Speciality Steel UK

With permission, I shall make a statement on Speciality Steel UK, but before I do so, I would like to say that I know the thoughts of the whole House will be with the Prime Minister following the passing of his father Roy earlier today. The workers at Speciality Steel UK have faced years of uncertainty. The plants have been mothballed and the jobs furloughed for several years. This outrageous situation is a monument to years of neglect by successive Conservative Governments who let this industry decline, but this Government and I have taken a different approach. We have done all we can to rebuild the sector, and we have confronted its challenges head-on. In the case of Speciality Steel, complex ownership structures and opaque financing arrangements have amplified the headwinds of the wider sector. I do not need to remind the House about this case’s links to a prominent ongoing corporate scandal involving a former Conservative Prime Minister. As the House may recall, Speciality Steel UK entered liquidation in August last year, with the independent court-appointed official receiver managing the liquidation process. Since then, the Government have provided funding to enable the official receiver to carry out his statutory duties, including maintaining site safety, supporting employees and conducting a sales process for the business and its assets. Throughout that period, our priority has been facilitating a private sector solution. The official receiver engaged with a range of interested parties and earlier this year identified a preferred bidder. That bidder subsequently requested Government support to make its purchase of Speciality Steel UK possible. However, following extensive engagement between the bidder and its advisers, and having done all the due diligence and given the case the consideration that taxpayers would expect, the Government have decided that they cannot provide support on the proposed terms. This decision has not been taken lightly. For over a year, we have funded the official receiver process, while working constructively on efforts to secure a private buyer. We took a long, hard look at the offer that was on the table, but the truth is that we had serious concerns about the proposed financing of it, the protections for UK taxpayers, and whether it could offer long-term stability for the local economy and community. Having concluded that we cannot support the preferred bidder’s proposal, we are faced with a choice: we can allow events to take their course through the liquidation process, and risk being left with no say in the future of the sites, or we can act. This Government choose to act. We have made a commitment to reindustrialise Britain—to bring good growth to every postcode of our country. Backing the proud communities of Stocksbridge, Rotherham, Wednesbury and Brinsworth is absolutely part of that commitment. These workers and those across the wider business have endured a prolonged period of uncertainty. The Government cannot accept the prospect of another prolonged process that will create more worry and anxiety for workers, deter businesses and hang over the local community. Nor can we accept a situation in which decisions impacting the future of communities in South Yorkshire are effectively taken by default, rather than through a deliberate assessment of what will best support growth, opportunity and prosperity in the years ahead. We will therefore engage with the official receiver’s sale process and develop a proposal for the public acquisition of SSUK. This will preserve strategic control and ensure that all credible future opportunities can be properly considered before irreversible decisions are taken. We are taking this step because SSUK occupies a unique place in the UK’s steel ecosystem. It offers specialist capabilities that have served advanced manufacturing supply chains, including in aerospace and defence. In other words, it is capable of supplying the growth-driving sectors of our economy—those that we have committed to supporting through our industrial strategy. SSUK’s strategic value extends well beyond its economic contribution. It lies in its specialist steelmaking capabilities, which have historically produced products like aircraft landing gear, helicopter rotors, missiles and munitions. It would not be right to let this go by default. I want to make an important clarifying point: we will work towards public acquisition, but that is not the end of the process, or the end of the conversation about the long-term future of the business and its sites. It means that we are keeping our options open while Government, local leaders, industry experts, private investors, workers and other partners consider what is best for these strategically important locations. I want to thank those Members of this House with SSUK sites in their constituencies for their engagement with my Department, and I welcome their continued input. That includes my right hon. Friend the Member for Rawmarsh and Conisbrough (John Healey), and my hon. Friends the Members for Rotherham (Sarah Champion), for Penistone and Stocksbridge (Dr Tidball), and for Tipton and Wednesbury (Antonia Bance). I recognise the role played by the Mayor of South Yorkshire, Oliver Coppard, and his team in ensuring a joined-up vision for the future of South Yorkshire. I welcome the work that I know we will do in lockstep to deliver this future. Working towards public acquisition will create the time and space necessary for undertaking a full assessment of the opportunities available. It will let us consider future industrial use, regeneration opportunities and the role that specialist manufacturing capabilities could play in supporting growth and our national resilience. One option that will be assessed carefully is the future of speciality steel production. However, we are not prejudging the outcome of that assessment. All options will be considered rigorously against their economic and industrial benefits, their impact on regional growth and their value for money. I should note that all future decisions and spending commitments will be subject to detailed due diligence and funded from existing Government budgets. Our announcement today must also be seen in the wider context of the Government’s commitment to the future of the British steel industry. Steel remains fundamental to our economy, our infrastructure, our energy system, our advanced manufacturing base and our national security. It underpins critical supply chains and supports thousands of skilled jobs across the United Kingdom. That is why we nationalised British Steel earlier this year; why we intervened to secure stability and maintain production at the site while we develop long-term options; and why we secured a better deal for the steel communities of south Wales, with £500 million of Government support for a new electric arc furnace at Port Talbot. In our steel strategy, we committed to stabilising and rebuilding the steel sector. What is more, we set out a goal of supporting productive and profitable steel producers that can meet their customers’ needs, strengthen our national security and provide high-quality, secure, long-term jobs, backed by private investment. That was not an empty promise or wishful thinking. We have acted to tackle the challenge posed by global steel overcapacity through trade measures that protect our domestic production from unfair pressure and support the viability of the nation’s steelmaking. I want to speak directly to the workers of Speciality Steel UK, who have been stuck on furlough, unable to do the jobs of which they are so rightly proud, through no fault of their own. I know that they feel ignored and let down by previous Governments, but as Business Secretary, I will not duck these difficult decisions, and neither will this Government. I will do all that I can to secure a bright future for you, your communities and your families. Taken together, these actions demonstrate that this Government are serious about reindustrialising Britain, and the steel sector playing its part. We want to attract private investment, strengthen domestic supply chains and ensure that industrial communities have a genuine opportunity to thrive in the decades ahead. That is why we are moving towards the public acquisition of Speciality Steel UK. As ever, I commit to keeping all Members informed as this important work progresses. I commend this statement to the House.

