Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 33 - 39)




  33. Good afternoon, gentlemen. We are very pleased that so many of you are able to make it today. We realise one of your number has been regrettably detained in Sheffield, Mr Fletcher, as a consequence of the dangers of flooding to his plant. We are grateful for the time you have taken because we realise that for some of you there may be pressing problems of that kind. Perhaps, Mr Siddall, you could introduce your colleagues and then we will start.

  (Mr Siddall) Thank you, Chairman. Good afternoon. I would just like to thank you and your Committee for inviting us here to give evidence this afternoon. My colleagues do indeed represent all facets of steel production in the UK and I would like to introduce them to you. My name is Peter Siddall. I am President of the UK Steel Association and Chairman of a £40 million turnover family business employing some 400 people across the UK. My company is the UK's largest purchaser of steel wire and, indeed, we export wire products to the USA and to all over Europe, but to Germany in particular. As you pointed out, Chairman, I am sorry that David Fletcher, the Chief Executive of Forgemasters, cannot be here today but as the River Don is six inches below his electric melt shop at the moment you will perhaps excuse him. On my left is Tony Pedder, who is Chairman of Avesta Sheffield, the stainless steel maker, and a main board director of the Corus Group, the UK's largest steel producing company. His company supplies about 50 per cent of all the steel used in the UK and exports similar quantities all over the world, but mostly to customers based on Europe's mainland. On my immediate right is Tony Bagshawe, who is President and Chief Executive of Niagara LaSalle UK, who are specialist suppliers of mainly semi-finished and pre-formed products to precision engineering companies, predominantly based in the UK's manufacturing heartland in the Midlands. However, exports, mostly to the USA and Europe, account for 25 per cent of the turnover. The fourth member of our team, on my far right, is David Rea, UK Steel Association's Secretary General. The Association represents 95 per cent of all UK steel producers and most primary processors, so he is well placed to cover questions about the industry's relationships with Government both here in the UK and in Brussels. Finally, Committee Members may also care to note the differing ownerships of our three companies. We are variously based: a UK company; a UK-Dutch combination and a UK subsidiary of a USA based international group. Thank you.

  34. Thank you very much indeed, Mr Siddall. I think you appreciate that this inquiry was triggered off initially by the Corus experience in the sense that there were a sizeable number of redundancies and closures, or partial closures. We want to try to get a picture of the industry in the round. I should say at this point, Mr Pedder, that we may in fact invite you back to deal with the specifics of your own business because we realise that you are the biggest single player and it may be that it would be unfair to the others to concentrate on the affairs of Corus today. I am trying to get a sense of balance when one enterprise is responsible for 50 per cent of output and has been the leading one, as it were, in respect of the steel industry. It may be that the other players have a different story to tell but this will emerge. It may be that we will invite you back. Please, all of you, in your respective roles, feel free to chip in. Perhaps you could give us an indication, Mr Siddall and Mr Bagshawe, and, indeed, Mr Rea, is it a single company that is restructuring, that is confronting difficulties, or is it just a general malaise related to the currency and other issues that are affecting the steel industry in the UK?
  (Mr Siddall) Just to answer that question first before handing over to my colleagues, I would certainly say that it affects all strata of the British steel industry, and indeed the downstream producers as well. In contrast to Corus, I represent small family businesses. Thirty per cent of the turnover of my group of companies is exported. Indeed, particularly with the extreme strength of the pound and various other factors, we are finding things very tough indeed. In fact, my own company has had to make some redundancies and do some restructuring. I would stress that these things are never done lightly, indeed it is the last thing we would wish to do.
  (Mr Bagshawe) Just to build on what Peter has said, my own company, to put it in perspective, has a turnover of around £100 million and we operate from seven manufacturing sites in the Midlands. We have always exported a significant proportion of our product and historically Europe has been our major market with the US as a secondary market. We have found the last 18 months in particular very testing. We have indeed, sadly, had to make some restructuring decisions ourselves and have carried these through. The price pressures in particular driven by the euro are exceedingly demanding. My own fear is that the worst is not yet over, I think that next year will be again a very testing year and the pressures will not come off. It is certainly not just a problem experienced by Corus, it is an industry-wide problem.
  (Mr Rea) It is probably worth adding as well that across the whole product range, and the UK is fairly unique in having such an extensive product range from a wide variety of types of steel companies, all the markets for those product ranges have been so severely hit by the euro/sterling question that there are no companies in our membership that are an exception to this.
  (Mr Pedder) As you said, Corus could talk extensively about this but I think the position that Peter and the others have expounded is correct.

