HC Deb 28 November 1978 vol 959 cc397-408

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates]

12.15 a.m.

Mr. Frank Hooley (Sheffield, Heeley)

Sheffield has been traditionally famous for centuries for the production of cutlery and, of course, steel. Today it is an important centre for the production of items of equipment for the nuclear power industry, aero engines, the offshore oil and gas industry, steel-making plants, shafts and rotors for electric power plant, crankshafts for cars, hand tools, machine tools, magnets, the fabrication of titanium, forgings, castings, die stampings, and the use of steel involving alloys of tungsten, chrome, nickel, vanadium and other alloys. It is one of the greatest industrial engineering cities of Europe and the home of famous names like Vickers, Firth Brown, Hadfield, Osborn, Edgar Allen, Thomas Ward and Stanley and Ridgway Tools.

But most of this manufacturing capacity depends on high quality alloy steel which is made in Sheffield—or until recently was mostly made in Sheffield. But in the early days of 1977 a serious problem arose with the import from other countries of tool steels, high-speed steels and stainless steel bar. Some of the most important forms of alloy steel are used in the city's industries. I am afraid that I must weary the House with one or two figures showing the extent of this important penetration and where the damage was being done at that time.

The import from Japan of these three forms of steel was 148 tons in 1972. By 1976 it had risen to 2,900 tons, and it was alleged that the Japanese were selling at 50 per cent. below their home prices. The import of stainless steel bar from Spain was virtually nil in 1970, but was 1,500 tons by 1976. Stainless steel bar imports from Austria also were virtually nil in 1970 but had become 2,000 tons by 1976. From Sweden, imports of tool and high-speed steel were 2,000 tons in 1972 and had risen to 5,500 tons by 1976, and it was alleged that the Swedes were selling at 48 per cent. below their home price. Imports from West Germany of tool steel and stainless steel bar were negligible in 1972 but had risen to 3,500 tons by 1976.

By January 1977 the alarming fact emerged that the import of these special steels had risen to a 71 per cent. penetration of the United Kingdom market. In 1976 it was 35 per cent., and five years earlier it was 8 per cent. It was estimated that that had involved a loss of 1.500 jobs in Sheffield in 15 months. The impact was primarily on the private sector and did not greatly affect the British Steel Corporation.

In the light of those figures the British Independent Steel Producers Association made strong representations for antidumping action by the Government. In a letter dated 29th March 1977, addressed to me, and sent, I believe, to other hon. Members, Mr. Stanley Speight, of Neepsend Ltd., wrote: I am not exaggerating when I say that 1 can see a positive danger, unless there is some action by Government, of this industry disappearing from Sheffield in the same way that we have lost for instance our motor cycle industry… I think I can emphasise the seriousness of the position if I say, quite sincerely, that in an integrated group like Neepsend making a lot of finished products, it would be economic sense for us to stop steel making and buy our steel in the cheapest market. We would probably achieve better results from a profit point of view but of course this is not in the long-term interests of our company and all its employees, neither is it in the interests of Sheffield and the nation. I think, however, it does emphasise the seriousness of the problem. That statement sums up very well the problem that faced Sheffield then and still faces it.

The Government were hamstrung by our membership of the EEC in taking any action, because we are not allowed under the treaty to negotiate on trade matters with other countries. But the Government did press the Commission to negotiate with the external suppliers of the steels, particularly Japan, Sweden and Austria, with a view to limiting imports.

The matter became so serious that a deputation from Sheffield went to the Department of Industry on 18th May. I was accompanied by my hon. Friends the Members for Sheffield, Brightside (Miss Maynard) and Sheffield, Hillsborough (Mr. Flannery) as well as trade union members from the Iron and Steel Trades Confederation and the Amalgamated Union of Engineering Workers and a member of BISPA. Following those representations the Government introduced a system of surveillance licensing over imports of steels. Some voluntary limitation on imports was agreed with Japan and antidumping duties were imposed on steels from Spain, South Africa and Japan. So, following that approach by Sheffield, there was some action by the Government to try to limit the damage that the imports were doing to the Sheffield steel industry.

Unfortunately, however, the action was not sufficiently extensive or effective enough to prevent the situation in 1978 from becoming more serious through the import of those three sensitive products—high-speed steels, tool steels and stainless steel bar. I must again give some figures. Whereas the aggregate import quantities of those sensitive products in 1972 had been 9,200 tons, by 1978 the figure had shot up to 24,300 tons.

