UK steel industry in jeopardy: panic in the Tory party

Simon Clarke, MP for Middlesbrough South is concerned about plans for the UK steel industry
Simon Clarke, MP for Middlesbrough South and East Cleveland
Photo from wikimedia commons

Simon Clarke, Conservative MP for Middlesbrough South and East Cleveland, is up in arms. He is up in arms because an independent advisory body, the Trade Remedies Authority (TRA), has advised Liz Truss, the Secretary of State for International Trade, to remove half the safeguards that are currently in  place to prevent steel dumping by China on the UK market. One of those safeguards covers the steel plant at Skinningrove. It is in his constituency, and he has come out to defend it.  He met with Boris Johnson on Wednesday (23 June) to discuss ways of protecting the industry and preventing the loss of safeguards.

Tory MPs in Tees Valley voted against the amendment

Clarke was in less militant mood on Monday evening (21 June). Labour brought an opposition day debate with exactly the same purpose, and he voted against it. As did all of the Tory MPs in the Tees Valley. Jacob Young even spoke during the debate and voted against the motion. He then accompanied Clarke to the meeting with Johnson on Wednesday. However, until Monday Clarke would have been defending his constituents’ interests only against the recommendations of the TRA. Now he has the entire Tory Party against him. The vote on Monday night not only saw Conservative MPs queuing up to oppose the motion. They then all voted against it.

A case of stabbing your constituents in the back, then realising you’d shot yourself in the foot, perhaps?

The background

Essentially the background is this. In 2016 the EU put 19 trade remedies in place, in accordance with WTO rules. The purpose was to protect European steel producers against steel dumping by China.  The UK was included in those protections. Once it left the EU, agreement was made that these safeguards continue in the UK until they expire on 30 June 2021.  The EU has since moved to extend those trade remedies for another three years. The TRA, however, has recommended to Liz Truss that she remove nine of them.

A reaction from UK Steel

UK Steel, the industry’s trade body is unhappy (to put it mildly) at the prospect. They have described the plans as a ‘hammer blow ” to the industry. They object to support for the industry being made on a product-by-product basis instead of supporting the industry as a whole. UK Steel also points out that it puts certain steel producers at risk. And this is where Simon Clarke comes in. In an article on 20 May, the ft, specifically highlights the risk to the industry in the Tees Valley:

“UK Steel said the removal of protections will have an adverse impact on the manufacture of steel sections at Teesside, [and] tubes in Hartlepool”

Steel Sections are manufactured at Skinningrove, in Simon Clarke’s constituency. 

The Labour amendment

Labour has since set about defending the industry, culminating in an opposition day debate on Monday. It attempted to gain cross-party consensus on measures to prevent the removal of safeguards from going ahead. As we have seen it didn’t turn out that way.

The spokesman for the government at Monday’s debate, Ranil Jayawardena, explained that the Secretary of State of International Trade could only either accept or reject the recommendations of the TRA. If she rejected them the whole set of safeguards would lapse on 30 June, as she did not have the powers to take a different course from that recommended. 

Over a barrel

Stockton North MP, Alex Cunningham, took particular exception to this ‘our hands are tied’ gambit.  In a statement to TVM, he said

”Labour has laid out plans for emergency legislation to do just that – that’s what emergency legislation is for. The government was seeking to force MPs over a barrel to accept the slashing of safeguards rather than look for a meaningful, cross-party consensus that would safeguard our steel industry.”

Presumably, at their meeting on Wednesday, Clarke, Young, and their associates, were asking Johnson to do precisely that:

Simon Clarke's facebook post about the meeting about the UK steel industry

Reaction from other MPs

Now you might think that some of these might have thought of this on Monday when making their speeches.  Scunthorpe MP, Holly Mumby-Croft , did not mince her words:

“I have put on record my opposition to the TRA’s preliminary recommendations in pretty frank terms, and many colleagues have spoken about the issue in Parliament, fed their views back to the TRA and raised the issue with the Department for International Trade. Despite this extensive feedback, a week later the TRA’s final recommendations still overlooked many of the arguments that were made on both sides of the House … regrettably, some decisions were made despite the data being insufficient.”

And Miriam Cates  MP for Penistone and Stocksbridge:

“It is therefore incomprehensible that the Trade Remedies Authority is recommending that we allow over half our safeguards on steel products to lapse, at a time when the EU and the US will be maintaining their safeguards in response to the continuing threats to steel producers around the world.”

And Redcar MP,  Jacob Young  “the conclusions of the independent TRA do not seem to reflect the reality of the interdependence of our industry. The current situation is to the detriment of the UK, so we need to consider how we combat that unfairness.”

So the Tory MPs agreed but still voted against the amendment

Yet all of them first voted against the motion then turned up on Wednesday to lobby the prime minister.  Cynics might suspect that this is with a view to denying Labour credit for defending the industry and giving it to Boris Johnson in an act of spectacular loyalty.

Were this their aim, however, it faces two problems.  The first is that this information has been in the public domain for some time. The  FT article containing the reaction of UK Steel to the measures was published on 20 May, at which point Clarke and Young, at least, had nothing to say about it.  Secondly their colleagues on the government benches have now had their say on the issue, and little or none of it was positive.