I call the shadow Minister.

On behalf of Conservative Members, I send my thoughts to the Prime Minister, following the tragic passing of his father. I thank the Secretary of State for his statement. In her statement to the House following the insolvency of Speciality Steel UK in September last year, the then Minister for Industry, the hon. Member for Croydon West (Sarah Jones), stated that the Government would pursue every avenue to keep the company’s sites producing, as part of the Government’s wider work to grow a resilient domestic steel industry. We can all agree that the compulsory winding-up order against Liberty Speciality Steels created a great deal of uncertainty, especially for the more than 1,000 workers employed there. I am keen to hear how the Government have kept their promise to stand by the entire workforce throughout this process, including while overseeing bids to sell former assets. Will any redundancies follow nationalisation? However, continuous operational failures have already pushed businesses into a state of chronic uncertainty; a failure to file accounts for more than six years led to a separate prosecution by Companies House, and there was an investigation by the Serious Fraud Office into suspected fraud, fraudulent trading and money laundering. The Secretary of State said that the official receiver wanted to gain a better understanding of the company’s business and the conduct of its directors in the period leading up to the liquidation. Can he give an update on any investigations into conduct that the Government have undertaken, and on any steps taken to recover money belonging either to the business or to the British taxpayer? Despite the rhetoric about the Government supporting the UK steel industry, all that the industry has experienced is increased pressure and apprehension. From the steel strategy, which is likely to lead to ever higher costs for taxpayers, to the introduction of the UK carbon border adjustment mechanism, which fatally weakens our national resilience, the survivability of steel producers is becoming more difficult. Indeed, a manufacturer in my constituency told me some months ago that it will likely dissolve by Christmas if the Government do not change course. Energy prices are also a significant hurdle for steel plants. The Government’s Clean Power 2030 action plan risks making things worse; it could force rapid change without ensuring the infrastructure or investment to support it, while increasing costs for manufacturers and threatening jobs in key industrial communities. Nearly 92% of global steel production faces no comparable carbon pricing. Only the UK, the EU, Canada and New Zealand, covering just 8% of global output, apply prices in the £30 to £70 per tonne range, but we expect our industry to compete with countries that pay a fraction of that, or nothing at all. The Secretary of State will say that the Government are helping to address the burden of high bills for manufacturers via the British industrial competitiveness scheme, but unfortunately their efforts are too little, too late. Having a strong steel industry is vital to our national security and resilience. Traditional bulk commodity steelmaking is vital to our national infrastructure, and modern advanced steel manufacturing is a vital foundation for sectors such as aerospace, defence, nuclear and automotive, all of which are critical, given rising geopolitical tensions. I understand that another issue facing Speciality Steel UK was having the capital to buy raw materials that would allow the continued production of advanced steels, such as the landing gears produced at Stocksbridge. Could the Government therefore outline what support has been given to maintain site operation through this process, and whether advanced steel manufacturing will be a priority following nationalisation? Circling back to the Government’s commitment to pursue every avenue, can the Minister explain how much consideration has been given to private investment as a solution? How much was spent on private sector solutions before the decision to nationalise, and what was the main basis for that decision? Considering that a preferred bidder had been identified, it is surprising that the Government have moved away from this completely. Indeed, at the Business and Trade Committee on 22 June, the Department’s director for materials and industry noted that “significant investment” was required, and stressed that the majority of this should come from the private sector. Other than a new Prime Minister who is ideologically committed to nationalisation, what has changed? Will the Minister outline the terms asked for by the private bidder that the Government were not willing to agree to? If the business has unique capabilities and demand is there for its products, does that not imply that the barrier to a viable private sector buyer is either the Government’s own ideological obsession with nationalisation, or an economic climate in which it is increasingly impossible to run a successful manufacturing business in Britain?