The point about the situation this year, a point that I must emphasise, is that the major damage is now being done by three of our EEC partners—West Germany, France and Italy. The import figures for West Germany in the course of 1978, supplied by BISPA and calculated on an annual basis, was 6,900 tons. The figures for France and Italy were 3,600 tons and 4,500 tons respectively. In 1973 Italy had supplied no steel of this kind to the United Kingdom market. Those countries sent us a total of 15,000, whereas in 1972 the import figures from those sources had been 1,500 tons. We have had a tenfold increase from our EEC partners over six years. What is more depressing is that Germany appears to be providing a back door for Austrian steel to enter this country, although theoretically we could take action as Austria is outside the EEC.

In July this year Mr. Stanley Speight, former master cutler of Sheffield, and director of the Neepsend firm, made a massive public attack on the matter. He said: I have always believed that Britain should be a part of Europe, but I never thought we would become a doormat for Europe. That is just what we have become. In terms of special steels our problems now are from EEC partners. High-speed and tool steels are products not covered by the Davignon agreement and not even by the Treaty of Paris. To show that there is independent evidence and that this is not just special pleading by Sheffield, must quote the findings of the iron and steel sector working party report of NEDC, a report which for some reason was leaked to the press. although efforts by me as a Member of Parliament to obtain it have been unsuccessful. The report pointed out that in 1971 the import percentage of high-speed steel in the British market was 1 per cent. and by 1977 it was 30 per cent.; that of tool steel was 8 per cent. in 1971 and by 1977 it had become 49 per cent.; that of stainless steel bar was 5 per cent. in 1971 and had shot up to a disastrous 69 per cent. by 1977. The main origins of this penetration were West Germany and Italy, followed by Sweden and Austria.

No doubt partly as a result of this very damaging report by the working party my right hon. Friend the Secretary of State for Industry wrote to Commissioner Davignon on 15th September drawing attention to the serious consequences for the Sheffield industry of this degree of penetration and pointing out that in terms of special steels Sheffield was now working down as low as 40 per cent. of capacity, and saying that employment in the Sheffield area, which had been of the order of 17,000, had slumped to 12,000 in 1976 and was down to an estimated 8,000 in 1978. It is also possible that the pricing level of the German steel especially was breaching the Coal and Steel Community pricing rules under article 60 on discriminatory pricing. I hope that my hon. Friend the Under-Secretary of State will refer to this when he replies to the debate.

On 6th November of this year a deputation again went to the Department of Industry. This time it consisted of six hon. Members from Sheffield, Rotherham and other areas close to Sheffield and a powerful trade union delegation from the Iron and Steel Trades Federation, the Transport and General Workers Union, the Amalgamated Union of Engineering Workers and the boilermakers, as well as representatives of the Sheffield trades council and the city council. It made a strong protest about the state of affairs which has been developing and which could threaten the very existence of the special steel industry. I understand that Ministers have also received strong representations in more or less the same terms from BISPA and the Sheffield chamber of commerce.

Redundancies are spreading in the city. Neepsend Ltd. recently has had to declare 100 redundancies, Keyser Sanderson 60, Swift Levick 200, and there may be more to come. We do not find this in any way tolerable for an important key industry which is the basis of Sheffield engineering and which contributes important components to a wide range of high technology industries such as the nuclear industry, aero engines and offshore engineering.

It is fair to say that there is a case for reorganisation and modernisation within the Sheffield special steel industry, and a good many takeovers and amalgamations have occurred already. The Aurora company has taken over Samuel Osborn, the Weir group has taken over O.H. Steelfounders, Dunford Elliott took over Hadfield, Johnson and Nephew and Firth Brown was amalgamated a little while ago into the Johnson Firth Brown combine, Edgar Allen and Balfour Darwin have become Edgar Allen Balfour, we had the whizz-kid financier Mr. Jessel in and out, and we have had the very unwelcome interference of Lonrho in the recent past.

There has been new investment in important machinery, notably the GFM forging machine in Firth Brown, but I believe that there is a case for new investment and further reorganisation of the industry with involvement by the National Enterprise Board.

This industry is the basis of a wide range of industries vital to this country's future as an industrial Power. I want to make it clear to the Minister that we are not going to allow it to be destroyed, that it must be preserved and that, whatever action has to be taken within the EEC and, if necessary, outside the limits of the Treaty of Rome and the Treaty of Paris, we are going to protect this industry and make sure that it is not destroyed.

12.31 a.m.

The Under-Secretary of State for Industry (Mr. Les Huckfield)

I pay tribute to my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) and, indeed, to my right hon and hon. Friends the Members for Penistone (Mr. McKay), Sheffield, Hillsborough (Mr. Flannery), Sheffield, Brightside (Miss Maynard), Sheffield, Attercliffe (Mr. Duffy), Sheffield. Park (Mr. Mulley) and Rotherham (Mr. Crowther) for the way in which over a period, they have pressed their case. I pay particular tribute to my hon. Friend the Member for Heeley for the way in which he put his case tonight and to my hon. Friends the Members for Hillsborough and Brightside who have stayed tonight, because I know that there is a great deal of concern in Sheffield about this matter.