First there were those who thought this was a golden opportunity to make sarcastic comments about the opposition, and possibly didn’t feel the need to read the commons briefing paper on the subject.  Then there were those who, like Jamie Wallis (Con, Bridgend), thought the proposal in the debate to be unrealistic:

“Their proposals to simply reject the TRA’s recommendations would result in all the current safeguards being revoked. It would breach World Trade Organisation rules and open the UK up to legal retaliation from other members. Not only is that counterintuitive, but it is quite the opposite of championing our British industries and reviving the UK steel industry.”

And Richard Fuller (Con, North East Bedfordshire),

“ Changes by politicians to the recommendations of the Trade Remedies Authority is the sort of meddling that the regulations were designed to discourage, because political involvement is too often influenced by lobbying pressure and special interests rather than by the wider benefits to society.”

And Peter Gibson (Con, Darlington),

“I am proud that the Tees Valley has been at the forefront of British steel manufacturing for 170 years and while the old Redcar Steelworks closed in 2015, we have a bright future as the home of the innovation and design sector …

“This Conservative Government is delivering where the last Labour Government failed.”

An unenviable task

So, Simon Clarke, as it appears, now has the unenviable task of not only persuading the Prime Minister to do what the Labour Party asked for on Monday, but also to persuade his Conservative colleagues to withdraw their comments. He might begin by inviting them to now read the    commons briefing paper that was prepared for Monday’s debate.

 That paper makes the following assessment of the steel industry’s contribution to the UK economy. It currently employs 33,400 people in the UK, 0.1% of the workforce, and its output is  0.1% of the UK economy. Its share of economic output has been in gradual decline following a sharp drop in the early 1980s. By 1990 it contributed 0.3% to the economy. The industry is also small compared to those of Europe’s other steel producing nations, where 25% of the continent’s output is from Germany. Of the UK workforce, 2,900 are employed in the North East.

Decline in the UK steel industry

Of the major European producers, the UK steel industry has declined more than the others. While all countries experienced sharp decline during the financial crash of 2009, UK production fell again by 10% in 2015 and a further 30% in 2016. This decline was not experienced by other European producers. Where once the UK’s output was similar to that of France and Italy, it is now less than any of its European neighbours. The issue of steel dumping by China affects steel producers everywhere, but it does not fully explain the problems the industry has experienced in the UK.

State Aid levels are low

Other European governments have been more proactive in supporting their industries than the UK.  Thus, James Crisp in the Daily Telegraph, 17 January 2020:

“UK state aid levels are among the lowest in the EU and it could comfortably ramp up its state aid without falling foul of state aid rules.

“The UK spends just 0.38pc of GDP on state aid while Germany spends 1.31pc and France 0.78pc.”

Government support for the steel industry?

All of this indicates that the UK government could have supported industries such as steel to a much greater degree than has, in fact, been the case.  As the commons briefing paper observes, “. The sector has consistently been calling for further government action, in particular on energy costs and public procurement.”

It has asked that a target be set for procurement of UK produced steel in public sector contracts, and that beginning with the HS2 project.  The paper goes on,

“As a major source of demand for steel, the government can use its purchasing power to support the UK steel industry. The government can also encourage private sector manufacturers in the UK to use UK suppliers of steel, for example in the automotive industry”.

Steel Procurement Taskforce and UK Steel Council

In March 2021 the government set up a Steel Procurement Taskforce to “explore what government and industry can do to address challenges the sector has reported facing in competing for and securing public contracts”.

This is in addition to the UK Steel Council, set up in 2016, to

“work in partnership on the shared objective of creating an achievable, long-term plan to support the sector’s transition to a competitive, sustainable and low carbon future.”

The question arises, however, as to whether the government is putting its money where its mouth is.  While the UK is no longer subject to EU state aid rules, an agreement has been put in place whereby the UK has will remain in ‘broad alignment’ with EU rules.  In 2020 issued guidance which stated “that steel is one of “historically sensitive sectors”; a subsidy targeted at this sector is “likely to increase the risk of trade partners deciding to start a dispute.””

An excuse?

Is this a case of the government continuing to use state aid rules as an excuse for its reluctance to intervene to support industry? It appears so. The briefing paper goes on to detail the cost of energy to large industrial consumers like the steel industry. The cost of electricity was 95% higher in 2019 than in 2010, and, in addition,

“UK Electricity prices for extra-large industrial consumers in the first half of 2020 were higher than for any EU member state. They were 11.7 pence per kWh which was 84% above the median price in the EU.”

So if the UK were to reduce energy costs to the steel industry, this would serve only to bring it closer to that enjoyed by producers in the EU, which does not seem likely to increase the risk of starting a trade dispute.

A “drop in the ocean”

In his concluding remarks,  Ed Milliband  pointed out that the government’s commitment to supporting the steel industry was a drop in the ocean compared to what was required:

“The industry says that we need billions for the green steel transition. A £250 million clean steel fund in 2023 is not going to cut the mustard. It is not going to give us the steel industry that we need in the future. There is a big choice for us as a country: do we invest to retain steelmaking capacity, with all the jobs and security it brings; or do we have some kind of neglect of the industry, with devastating consequences?

It is true of hydrogen as well. A £240 million hydrogen fund is better than nothing, but the Germans are offering €9 billion to invest in hydrogen.”

Pity it took until two days after the debate for a group of Conservative MPs to wake up to this fact.

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