Update on UK steel industry:Written statement - HCWS410

WS
Department for Business, Innovation and Skills
Made on: 17 December 2015
Made by: Sajid Javid (Secretary of State for Business, Innovation and Skills)
Commons

Update on UK steel industry

When the Steel Summit met on 16 October, I agreed that three Ministerial-led Working Groups would be set up immediately to address the ‘5 Asks’ of UK Steel and the longer-term future of the industry. This statement reports on the progress of the Working Groups and other action taken by government to support the industry and steel workers.

The three Working Groups are:

  1. Procurement – chaired by Matthew Hancock (CO);
  2. International Comparisons – chaired by Anna Soubry (BIS)
  3. Competitiveness and Productivity – chaired by Lord O’Neill (HMT)

Procurement

UK Steel asked at the Summit that the Government should:

“Support local content in major construction projects: British steel must have every opportunity to be at the heart of HS2 – the Government must look to unlock the significant opportunities for the steel sector and to strengthen supply chains on this and other major projects.”

Matthew Hancock’s group has met three times. It has brought together procurement leads from across government – Cabinet Office, HM Treasury, Infrastructure UK, Department for Energy and Climate Change, Department for Transport and Ministry of Defence – alongside representatives of the UK steel industry and the Scottish and Welsh Governments.

Areas focused on have been:

  • new guidelines for departments to apply when procuring major projects involving steel, as enabled by flexibilities in the new Public Contracts Regulations 2015, and consistent with value for money;
  • interrogating the National Infrastructure Plan and Government Construction Pipelines to better identify the future pipeline for steel; and;
  • updating the current British Standards for steel.

Specific outputs to date include:

  • A new Procurement Policy Note (PPN) on procuring steel in major projects was issued by Cabinet Office and the Crown Commercial Service on 30th October. This requires government procurers to consider wider socio/economic impacts and benefits in their procurement objectives so that issues such as skills, responsible sourcing, good supply chain management, and health and safety capability can be taken into account where relevant. This will help to level the playing field so that the true value and competitive edge of UK steel is fully recognised. The PPN applies to all Central Government Departments, their Executive Agencies and Non Departmental Public Bodies; and directly to any major procurement projects with a significant steel component, where the overall project requirement has a capital value of £10 Million or above. The PPN is at: https://www.gov.uk/guidance/procurement-policy-note-1615-procuring-steel-in-major-projects

  • Further detailed guidance on how social issues should be taken into account in the procurement of steel for major projects was issued on 11th December. This covers all key stages of the procurement lifecycle, including pre-procurement, requirements and specifications, use of labels and standards (including reference to parts of BES 6001 relevant to responsible sourcing of steel), selection of suppliers, award of contracts, contract conditions and contract management. The guidance is at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/484843/Social_guidance_supporting_PPN1615_.pdf

  • Indicative quantities of steel have been mapped for key projects in the Infrastructure and Government Construction Pipelines, including HS2, new nuclear and offshore wind, and shared with industry. Steps have also been agreed with industry on how to make better use of the pipelines as they are updated on a six monthly basis.

  • The British Standards Institute (BSI) has agreed to revise and update the voluntary British Standard BS4449 which applies to steel reinforcement bar (rebar), in the absence of a harmonised European standard. The revision, which is now being consulted on with a view to being implemented in Spring 2016, addresses concerns about the type and quantities of alloys and other “exotic” ingredients being added to some imported rebar that is used in construction. The revisions involve changes relating to: (a) Traceability, which means that chemical composition details will have to be listed, similar to an ‘ingredients’ label on food; and (b) Limits placed for the first time on the amount of boron and other alloys that can be added to rebar.

The Procurement Group will meet again in January.

International Comparisons

UK Steel asked at the Summit that the Government should:

Continue to back EU-level action on anti-dumping measures which support the UK steel sector against the rapid rise in global imports and push the European Commission to speed up its investigation process and action

Industry also suggests other member states get away with sailing closer to the wind on State Aid rules”.

  • The Prime Minister raised Chinese over-capacity with President Xi during his state visit to the UK. I did likewise with the Chinese Commerce Minister. Both recognised the issue for the UK and globally, and stated that China is taking action to reduce overcapacity. The Emergency Council also underlined that the EU should make use of both bilateral and OECD dialogues to raise the issue with China and other producer countries and we are following up to ensure this happens.

  • At our request, the Luxembourg Presidency convened an Extraordinary Competitiveness Council on Steel, which, recognising the severity of the crisis facing the Industry across the EU, concluded that concrete actions should be taken in a number of areas, including: making full and timely use of EU trade policy instruments; making best use of the possibilities given under the revised State Aid rules to support Energy Intensive Industries; considering, as part of the reform of the European emissions trading system (“EU ETS”), a more focused mechanism for free allocation of allowances; and a special High Level stakeholders’ conference to review the current situation and consider policy actions. We are now following up to ensure the conclusions are implemented and expect the conference to take place in the New Year. My fellow ministers and I have also been engaging with MEPs to ensure that the European Parliament amplifies the messages coming out of the Extraordinary Council.

