Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by Sheffield Forgemasters Limited

I last gave evidence to the Select Committee on 7 February 2000 as part of the Engineering Employers Federation delegation and at that point I outlined the background on the Sheffield Forgemasters Group, what we did, and the impact of the exchange rate bearing in mind we export over 60 per cent of what we make and of this 60 per cent over half is into Europe.

  I enclose three exhibits which graphically illustrate the consequences of the £/euro relationship. At the last Select Committee I was asked how well we were faring in competing with Eastern Europe and I indicated that we were holding them off. Regrettably, with the pound still above the 3.20 DM level we are fighting a losing battle.

  The effect has been particularly acute in our heavy foundry where it is difficult to automate the process and I fear that a further tranche of redundancies is imminent. We have been more successful in other areas of our plant, such as roll manufacturing for steel mills. Here we have invested over £3 million of capital which will increase our productivity.

  The problem we now have is that our American owners, who bought the business in 1998 believing that it was a door into Europe with a relatively favourable rate of exchange, are now becoming disillusioned. They have seen virtually no return since the purchase and currently we are not in a position even to pay the interest payments on our intercompany loan. They are particularly disturbed by the continuing strength of sterling as they see it and by what they see as a lack of Government interest in manufacturing.

  On his last visit to the UK the Group CEO indicated that he is coming under increased pressure from his US shareholders over his investment in the UK and whether or not the UK business should be restructured to reduce the cash drain. The US shareholders are encouraging the Group to look towards Eastern Europe as they perceive a better industrial climate.

  I have a grave concern that the environment levy may prove to be a further nail in our coffin. I would hasten to add that I am totally supportive of reducing the global warming effect but I would ask the Government to recognise that industry only contributes a minor part of the problem. The voter is the biggest culprit, we all leave lights on, boil full kettles of water and drive motor cars etc, and I feel that industry represent a soft and politically acceptable target without really solving the problem.

  As to the levy itself, it is neither fair nor easy to understand and as such fails even as a tax let alone a levy. It is also perverse in the case of steel as it encourages steel to be bought from low cost non-signatories of the Kyoto Agreement who pollute more than the UK steel industry.

  Even within the tax, steel made by oxygen steel making which uses coal and iron ore, depleting natural resources and generating more CO2 than steel made by recycling scrap, a waste product, pays less levy!

  If we do wish industry to get better I would request that this is done by incentives rather than by a thinly disguised tax. Secondly, bearing in mind the current problems with the strength of sterling against a weak euro, even if we can't ditch the levy I would at least ask for a moratorium on implementing the levy until economic conditions are better. Unless such a respite can be obtained I fear it could hasten the demise of more United Kingdom manufacturing and result in the loss of assets which will never be replaced.

6 November 2000

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