Nadhim Zahawi responds to debate on UK steel industry

14th September 2020
Nadhim Zahawi responds to an Adjournment debate on the challenges and opportunities facing UK steel industry. 
 

I congratulate the hon. Member for Newport East (Jessica Morden) on securing this evening’s debate. She has been a passionate advocate for the UK steel industry, including in her role as co-chair of the all-party group on steel and metal-related industries. Clearly, this sector is important to the United Kingdom and testament to that is the number of colleagues who are present in the Chamber at 11 pm on a Monday night. One colleague who is unable to intervene or speak tonight is my hon. Friend the Member for Corby (Tom Pursglove). Although he cannot make his voice heard in this place, he certainly does on behalf of his constituents who work in the important steel industry in his constituency.

This debate represents a welcome opportunity to discuss the UK steel sector, which will continue to play a critical role as a foundation industry as we secure our economic recovery and long-term prosperity following the impact of the coronavirus. Madam Deputy Speaker, you will know that the steel sector provides well-paid, highly skilled jobs, as we have just heard from the hon. Lady. It also plays a key role in critical UK supply chains across many important parts of the UK economy, including automotive construction, power generation and, of course, defence.

Earlier this year, we welcomed the acquisition of British Steel by Jingye following a period of insolvency.

Will my hon. Friend give way?

Very briefly, because I have a lot to get through tonight.

I just want to say that the constituents in Scunthorpe regularly mention to me the support that they receive from the Government. Does my hon. Friend agree that support for other steel plants such as Celsa is vital?

It certainly is and I hope that I can cover that in the time that I have left to me.

Both officials and Ministers invested considerable time and effort in closing the deal with Jingye and the planned £1.2 billion investment that will go into the operations of British Steel. I hope the hon. Lady agrees that this represents a huge vote of confidence in the UK steel industry and the high-quality steel produced here in the United Kingdom. Notwithstanding this positive outcome for British Steel prior to the pandemic, the global steel industry was already facing significant headwinds. This included demand slowing across developed economies and persistent global excess production capacity, which depresses prices and harms the profitability of UK steel producers.

In the past few days, Tata Steel has published its accounts, which show a challenging position across its UK and European operations. While it is not appropriate for Ministers to comment on the performance of individual companies, I wish to reassure the hon. Lady that we continue to work very closely with the entire UK steel sector and the trade unions, and that we understand the challenges facing the industry in the UK.

While the coronavirus has come at a challenging time for the industry, we have been working intensively over this period to ensure that the UK steel industry has been able to access the support that it needs since the start of the covid-19 pandemic The Government have set out a far-reaching package of support to protect jobs, incomes and businesses across every part of the economy. Those working in the steel industry have been among the 9.6 million individuals across the country who have been able to access the job retention scheme. The scheme has protected people’s livelihoods in the industry and ensured that steel manufacturers have been able to retain high-skilled staff while managing the impact of reduced demand caused by the pandemic.

Importantly, we have worked closely with the steel industry representatives over this period to ensure that the furlough scheme—the job retention scheme—was sufficiently flexible to accommodate some of the real key asks from the industry and from the unions to meet the changing requirements of the industry as the wider situation evolved. I have been engaging personally on a regular basis with companies, trade associations, and, of course, the trade unions to gather their feedback. Direct input from the steel sector has helped to shape a number of our covid-19 support schemes. The coronavirus large business loan interruption scheme, the tax deferrals and the trade credit reinsurance scheme, which we launched with £10 billion, clearly came through as a result of that particular engagement with the industry. They were developed rapidly in response to that particular challenge faced by companies in the industry.

In addition to those far-reaching economy-wide schemes, we have committed to consider bespoke support on a last-resort basis where a viable company of strategic importance has exhausted all other options available to it. The House will be aware—the hon. Member for Newport East mentioned it—that such circumstances apply to Celsa Steel, which is a critical supplier to our construction industry. Government support in that case secured over 1,000 jobs, including 800 positions at the company’s principal site in south Wales. Commercial confidentiality prevents me from setting out further details on that case, or indeed from commenting on any discussions we have had with individual steel companies over this period. However, I hope that hon. Members agree that that is a clear signal from the Government of our continued commitment to the UK steel industry and the 30,000 individuals who are employed in the sector.

The support to Celsa was absolutely welcome and we certainly appreciate that, but what about Tata Steel? The Minister says he is looking for strategic importance and a viable business that will play a critical role in the future of our manufacturing sector. Surely, Tata Steel qualifies on all three counts?

The hon. Gentleman will know, because he is deeply involved with Tata Steel in his constituency, that that is absolutely right with regard to the strategic importance of Tata Steel. I hope he will forgive the fact that I will be unable to go any further at this stage because of the need to protect commercial confidentiality. Suffice to say that he is absolutely right that it ticks all those boxes.