Anna Soubry’s group has met four times and has brought together representatives from all major steel producers with trade and state aid policy leads from my department and other Whitehall leads – Foreign Office, HM Treasury. The Scottish and Welsh Governments have also been involved.

Areas focussed on have been:

  • Identifying opportunities for joint working between industry and government on current and forthcoming anti-dumping cases;

  • What more could be done to support the steel industry by speeding up anti-dumping cases and how we can work with our international counterparts to address steel dumping, in particular from China.

  • Assessing whether more can be done to support energy intensive industries, within existing state aid rules, compared to our European and international counterparts;

  • Addressing concerns about existing support given from other EU Member States to steel companies that may be out with State Aid rules.

Anti-dumping

  • Industry and Government have agreed to work together on forthcoming anti-dumping cases. This includes full evidence sharing, clarity on the timetable for each case and agreement on, if, how and when the Government should intervene. We are also working with industry on identifying ways for the Commission to accelerate and prioritise its trade defence investigations so as to get results quicker to prevent dumping.
  • In July, we voted in favour of EU anti-dumping measures on the import of Chinese wire rod products. We have also voted in favour of anti-dumping measures on the imports of steel tubing products and lobbied successfully for an investigation into cheap imports of Reinforcing Steel Bar.

  • The UK Government has been calling, at all levels for steel cases to be given priority. I have met with Commissioner Malmström to discuss how anti-dumping investigations can be accelerated and other related measures. Discussions have also taken place with other EU Ministers.

  • Following continued engagement with the Commission on the speed of investigations, the Commission has responded rapidly to an industry request for Registration of cold‑rolled flat steel products. This means that imports of this product will be registered in a timely manner so that, if appropriate, any future anti-dumping measures agreed will apply retrospectively from the date of registration rather than when the investigation has been completed. We will continue to press the Commission to ensure that ongoing investigations and requests for action will result in similarly rapid response from the Commission.

State Aid

  • We have undertaken a review of how other EU Member states support their energy intensive industries within existing rules. This work concluded that the UK is currently making full use of the scope to provide state aid compliant support to industry through the suite of measures in the Energy Intensive Industry compensation package. However, we are looking to see if there may be opportunities to make greater use of the EU’s General Block Exemption regime in other areas, particularly energy efficiency. Further, more detailed discussions will take place with industry.

  • We have looked into claims of wrong-doing in other EU member states and have found no evidence to back up these claims. We have shared this conclusion with industry and the Unions and asked them to provide us with any further evidence they may have. The industry has raised concerns about interventions by the Italian Government in favour of Ilva with the European Commission. The Commission is currently investigating this matter. Given the importance of ensuring a fair and level playing-field across the EU, we have asked the Commission to be extremely vigilant and respond quickly wherever suspicions of wrong-doing arise.

  • We have also examined state aid regimes in non-EU countries and have concluded that there is substantial subsidisation of steel sectors.

The International Comparisons group will next meet in January.

Competitiveness and Productivity

UK Steel asked at the Summit that the Government should:

(a) “Fully implement the Energy Intensive Industry Compensation Package ahead of April 2016. The sector is currently still paying 70% of the policy costs that the full Package aims to address.”

(b) “Bring Business Rates for capital intensive firms in line with their competitors, by removing plant and machinery from business rate calculations.”

(c) “Don’t gold plate regulations unfairly and deliver pragmatic implementation of regulatory frameworks vital the sector (e.g. Industrial Emissions Directive).”

(d) And for the longer-term: We call on the Government to develop a long term vision and strategy for the UK steel sector, through an independent report, demonstrating the broad value the sector adds to the economy and setting out a viable roadmap for safeguarding and growing this value for the UK.

Lord O’Neill’s group has met three times. It has covered: energy costs; business rates; regulation; and the longer-term future of the industry, taking evidence from industry, unions and government representatives, with involvement from both the Welsh and Scottish Governments.

Specific outputs to date include:

  • Energy Costs: The Prime Minister announced on 28 October that compensation for Energy Intensive Industries would be paid from the date State Aid clearance comes through. Today, we have received approval from the European Commission for the UK Government to commence relief in line with our initial notification for the most electricity intensive businesses for the costs of renewables policy in their bills. We are going further and at Autumn Statement 2015 the Chancellor announced that Energy Intensive Industries, including the steel industry, will be exempt from the policy costs of the Renewable Obligation and Feed-in Tariffs, to ensure that they have long-term certainty and remain competitive. Compensation will continue to be paid until the exemption is in place. This commitment will give the UK Steel Industry greater certainty around energy costs. Relief from energy policy costs will save industry hundreds of millions of pounds.

  • Business Rates: Through the Working Group, industry have had direct discussions with HMT to feed into the review of Business Rates and to give more detailed evidence on the impact on investment in Plant and Machinery. The review of business rates will be fiscally neutral and will report at Budget 2016.