I thank the shadow Minister for his response. I particularly appreciate his words for the Prime Minister, which I know he will appreciate, as will his family. The shadow Minister began with a long list of neglect regarding the policy, operations and ownership of this particular set of steel businesses. The obvious question is why the Conservatives did not do anything about it when they were in power—it certainly was not for want of requests to act from Labour Members. He has asked for reassurances about the workforce, and I am happy to give those to him. The cost of funding the official receiver, both to date and ongoing, is essentially the wages of the staff. They are in a position where they will be paid, which is paramount. The shadow Minister talked about the business environment. I say politely to all Conservative colleagues that they left us with the highest industrial energy prices in the developed world. That was the legacy—it is not due to any policy changes made by Labour. What do our industrial subsidies mean? For a sector such as steel, where an electric arc furnace is obviously incredibly energy intensive, the supercharger package—not the BICS package, because the supercharger package applies in this case—will bring down average electricity prices from approximately £168 per megawatt-hour to £86 per megawatt-hour. It is not just about being competitive with peers; that is a genuinely competitive position with our rivals. We introduced those subsidies because we were aware that the business environment we inherited from the Conservative party was not satisfactory. We had to act, which is why we have done so. Turning to wider measures, yes, we have activated a substantial trade defence policy. That is not just about maintaining domestic production; it is about being a country where the rules of the game apply. If we want people to be based here in the UK, they have to be able to take advantage of effective trade remedies when they are facing unfair competition. I know that that is an issue for the downstream users, but it is the position that I think the country has to take. What the shadow Minister has said about carbon border adjustment mechanisms is, I think, a new policy since I was last Secretary of State—the Conservatives are perhaps disowning the policies they had at the end of the last Government, because they were certainly committed to CBAMs then. Of course, CBAMs are fundamentally about trying to maintain fair competition between carbon-intensive sectors in developed countries such as ours and the rest of the world, so there is a little bit of incoherence there, to say the least. On the issue of working capital, the opportunity presented to us by Speciality Steel UK is that previously, the business only produced when the customer effectively supplied working capital—a highly irregular position, but one reflective of the opaque and byzantine financing arrangements under the previous owners. I believe the opportunity exists to operate a successful business in this space. There is nothing ideological about this; my ideal is for the business to be run in the private sector. The shadow Minister has asked why we could not take forward the preferred bidder. I will not go into the details, but when I come to this Dispatch Box I have to be satisfied that any public support given meets the reasonable conditions we would expect, such as that taxpayer money will be protected and will not be spent without delivering the outcome for which it has been granted. If I cannot do that, I cannot grant that subsidy, which I think is the position any Secretary of State would have to take. What is the barrier to a private sector solution? Effectively, it is risk—the fact that this was left so long without activity from the Conservative Government and the workforce have not been making steel. The customers are therefore in a position where that is a big, substantial challenge for any private sector entity to take on. If we do end up with a public ownership position, I think the state will be better able to take on that challenge, but it is the legacy of neglect that has been the barrier. That is exactly what this Government are determined to resolve.