I am particularly glad tonight because I can bring my hon. Friends up to date with events which have been taking place today, in connection with special steels. We recognise the long-standing special steels tradition in Sheffield, such as the high alloy steels with their high technology applications in aerospace, gas turbines and chemical plants. There has also been the recently commissioned British Steel Corporation major development costing £130 million aimed at re-establishing Sheffield's pre-eminence in stainless steel. Developments in low alloy engineering steels have taken place recently in Rotherham with some record performances in steel melting.

Of course, my hon. Friend's main concern has been in tool steel, high-speed steel and stainless steel bar. I recognise that this is also Sheffield's main concern at the moment. This is only one section of the special steel industry, but it is very important.

My hon. Friend was right to draw attention to import penetration levels. Because of their concern about import penetration in the early part of 1977, the Government encouraged the sector working party to carry out its own special study of the reasons for this growth of imports to which my hon. Friend referred. Because that study took evidence from stockholding merchants and was widened to include interviews with representative users, and because a consultant then had discussions with producers, a great deal of the information is confidential. That is why it is difficult to have full publication of it. Nevertheless, my hon. Friend referred to some of the trends which that study confirmed.

The study confirmed a number of factors which had contributed to the current situation of high import penetration. The report mentioned marketing deficiencies, the loss of previous advantage vis-à-vis our competitors in product quality and finish and the fact that inflation here was at a higher rate than that of many of our international competitors, and of course there has been a certain lack of investment, to which my hon. Friend referred.

The most important difference to which the study drew attention was that some European special steel makers, both within and outside the Community, seem determined to preserve and increase their market share and thus maintain production levels by offering steel at prices which can probably cover only their variable costs of production. In contrast, United Kingdom companies maintained their profitability, but at the expense of market share. That is the main difference to which my hon. Friends have drawn attention so far. They also referred to the fact that we now have figures of well over 50 per cent. import penetration of certain special steels. My hon Friend the Member for Heeley mentioned some further figures which I gave him in a parliamentary answer this week.

It was because of that evidence that the Government wanted to act as vigorously as possible to protect the industry against unfair competition from other countries and, indeed, to support the industry's own efforts to reach understandings with major foreign competitors. Some of our efforts in this direction have been publicly acknowledged by the British Independent Steel Producers Association—BISPA.

My hon. Friend referred to certain imports. He will know about the antidumping duty which was imposed in October 1976 against Spanish stainless steel bar, which is still in force. He will also know about the investigations which have been undertaken into alleged dumping of various special steels from Austria and Sweden. These were terminated in the light of inter-industry understandings which were reached and later market developments. My hon. Friend will also know about the satisfactory understandings which were reached about the expected level of Japanese exports to the United Kingdom.

My hon. Friend mentioned the fact that a package of measures was announced by the European Commission in December 1977. These, of course, generally cover ECSC special steels as well as bulk steels and provide for consultations if problems arise on Treaty of Rome steel products. Nevertheless, I recognise, as my hon. Friend said, that the coverage so far is certainly not as universal as he and his Friends would wish.

In this particular scheme from the EEC, it is the Community's base price scheme for steel imports which provides for rapid anti-dumping action where injury is caused by steel products imported at below the base price from third countries with which no satisfactory agreement is currently in operation.

Again, referring to the third country figures, I am sure my hon. Friend will recognise that because of these kinds of actions the share of the United Kingdom market of stainless steel bar from Spain has fallen from 8.3 per cent. in 1977 to 5.5 per cent. in the first nine months of this year. Sweden's share of our market for alloy tool, die and magnet steel has fallen from 13.6 per cent. in 1976 to just 4.1 per cent, in the first nine months of this year. Austria's share of our market in the same sector has declined from 4.6 per cent. in 1977 to only 1.3 per cent. so far this year. All of this represents useful if, perhaps, so far limited progress.

Of course, taking the broad areas, I am sure my hon. Friend will recognise that so far, as a result of some of these activities alloy tool, die and magnet steel import penetration has fallen from 73..01 per cent. in 1977 to 71..34 per cent. so far this year. Stainless steel bar penetration has fallen from 44.78 per cent. to 41.25 per cent. I am not saying that those are figures for complacency, but I give them to my hon. Friends to show that some effect of these measures is now being seen.