  • Regulation – Industrial Emissions: The Government confirmed to the steel industry in October that it will be able to take advantage of special flexibilities to comply with new EU rules on emissions. The EU Industrial Emissions Directive (IED) was the industry’s primary concern and could have added millions of pounds of additional costs to the industry in January 2016 at a time when it is already facing unprecedented global pressures. The UK pushed for transitional arrangements and derogations in the IED, and both will benefit the steel industry following detailed work between government and steel companies.

  • Regulation – Other: The industry was invited to highlight any other regulatory concerns to the Working Group. None were identified, though the Working Group stands ready to take evidence and act should any other regulatory issues emerge.

  • Improvements to competitiveness: A workshop was organised to bring together representatives from the steel industry, trade unions and government in order to brainstorm interventions that could increase competitiveness within the areas of skills, innovation, exports and inward investment. Officials are working on the most promising proposals from these workshops to identify actions that industry and government may wish to explore.

  • As an immediate step on innovation, £400k has been provided this year to enable the Centre for Process Innovation on Teesside to extend its partnership programme to steel and other metals companies. The programme, which started with the chemicals industry, is focussed on equipping SMEs in the supply chain to innovate and grow. The extension follows a recommendation in the Metals Strategy and will be delivered with support from the Metals Processing Institute.

  • Industry future: We have been working very closely with steel stakeholders to understand the needs of the sector both now and going forward. Through the Competitiveness & Productivity Steel Working Group an independent external report has been commissioned to identify the relative strengths and weaknesses of the UK steel industry, and consider how this could change over different time horizons. The outcomes will support the UK steel industry develop a strategic forward plan, and will help clarify how HMG could support competitiveness in the sector over the short, medium and long term.

The Competitiveness and Productivity group will next meet in the New Year.

Local support

Notwithstanding the actions we can take as Government to support the industry, the UK steel sector is facing severe challenges and many companies have had to take difficult commercial decisions. There is no straightforward solution to the complex global forces facing the steel industry; the price of some steel has halved over the past year alone, there is 30% overproduction across the world, European demand has not returned to pre-crash levels and recent currency fluctuations have added further pressure.

I realise this is an incredibly difficult time for the employees affected by recent job losses, as well as their families and the local communities in which they live. The Government is committed to doing all we can to give these employees the help and training needed to quickly return to work and we have made available up to £89 million in support packages for those who have been affected.

Recently my Ministerial colleagues The Rt Hon Anna Soubry Minister for Small Business, Industry and Enterprise and Nick Boles Minister of State for Skills visited Scunthorpe and Redcar respectively to better understand the issues currently facing the communities and how our support is having a real impact. We remain in regular contact with the companies and communities affected.

In Redcar, following the sudden closure of SSI in October, we set up a taskforce, chaired by Amanda Skelton, and agreed a support package worth up to £80 million. Over £40m of the support package is aimed at skills and jobs creation and includes:

  • £3m which has been made available to colleges in the region to support re-training activity, as well as a further £2.65m skills funding to plug any gaps in skills provision not available via the Further Education Offer;
  • £1.7m to ensure that the fifty apprentices who were with SSI can continue their apprenticeships with alternative employers;
  • A £16.5m Jobs and Skills Fund to help local firms employ former SSI workers or their spouses in full-time or part-time jobs for a minimum of three years;
  • £16m support for firms in the SSI supply chain and wider Tees Valley impacted by the Redcar steelworks closure, to safeguard jobs, provide the stimulus to create new posts and provide expert assistance to help them expand their business
  • £750,000 to fund advice and grants to start up a new business.

This is in addition to statutory payments made to former employees, which have been processed rapidly by the Redundancy Payments Service to ensure individuals received the money as quickly as possible.

These initiatives have so far seen 500 affected individuals find new employment. I am also pleased to confirm that all 51 apprentices that were affected by the sudden closure of SSI are in education, training or have been placed with employers.

In order to support the Tees Valley area going forward and ensure a strong economic outlook, Lord Heseltine has been appointed to lead the Tees Valley Inward Investment Initiative. He will be working to advance specific investment projects, to conduct a wider analysis on unlocking growth in the area and to help the new Combined Authority make the most of its new devolved powers. He has visited the region and met with key people on organisations several times and will be reporting back in the new year.

In Scunthorpe, we have announced a package, worth up to £9 million, jointly with Tata, to support Tata steelworkers, the local economy and supply chain. We are working closely with a local Task Force, chaired by Baroness Liz Redfern, to deliver this support. This package includes:

  • £3m from UK Steel Enterprise (Tata’s Regeneration arm) “to support job creation”
  • £3m of match funding from the Government to provide “support for more start-up businesses and companies that are looking to expand and create jobs”.
  • £3m of training of affected employees through local further education colleges.

We remain in close contact with Tata to understand their ongoing issues and how we can support them.

I am pleased to inform the House that Administrators for Caparo Group have been able to complete sales for all but one of the remaining business entities, preserving over 1,100 jobs mainly in the West Midlands.

This statement has also been made in the House of Lords: HLWS429

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