Today is a really good day. I have been in this Chamber for more than a decade, watching my industry being allowed to wither on the vine. Secretary of State, a huge thank you to you for understanding the potential in the Rotherham, Brinsworth, and Stocksbridge sites, which work hand in hand. It is not just about the sites themselves, but the infrastructure around them. We have a whole supply chain that needs these sites back and running again. Of course, this is green steel, or recycled steel, so it fits exactly with the Government’s industrial strategy—it is the linchpin. Secretary of State, thank you for continuing the pay so far and thank you for committing to continue it for the next six months. Can he also speak a little about the training that the staff will get? While they are grateful to be furloughed, they want to be working, and that means that they need to be fit the day that he says we can open the doors. They want to be ready to go. Can he also say a little about product accreditation? Literally every week, I have people from around the country calling in, trying to purchase steel. However, to purchase it, accreditation needs to be in place. Finally, can he speak a little about any anticipated restart costs? I know the workers are doing all they can to maintain the sites, but there are likely to be costs. Today is a good day, and I thank the Secretary of State.

Order. Can all Members look at the Chair when speaking? Sometimes we cannot hear what is said. Also, the Member is not addressing the Secretary of State, but the Chair. It will help us all if we do it that way.

I thank my hon. Friend for her engagement, her support and her advocacy on behalf of her constituents. This has been and is a difficult situation for them, and it is exactly because of our commitment that we are seeking to resolve things in a favourable way. The work we can now do will have to look at the capacities, the potential for new investment that might be required, the product lines, where the customers are and so forth. The key issue—I am not sure if this has ever been put on the record in Hansard before—is homologation. That is the assets of these sites and the accreditations they have for such a speciality set of products. Those assets are incredibly valuable. Not many parts of the world can produce to the standard that we are talking about. We now have a process—I want that to be as short as possible—where we can assess that. I will remain in close contact with her. I want to be in a position where, if we can take this forward, we can pass that good news on to her constituents.

I call the Liberal Democrat spokesperson.

First, may I pass on my condolences and those of my party to the Prime Minister on the sad passing of his father? I thank the Secretary of State for his statement. We Liberal Democrats recognise that national security, energy security and food security are all intertwined. Steel is critical to our renewables sector, our defence and our national infrastructure. In a previous debate on this company, we said on the record that nothing should be off the table, and we look forward to receiving further details from the Secretary of State as the process continues. I have a few questions for the Secretary of State. First, on jobs and the employees, can he offer any further information not just on training, as another hon. Member has raised, but on the timeline by which staff will have more information about what this decision means for them? The Secretary of State highlighted that this process may end up in public acquisition. Is he in a position to say how much that would likely cost the taxpayer? Can he give us a broad estimate or range for how much those costs might be? Related to that, I note that the Secretary of State said that it would be funded through existing budgets. Can he say where that money might come from and whether it might get rediverted from other sources of funding, such as for transport, energy projects or something else? I have two final questions. We know that the warning lights were flashing for a very long time—the Secretary of State mentioned that himself. Will there be any formal process to look at the lessons learned, both politically and administratively, to make sure that something like this never happens again? Finally, he will know that as well as using domestic steel suppliers for our British procurement, the way to really boost British industry is to have a stronger relationship with Europe, so that British steel can be used throughout supply chains and procurement right across Europe. Will the Government look at strengthening that relationship?