  35. If we could pick up one or two of the points relating to Europe as distinct from the currency. The UK has to operate within a European framework, there are constraints on state aids and the way in which they are administered elsewhere in Europe may be different from the way in which they are in the UK. Do the Dutch, Austrian and French steel makers have structural advantages that we do not? Are there ways in which Britain applies European led regulation in a more rigorous or different way from our foreign counterparts? Maybe, Mr Pedder, coming as you do from a joint Dutch-British company, you can take this up.
  (Mr Pedder) I would say, Chairman, that there are differences borne out of the environment and out of culture but not major structural differences between the way the various steel companies that are our competitors operate in comparison with us. There has been the odd instance of unfair state aid, which is jumped on fairly quickly these days and dealt with, but I would say that by and large the playing field in that regard is fairly level now across the EU.
  (Mr Rea) I think that is about right. We have a long experience in Europe, of course. The ECSC Treaty predated the EU Treaty so steel has been heavily integrated in Europe longer than any other UK sector. The current practice and operation will change in 2002 when the Treaty expires but there are certain key structural points in there where I think we should be well served by a continuation of that stringent approach to a level playing field.

  36. What about the prospects of enlargement? We know about the existing members but we have already discussed with your trade union colleagues the Polish situation where the DTI is endeavouring to get the Polish industry to restructure itself. Is this Eurofer acting in a kind of protectionist way or do you think there is a case (a) for enlargement and the involvement of the Polish industry and (b) for the reform of that industry so it is on all fours with the rest of Europe?
  (Mr Pedder) Without getting into the broad politics of the enlargement of the EU, I think as far as the steel industry is concerned, there are sound arguments for bringing steel companies, which are outside the boundaries now inside as long as the rules and the state aid protections that we referred to a few minutes ago are applied rigorously. If there is any need for transition arrangements for companies to be modernised and brought up to a competitive situation then any aid has to be controlled exceptionally rigorously against delivered targets and delivered dates of achieving a competitive and open situation. I think in general we would welcome those companies that are outside being brought in under the same rules as quickly as possible. There are obviously political issues which go beyond that.
  (Mr Siddall) Just to point out, Chairman, that 40 per cent of EU steel imports come from outside the EU, plus Turkey. There are a lot of countries with important steel industries such as the Czech Republic, Slovakia, Bulgaria, Rumania, Poland, Hungary, Slovenia, Turkey and Latvia. They all have important steel industries and, other than Slovenia, we would say they all need restructuring and few are in a fit state to survive full exposure to the competition after accession unless they have state aid. I think the key point is it is vital all candidate countries are applying the full panoply of EU law by the time of accession. To my mind any temporary derogations after accession would be extremely damaging to the EU industry, extremely damaging.

  37. On page 30 of your evidence you make reference to dumping. One would imagine that one of the dangers of enlargement could well be from some of the countries you have suggested that if the restructuring is not complete when they arrive that there might well be instances of dumping. Do you have much confidence in the ability of the EU, and in particular this Government, to defend your corner against charges of dumping? We get the impression from your evidence, and in particular what you say at page 30, that frankly the British Government does not seem to be getting behind you on these issues. Is that a reasonable summation of the position?
  (Mr Rea) It is a complicated issue this one, is it not? I think at the bottom line we have to say that it has been a tradition that the UK Government has not had an attitude to challenge imports and sources of imports as vigorously and effectively as we might have wanted. One is always aware that in a European club there are balances of interests in these things, producers as well as consumers and different nationalities as well. However, HMG has been noticeable as being at one end of the spectrum which we would regard as often unhelpful to a UK or even a European interest. Yes, we do have some concerns that they may not be as vigorous as they should.

  38. Do you think you could give us some specific examples in written evidence to us where you have sought the support of Government and it has not been forthcoming?
  (Mr Rea) Yes.

  39. Does anyone else want to supplement that?
  (Mr Rea) No. I would just add we would be very pleased to do that because it is something we have discussed with Ministers on a number of occasions on specific issues where we feel the DTI has not been vigorous enough compared with its European colleagues in agreeing European proposals for dealing with this. We will be very happy to do that.
  (Mr Pedder) I think I would only add, Chairman, in a way it would be wrong to link accession to the EU to dumping because those steel flows can come anyway from outside the EU and can be dumped whether it is from a Member State or other. As David Rea said, the proof of dumping is extremely difficult and you need to get into a fairly detailed examination of costs and sales price to other customers that a potential dumper might be effecting. I think the issue is one of attitude and approach. This is a fast moving market, the steel market, and if steel comes in at very low prices it contaminates a market very, very quickly for all of us and that contamination can last an extremely long time. Therefore, any delay in taking action which holds up the import of steel at below competitive prices really is with us for far longer than would be sensible and we would care to have. It is that attitude and approach to act very quickly rather than to go through a lengthy several months long procedure that is the scene we would like to see.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 14 March 2001