The steel industry in WalesWritten evidence from the Welsh Government (SIW 03)

Introduction

1. The House of Commons Welsh Affairs Committee has asked the Welsh Government for written evidence on the steel industry in Wales—in particular on:

Recent changes to the steel industry in Wales, including the major restructuring by Tata Steel, and future prospects and challenges for the industry.

Welsh Government support for steel workers affected by restructuring in the steel industry.

Welsh Government support for the Welsh steel industry.

The adequacy of UK Government policy to support energy intensive industries, such as steel.

The Steel Industry in Wales

2. The Welsh Government recognises the importance of a sustainable, modern Welsh steel industry and we maintain close links with our steel businesses. Working within state aid parameters we continue to develop that relationship to help ensure Welsh steelmaking can remain at the forefront of European manufacturing.

3. Steel production is a significant contributor to the economy of Wales, providing high quality employment, both directly and indirectly. In 2012 primary steelmaking and associated downstream steel and metal related businesses provided employment for around 17,000 in Wales.1

4. Basic metals and metal products accounted for 21% of Welsh manufacturing GVA in 2009 compared to 13% of manufacturing for the rest of the UK. In Wales, output in the industry fell by 0.2% for the year to 2012 quarter 2 compared to 0.4% for the UK over the same period.2

5. Wales is fundamental to the future of UK steelmaking. Of the 9.7 million tonnes of crude steel produced in the UK in 2010, 4.9 million tonnes was produced in Wales at two locations—Tata Steel’s integrated works at Port Talbot and in Cardiff at Celsa Manufacturing UK. Mir Steel’s Newport based steel operation incorporates rolling mills and a (currently mothballed) 750,000 tonne/year melt shop.

6. Tata Steel primary steelmaking operations produce slab and hot rolled, cold rolled and metallic coated strip steels. Celsa produces construction steels. These activities are complimented by significant downstream operations producing coated steels, steel for packaging applications used in food and beverage industries, specialised grain oriented (electrical) steels, armoured steels, and significant research and development on innovative high technology sustainable products.

Prospects and Challenges

7. The Welsh Government recognises the considerable ongoing challenges facing the steel industry following the economic downturn in 2008. Steel producers have taken actions to restructure to remain competitive and align production with demand. In Europe this has primarily involved mothballing or closure of plant.

8. Wales has historically experienced the consequences of steel industry restructuring and the devastating impacts on those whose jobs are affected, their families and the affected communities. Most recently Tata Steel announced on 23 November a further UK restructuring to improve competitiveness which will potentially affect 580 posts throughout Wales.

9. Although there are considerable difficulties in the short to medium term, the long term prospects for steelmaking in Wales remains positive. This is signified by continued high levels of investments. In 2012 Tata Steel invested over £240 million in its Port Talbot Works including a £185 million rebuild of the No. 4 Blast Furnace and an associated £53 million investment on a cooling system at the Basic Oxygen Steelmaking (BOS) plant. These projects follow a £60 million BOS plant Energy Recovery investment completed in May 2010.

UK Government Policy to Support Energy Intensive Industries

10. It is clear however that, to ensure steelmaking in Wales has a future and investment is sustained, the steel industry must be able to compete on a level playing field internationally. High UK energy costs and uncertainty over the impacts of UK Government energy and climate change policy are having a significant impact on competitiveness and business investment decisions. We have raised this at the highest levels of UK Government.

11. The UK Government must therefore deliver on its commitment to compensate key electricity-intensive businesses to help offset the indirect costs of energy and climate change policies and ensure they are able to compete on a level playing field internationally.

12. Welsh Government Ministers chaired meetings in 2012 with representatives of energy intensive operations in Wales including the steel sector. In discussions, whilst welcoming the UK Government’s package of measures, concerns were expressed as to whether the level of support will adequately compensate those industries most affected, and whether there is a UK Government commitment to support those industries longer term.

13. We have also raised with the UK Government Ministers that, prior to delivery of that package of support, important consideration be given to provision of immediate measures to relieve the impact of current energy prices on high volume energy intensive manufacturers including steel producers.

Support to Steel Employees affected by Tata Steel Announcement

14. Welsh Government is committed to work with those employees affected by restructuring decisions in the steel industry to provide a bespoke, co-ordinated approach. Following the Tata Steel announcement of 23 November, Welsh Government officials established a Task Force which met on Friday 30 November 2012. The purpose of the Task Force is to bring together agencies and organisations in a coordinated approach to assist employees affected by the restructuring announcement.