I thank the hon. Lady for her questions. I entirely endorse what she said about the centrality of steel to security and infrastructure, and, indeed, I echo her words. This is entirely pragmatic. I am seeking to resolve a series of long-running problems, which a great many of my Conservative predecessors—and there were a great many—ignored, considering them to be too difficult. That is the central lesson that I would learn: we have to be willing to confront these hard problems. We might think that we can pass them on to the next person, but that is not serving the country in the way that is required. Let me now deal with the hon. Lady’s specific questions. I expect this process to take between four and six months, but I want it to be resolved as quickly as possible. I think it important to point out that there are costs either way: there are costs involved in running the business in public ownership, and there would also be costs to the state from the remediation and regeneration, partly because of the legacy of public ownership but also because such big steel industrial sites come with so many issues to resolve if they are remediated that some of that would fall on the Exchequer. If this were a matter of public ownership, we would have to pay off the creditors, reach an accommodation with them, acquire the assets, and then inject some working capital over a period of between one and three years. I would expect the cost of that to be about £350 million, and I would expect something comparable were the option to be regeneration and remediation. The hon. Lady asked about existing budgets. We knew when we came to power that we needed to pay attention to the steel industry. There was a commitment in our manifesto for £2.5 billion, on top of on top of the £500 million that was granted to Tata in Port Talbot under the previous Government. We have spent some of that, although the lion's share of the sum has gone to British Steel, but the support for Tata has continued. Some of the money has gone on the official receiver process here. We have that existing budget in which to commence this work. These are obviously significant assets, and I think that this is an entirely appropriate use of them. The hon. Lady also mentioned the relationship with Europe. She will know that when the European Union changed its own trade defence measures on steel, that had some adverse consequences for us. My call to Commissioner Šefčovič was one of my first in the job, for a number of reasons. We talked explicitly about this, and are seeking a resolution specifically on steel, which I believe would be in our interests and those of the European Union.

I welcome the direction that the Secretary of State has set out today. Wednesbury Bright Bar is part of Speciality Steel UK. It is a specialist steel-finishing plant that produces precision-engineered bright steel bar in the heart of the UK metal-finishing industry area. It is used for automotive and advanced manufacturing across the Black Country and beyond. This is not primary steel production, and it will need a clear strategy separate from that for the primary steel production, which is the business in Rotherham, in Stocksbridge and elsewhere in the country. What specific consideration will the Secretary of State give to securing the long-term future of Wednesbury Bright Bar as part of work towards the public acquisition of Speciality Steel UK, and how will this support the skills, jobs and manufacturing supply chains across the west midlands and beyond?

I am grateful to the hon. Member for her support and engagement on behalf of her constituents. There is a co-dependency between the four sites in terms of how the business operates, but any long-term consideration, whether in the private or the public sector of the business, will have to include consideration of products, customers and markets if the business is to be run profitably. That will be central to the assessment that we can now make. However, I can give the hon. Member the reassurance that every part of this business clearly has worth—which is why they have been grouped in this way, historically and in a contemporary sense—and, of course, we are seeking the best solution for the workers in all four of the plants.

I call the Father of the House.

We know that Speciality Steel has been severely impacted by high electricity costs, and we know just what that means from people in Scunthorpe, the constituency next to mine, which is a very heavy user of electricity. They are paying 50% more for their electricity than is being paid in France, for instance. However, the Government insist on phasing out the blast furnaces. Once we have electric arcs in Scunthorpe, people there will have to use twice as much electricity, paying much more. Does the Secretary of State agree that we cannot reindustrialise Britain simply through public ownership, but must reduce our energy costs? Will he take steps, over the next year or two, not to worry about green energy and all that, but just to reduce our energy costs to a level roughly equivalent to that in France?