As we transition from managing the immediate challenges presented by covid-19 to securing the long-term recovery of the UK economy, we will continue to work with representatives of the steel industry, the unions and the devolved Administrations to address the strategic challenges faced by the sector. We are committed to working collectively with those partners to shape a steel industry that is sustainable, productive and innovative. To that end, we are taking action in key areas. I want to outline a few of the priorities for UK steel companies, including on energy prices, procurement, research and innovation, and international trade.

On energy pricing, it obviously still remains an inhibitor to our steel industry and to bringing steelmaking back to Teesside. What steps are the Government taking to improve innovation in the energy sector to bring about cleaner steelmaking?

My hon. Friend’s timing is impeccable, because I am just about to come on to our focus on energy and the clean steel fund. As we set out our focus on the recovery, our objective is both to boost the sector’s short-term competitiveness and to support the longer-term transformational investment that colleagues have spoken about that will drive productivity and efficiency, and support our net zero goals.

On energy prices specifically, the ability of our steel industry to compete internationally is a priority for the Government. We remain committed to minimising energy costs for business. Since 2013, the Government have provided £480 million in compensation to the steel sector to make energy costs more competitive. Moreover, we are investing £315 million in the energy transformation fund to help energy-intensive businesses such as steel companies to cut their bills and transition to a low-carbon future.

On innovation, supporting our steel industry in the UK to decarbonise and make the most of clean growth opportunities is a key priority for us. This is part of our wider agenda to put the UK at the forefront of research and innovation in the coming years. Last year, we announced two important new research and innovation programmes, which will help the steel industry in its effort to reduce emissions and support the decarbonisation of the UK economy to achieve our ambitious 2050 net zero target.

This is all well and good, but the Minister has not addressed the crucial issue of dumping. Even with all these measures in place, if steel is being dumped on this country, it will not take long before it kills our industry.

I will come back to anti-dumping at the end of my remarks.

To finish my point on innovation, another £250 million —a quarter of a billion pounds—of clean steel fund will support the sector’s transition to new low-carbon technologies and processes. A £100-million low-carbon hydrogen production fund will support the deployment of low-carbon hydrogen in industry to help decarbonise a range of sectors, including steel.

Will the Minister give way?

I want to make some headway. If there is time at the end, I will come back to the hon. Gentleman.

The hon. Member for Newport East rightly mentioned procurement. It is a priority for the Government to ensure that UK steel producers have the best possible chance of competing for and winning the contracts associated with our domestic infrastructure investment. We have published a steel pipeline on national infrastructure projects worth about £500 million over the next decade. For the first time, we have also published data on public sector steel procurement, which will be refreshed in the coming weeks and on an annual basis thereafter. That information serves as a testament to our ambitious plans for UK-sourced steel within our pipeline of major infrastructure projects. It will also serve as an accountability mechanism. We will work with the sector to achieve this shared aim.

We recently welcomed the commencement of construction work on the largest of these infrastructure projects, which the hon. Lady mentioned—HS2. We are keenly aware of the opportunity it represents for our domestic steel sector. The Department’s steel pipeline update from last year indicated that HS2 will require more than 2 million tonnes of steel over phases 1 and 2.

We are mindful that there are mechanisms by which we can actively support the sector to realise this opportunity and future ones within the parameters of our legal framework. To take just one example, the Department for Business, Energy and Industrial Strategy has signed up to the UK steel charter, which has been mentioned several times tonight. We recognise it as an important initiative, developed by industry, and we are actively encouraging other Departments to sign up. We look forward to making continued progress on the issue of procurement over the coming months.

International trade and EU exit, which were both mentioned in the debate, are huge areas of strategic significance for the UK steel industry. Overcapacity in steel production remains a global systemic challenge for the sector. We continue to work as part of the G20 global forum on steel excess capacity to address this problem. Unfair market-distorting practices have been partly to blame for the situation. We want all countries to act on and implement the recommendations agreed by G20 Ministers, and we will maintain pressure on them to do so.

In preparation for the end of the transition period, the Government have legislated for the full suite of tools permitted under the WTO to address unfair trading practices. We are working closely with the Department for International Trade to ensure that the UK has a suitable trade remedies system in place for the future to maintain the protection of our steel industry. We are also engaging with our European Commission colleagues to discuss how the steel safeguards should operate after the transition period, with the aim of preserving traditional trade flows and providing as much continuity to the industry as possible. We are committed to transitioning the definitive safeguard measures on those steel products and categories where there is a UK interest. We continue to make a strong case to the EU on behalf of the UK steel sector to ensure that appropriate tariff rate quotas are provided to UK exporters as soon as is practicably possible following the end of the transition period.

These are unprecedented times and the challenge for the UK steel industry is big. I have half a minute left, but I will take the hon. Gentleman’s intervention.

Will the Minister underline our commitment to blast furnaces as a central part of the steel-making process? With the right investment, we can make the transition to hydrogen and so on, but blast furnace production is absolutely central.

The hon. Gentleman is absolutely right that we have to make sure that, as a foundation industry, steel continues to innovate. Whether it is electric arc or other emerging technologies, such as hydrogen, which we are seeing the adoption of, we are absolutely committed to that.

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