member for Scunthorpe (Holly Mumby-Croft) and my hon. Friend the Member for Rotherham (Sarah Champion) referred to the problems of trade defence measures, and that is what I will concentrate my remarks on.

Last month, the Trade Remedies Investigations Directorate published a draft recommendation to withdraw half of all trade remedies on steel. If that happens, the consequences could be disastrous. During the Committee stage of the Trade Act 2021, I argued that there should be an independent body to make recommendations on trade remedies, which would also take into account domestic economic considerations, but the recent recommendations by TRID show that the regulations that were set out in its mandate, which now also govern the newly established Trade Remedies Authority, are simply not fit for purpose.

Steel manufacturing is a critical national asset. Steel produced in Britain is used to make ships for the Royal Navy and wind turbines to meet our climate obligations. The construction of a nuclear power station at Hinkley Point C is using Welsh steel, and 1.3 million tonnes of steel are required for the construction of High Speed 2. The sector directly employs more than 30,000 people, supports a further 41,100 jobs in high-value supply chains, makes a £2.8 billion direct contribution to UK GDP and supports a further £3.6 billion in its supply chains. Steel is a vital asset—we must protect it in the national interest. However, in making its draft recommendation, TRID failed to take into account the reality of the steel supply chain.

The full spectrum of measures is designed to protect the viability of steel as a whole, not just individual production lines. Removing safeguards would mean that the manufacture of steel sections, tubes, wire rods and plates in the UK becomes unviable. It seems almost certain that the European Union will retain its section 232 tariffs beyond 30 June, meaning that any global overproduction of steel will likely flood the UK, crush domestic supply and have potentially catastrophic consequences for the industry and communities here in Britain.

It is always a pleasure to see you in the Chair, Sir Graham. I congratulate my hon. Friend the Member for Aberavon (Stephen Kinnock) on securing this important debate.

Steel is a foundational sector across the UK and never more so than in Neath Port Talbot county borough. Upon these strong foundations, economies and supply chains are created. Port Talbot’s steelworks reaches all the surrounding communities. Thousands of Neath constituents have worked there, know someone who works there, or work in its supply chain—my father did. To say it has been a difficult few years for the steelworkers in Neath Port Talbot would be an understatement. Competing in a global market, the absence of anti-dumping tariffs, the lifting of lesser duty rates and rising UK energy prices have conspired to create uncertainty and fear. Over 2,000 local jobs have been lost since 2014. Steel and the steel industry are vital to Wales and its economy.

The idea that the steel sector does not have a future is unthinkable, but our steelworkers are as robust as the steel they make. They have bounced back from every adversity so far—but the situation is about to get much worse. The recent Trade Remedies Investigations Directorate recommendations on the existing steel safeguards could be catastrophic for the UK steel sector. Only 10 out of 19 product categories are recommended to have safeguards extended, leaving sites in Llanelli, Cardiff, Gateshead, Sheffield and many more without the protection to limit sudden increases in imports. The lifting of safeguards would open up UK markets to trade diversion and have a negative impact on the remaining measures. The interconnected nature of UK steel means that a threat to one product category will have consequences for the others.

Steel imports increased by 25% between 2013 and 2017, before the original EU steel safeguards were introduced. The current circumstances of global overcapacity and import restrictions in other countries make it highly probable that steel imports will again escalate should safeguards be removed. It is probable that the EU and the US will continue to provide safeguards for their industries and place measures on UK steel imports. It is astounding that the UK Government would provide open access to our steel market. The market remains volatile and delicate during the continuing pandemic, which has seen steel demand drop by 16% during 2020. The steel sector needs stability to recover and to adapt to a post-covid world. Safeguards are crucial to provide stability. The steel sector will continue to face many challenges—decarbonisation, subsidy regulation post Brexit, public sector procurement, energy price disparity—but it is the removal of steel safeguards that poses the biggest existential challenge, given the interconnectivity across the sector.

Well done to my hon. Friend the Member for Aberavon (Stephen Kinnock) for securing this important debate. He is both the Member for Port Talbot and our chair of the all-party parliamentary group for steel and metal related industries. He gave an excellent analysis, setting out the issues yet again.

My hon. Friend mentioned that we have had 19 debates on steel in this House over recent years. I feel I have been there with him in many of those, making the same points over and over again. I do so because steel has always been at the very heart of the community that I represent, with many workers in both the steel industry in Newport East and down the road in Port Talbot, and in supply chains, making world-class automotive steel for BMW, Jaguar Land Rover and other projects at Tata Llanwern. We also have the Celsa site in the constituency of my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), which is one of the largest producers of rebar; and Liberty, which produces hot rolled coil for domestic and export markets for use in construction and is at the cutting edge of modern steel technology. On that note, I know that we all want the future of all Liberty Steel businesses secured, including Newport, and I know that hon. Members for steel constituencies will hold Liberty and the Government to account and make sure that we uphold that commitment to the workforce and our industry going forward.

On behalf of that industry, those businesses, those workers and the unions in my constituency, I say again what steel MPs have been saying here for many years: steel should be a cornerstone of a comprehensive, forward-looking industrial strategy in this country. It has an absolutely pivotal role to play in our recovery from the pandemic. The economic value of the steel sector cannot be overstated. The industry makes a £2.8 billion direct contribution to GDP and supports a further £3.6 billion through its supply chains, while the average salary is around 36% higher than the regional average in steel heartlands such as south Wales and Yorkshire. If the Government are really serious about levelling up across the UK, they should look to steel as a foundation to build on.