15. Task Force representatives include Tata Steel, Welsh Government, Trades Unions, UK Steel Enterprise, Job Centre Plus, Careers Wales, and the Councils of Blaenau Gwent, Caerphilly, Monmouth, Neath Port Talbot and Newport. Tata Steel has put in place accommodation for Task Force representatives at each site and will work closely with Communitas to organise a skills matrix of affected employees.

16. Work has commenced, coordinated by all providers at the various sites. The support available is not exclusive to Tata employees and will be available to other steel workers in Wales affected by the announcement.

17. The Welsh Government has provided considerable assistance to steel sector employees placed on short time working patterns through the “ProAct” scheme which was established to enable employees to undertake subsidised training and to provide wage subsidies while that training was being undertaken. The following specific assistance is available to affected employees from Welsh Government, in conjunction with the support offered by other agencies:

Welsh Government ReAct Programme

18. ReAct provides a package of support to help people gain new skills, overcome obstacles and improve their chances of finding new employment in as short a time as possible after redundancy. The Programme is supported by the European Social Fund and provides for Individuals:

a vocational training grant of up to £1500.00 for people who need to update their skills to return to work; and

an extra support grant of up to £200.00 to help remove any barriers to training. This award covers expenses related to training such as travel and accommodation.

19. For business, ReAct provides:

a wage subsidy of £1500 for a new recruit working between 16 and 24 hours per week;

a wage subsidy of £3000 for a new recruit working for 25 hours or more per week; and

a training grant of up to 50% (up to a maximum of £1,000) of the cost of external, job-related training for the new recruit.

Welsh Government Start-Up Service

20. Welsh Government offers support through its Start up Service with a range of free services to help people start and grow their businesses, including:

business skills workshops to help build and plan new business;

business advice sessions with professional business advisers;

help to find business finance;

a bursary for recent graduates (NVQ4 or above);

a Young Entrepreneurship Bursary for young people aged 16 to 24; and

enhanced support to help with business growth initiatives.

Support to the Welsh steel industry

21. Welsh Government has produced a strategy for the manufacturing industry in Wales which highlights four high impact areas, matching growth opportunities with Welsh capabilities. One of these is process manufacturing, which has been included in recognition of the specific impact that companies including those in the steel sector have on the Welsh Economy and its future growth.

22. The Welsh Government has identified Tata Steel and Celsa Manufacturing UK as key Anchor Companies, acknowledging their important contribution to the economy of Wales. Anchor Company status recognises a company’s significant corporate presence in Wales and their potential to develop the economy through employment, R&D and the supply chain.

23. The Welsh Government is committed to work with the steel industry to identify, within state aid parameters, projects and partnerships with academia to drive investment in steelmaking, and research and development into the creation of innovative sustainable and higher value added steel products.

24. To help develop and strengthen the steel industry in Wales a dedicated relationship management approach has been developed to identify projects, supply chain initiatives and work with academia to drive forward potential projects and inward investment. These cover a range of activities including innovation and technology; environmental improvements; energy efficiency, logistics; and people development through Skills Growth Wales, Apprenticeship and ReAct programmes.

25. Examples of recent developments include the Sustainable Business Centre at Shotton to accelerate the development of low and zero carbon solutions for the built environment using steel in combination with other materials and the Wales Steel Training Research Innovation Partnership (STRIP) programme to help Wales’ steel industry develop new products and technologies.

Conclusion

26. Steel making in Wales is an important contributor to the economy of Wales. The steel industry is substantially investing in Wales to ensure its technologically advanced manufacturing facilities are amongst the best in Europe.

27. The Welsh Government recognises the considerable ongoing challenges facing the steel industry following the economic downturn in 2008. Working within state aid parameters we continue to develop the positive working relationship with the steel industry in Wales to help ensure Welsh steelmaking can remain competitive and at the forefront of European manufacturing.

28. We will ensure that those affected by restructuring in the steel sector receive all the advice and support possible to help enable them to locate employment.

29. To ensure the UK steel industry is able to compete on an internationally level playing field as we move to a low carbon economy, the UK Government must deliver an appropriate support package as committed to in its 2011 Autumn Statement to help offset the indirect costs of energy and climate change policies, and commit to a longer term strategy for our energy intensive industries

January 2013

1 Source: Inter-Departmental Business Register, ONS

2 Source: Index of Production, Welsh Government

Prepared 2nd July 2013