However, my hon. Friend was right tonight to point out that all of this might have done a great deal to mitigate the problems of low-cost imports from third countries. But instead of our own products filling the gap, it has been imports from other Common Market producers which have tended to increase as the measures against third country imports were taking effect. This, as my hon. Friend rightly said, is a much more difficult development.

My hon. Friend referred to the increasing share of countries such as Germany, which has doubled its level of imports into the United Kingdom of tool and stainless bar steel since 1976. Italy, which exported none before 1977, is now the largest supplier of stainless steel bar to the United Kingdom, and France has now, for the first time, become a substantial supplier of both stainless and high special bar.

It is in this kind of market that the Davignon measures do not have effect, although, as I have said, they have an effect in bulk steels. It is in this kind of market that Sheffield producers have been alleging that breaches in ECSC pricing rules have taken place. It is in this kind of market that the consultants' report to the iron and steel sector working party itself pointed to the prime need to take action to improve the European trading position and to control uneconomic selling.

It was because of this concern that the chairman of the iron and steel sector working party originally wrote to my right hon. Friend the Secretary of State on 15th August about the problems of imports of stainless, tool and high-speed steel bars. In his original complaint he drew particular attention to the high level of imports from other member States—Germany, Italy and France, as my hon. Friend has said—and referred particularly to cases of the low prices quoted, mainly by German producers whose domestic prices were alleged to be higher. In his submission he suggested that quotas should be imposed on all imports while longer-term solutions were being worked out.

However, I say to my hon. Friends—because I think that they accept the position in which we find ourselves as a Government—that we have no power to impose quotas against other Community countries. Quantitative import restrictions on trade between member States are specifically prohibited by article 4(a) of the ECSC Treaty and article 30 of the EEC Treaty. Apart from that, these provisions arc direcetly enforceable in the United Kingdom and any trader could quickly take legal action in United Kingdom courts against the Government if we attempted to prevent his importing from the Common Market.

Because of this situation my hon. Friend the Minister of State, Foreign and Commonwealth Office originally raised this matter in the Council of Ministers on 25th July. Since then as my hon. Friend knows, my right hon. Friend the Secretary of State has written to Commissioner Davignon. My right hon. Friend the Minister of State raised the question with Commissioner Davignon on 16th October. He raised the matter with him again on 21st November in the Council. Because of these representations Commissioner Davignon has assured my right hon. Friend the Secretary of State that he shares our concern about the social and regional consequences for Sheffield of any further deterioration in the situation of the special steels industry. Furthermore, he confirms that the information that we have supplied to him about prices is being used by Commission officials in an investigation into the pricing practices for special steels on the basis of article 60 of the ECSC Treaty, which prohibits discriminatory pricing. We have therefore today put the Commissioner's reply to the iron and steel sector working party which met this afternoon. We have asked for a quick response with its views on how we might respond most effectively.

We have also indicated to it today our willingness to help as much as possible with son-re of the investment which my hon. Friend said was so essential. We want this sector of industry to be made stronger with more investment in modern plant and equipment, with more research and development, and, where needed, some restructuring.

We have already made several grants to firms such as Johnson Firth Brown which received about £1.45 million under section 7 of the Industry Act towards its GFM project which had a total value of more than £9 million. There was assistance to Edgar Allen Balfour which has been offered assistance of £250,000 towards its project which involves investment of £2.4 million. I could give further examples.

We have today said to the NEDO sector working party that we would like it to consider whether a scheme under section 8 of the Industry Act would help. At its working party meeting this afternoon it took great interest in that possibility and, with BISPA, undertook to discuss the possibilities of the scheme with its members. We stand ready to consider other practical ideas and proposals by the working party by which the Government might help to improve the efficiency and competitiveness of the industry.

My hon. Friends therefore see that action is being taken on a number of matters which encompasses some of the issues which they have stressed. The sector working party will be letting us have their views on Commissioner Davignon's response in the next 10 days or so. My right hon. Friend the Secretary of State will then be in a better position to consider how best to reply to Commissioner Davignon's latest letter.

In addition, BISPA is going to Dussel-dorf next Thursday to continue its dialogue with other Community producers. It will then consider carefully the contribution that a section 8 scheme could make to the industry. In addition, at the Council of Ministers in late December we hope that we shall be presented with a further opportunity of pursuing this difficult matter further with the Commission.

I hope that what I have said tonight indicates that we share the concern which has been expressed many times by my hon. Friends. But I believe that if our attempts to solve this problem are to come to fruition it is a matter of the Government, the Commission and the industry all playing their part. I believe that if we work together we can secure a successful future for this section of the special steels industry.

Question put and agreed to.

Adjourned accordingly at sixteen minutes to One o'clock.