Pwyllgor yr Economi, Masnach a Materion Gwledig
Economy, Trade, and Rural Affairs Committee
07/02/2024Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
Buffy Williams | |
Hefin David | |
Luke Fletcher | |
Paul Davies | Cadeirydd y Pwyllgor |
Committee Chair | |
Samuel Kurtz | |
Vikki Howells | |
Y rhai eraill a oedd yn bresennol
Others in Attendance
Baroness Lucy Neville-Rolfe | Gweinidog Gwladol yn Swyddfa’r Cabinet, Llywodraeth y DU |
Minister of State at the Cabinet Office, UK Government | |
Chris Jaques | Tata Steel UK |
Tata Steel UK | |
Dickie Davis | Llywodraeth Cymru |
Welsh Government | |
Nigel Elias | Llywodraeth Cymru |
Welsh Government | |
Rajesh Nair | Tata Steel UK |
Tata Steel UK | |
Tom Smith | Llywodraeth y DU |
UK Government | |
Vaughan Gething | Gweinidog yr Economi |
Minister for Economy |
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
Aled Evans | Cynghorydd Cyfreithiol |
Legal Adviser | |
Evan Jones | Dirprwy Glerc |
Deputy Clerk | |
Gareth David Thomas | Ymchwilydd |
Researcher | |
Katie Wyatt | Cynghorydd Cyfreithiol |
Legal Adviser | |
Katy Orford | Ymchwilydd |
Researcher | |
Lara Date | Ail Glerc |
Second Clerk | |
Robert Donovan | Clerc |
Clerk | |
Sara Moran | Ymchwilydd |
Researcher |
Cynnwys
Contents
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Cyfarfu’r pwyllgor yn y Senedd a thrwy gynhadledd fideo.
Dechreuodd y cyfarfod am 09:29.
The committee met in the Senedd and by video-conference.
The meeting began at 09:29.
Croeso bawb i'r cyfarfod hwn o Bwyllgor yr Economi, Masnach a Materion Gwledig y Senedd. Dwi ddim wedi derbyn unrhyw ymddiheuriadau. A oes unrhyw fuddiannau hoffai Aelodau eu datgan o gwbl? Luke Fletcher.
Welcome all to this meeting of the Senedd's Economy, Trade and Rural Affairs Committee. I've not received any apologies for absence. Do Members have any declarations of interest at all? Luke Fletcher.
Diolch, Cadeirydd. I'm still waiting official confirmation, but I believe I've been co-opted onto one of the sub-groups of the transition board.
Dyna ni; diolch. Unrhyw un arall? Na.
Thank you. Anyone else? No.
Fe symudwn ni ymlaen i eitem 2, sef papurau i'w nodi. Mae yna un papur i'w nodi. A oes yna unrhyw faterion yn codi o'r papur yma o gwbl? Na.
We'll move on to item 2, which is papers to note. We have one paper to note. Are there any issues arising from this paper at all? None.
Symudwn ni ymlaen felly i eitem 3, sef sesiwn gyda Gweinidog yr Economi ar Tata Steel. Mae'r pwyllgor wedi bod yn dilyn datblygiadau yn y sector dur yng Nghymru yn agos, ac yn ystyried dyfodol dur yng Nghymru. Mae'r sesiwn heddiw yn gyfle i drafod y cyhoeddiadau diweddaraf gan Tata Steel ac effaith colli swyddi posib ym Mhort Talbot a mannau eraill. Rŷm ni yn ddiolchgar i'r Gweinidog am sicrhau ei fod ar gael ar fyr rybudd yn dilyn cyhoeddiad Tata ar 19 Ionawr ei fod yn dechrau ymgynghori'n ffurfiol ar ddiswyddo. Felly, a gaf i groesawu'r Gweinidog a'i swyddogion i'r sesiwn yma? Cyn ein bod ni yn symud yn syth i gwestiynau, a gaf i ofyn iddyn nhw i gyflwyno eu hunain i'r record? Gweinidog.
We'll move immediately, therefore, to item 3, which is a session with the Minister for Economy on Tata Steel. The committee has been closely following developments in the Welsh steel sector, and considering the future of Welsh steel. Today's session is an opportunity to discuss the most recent announcements by Tata Steel and the impact of potential job losses at Port Talbot and elsewhere. We are grateful to the Minister for making himself available at relatively short notice following Tata's announcement on 19 January that it is starting formal consultation on redundancies. So, may I welcome the Minister and his officials to this session? Before we move to questions, can I ask witnesses to introduce themselves for the record? Minister.
Croeso, Cadeirydd. I'm Vaughan Gething. I'm the economy Minister. To my left is—
Dickie Davis. I support the Minister in relation to the Tata company.
And to my right.
Nigel Elias, steel policy team.
Thank you very much indeed for those introductions. Now, Minister, you've made it clear that the current deal between the UK Government and Tata Steel is unacceptable. Can you tell us therefore what is your favoured alternative deal?
There is a credible alternative presented in the form of the multi-union plan. There's also an alternative plan that one union has put forward. Our view is that any credible plan will require more capital investment, and that's set out in most detail in the plan that the multi-unions have provided.
This is the Syndex plan.
Yes. That plan, or the alternative being advanced by a different union, they both require extra capital investment. The return is that you maintain primary steel making, you don't end up being reliant on other parts of the world for imports for a long time, and, I would think, potentially permanently. And also there's economic value you maintain as well, not just for the current workforce, but, of course, we've talked lots, and I'm sure we will do again through the rest of the life of this committee, about the current and the future economy, lots of which need steel. And I keep on saying 'cans, cars, construction'; they need an element of primary steel, so you would need to import that from other parts of the world, and, obviously, the economy of the future will still need steel—construction for homes, the realities of what you can do with on and offshore power as well.
So, it's a big economic choice not just for the direct and indirect employment now, but for the future, and I recognise that requires a greater level of investment. To be fair, the company have described the multi-union plan, which they spent the most detail going through, which is the Syndex report, they've described that as credible but not affordable. So, money is an issue. And so the length of time of the transition that the whole Senedd agreed yesterday is a really important factor to get there, because it's worth just rehearsing there has been a lot of talk about the lifetime of the assets, the two blast furnaces. There's an acceptance that I think it's blast furnace 5—it's odd, because we talk about the first and the second; it's blast furnace 5 and blast furnace 4—I think it's blast furnace 5 that is the one that everyone accepts that its practical lifespan is nearer to the end. Blast furnace 4, though, has a lifespan to go into the early 2030s, so a much longer period of time. And so it's, really, I think about whether blast furnace 4 continues, with the ability to generate primary steel.
And then there's a choice about what happens in the future. Will we have seen enough progress on electric arc to mean that you can make all types and grades of steel you need by that point, or will we need to continue reinvesting in not just blast furnace steel but how to continue to decarbonise that? Because, at the moment, there's a lot of work that is being done on how to take out some of that impact.
So, there's a variety of things, but you can't get to that future if you take both blast furnaces out and you move solely to electric arc steel making, which is when we want to get back to that you're then reliant on imports.
So, just for clarity then, Minister, your favoured approach is the Syndex plan.
It's the one that I've seen the most detail of, but my point is that any credible plan should be looked at. And that is then—. You've got lots of detail in the plan that Syndex have done from the multi-union framework. You then look at, if there is an alternative plan, that's got to be credible and presented, and there is now a consultation period where any credible plan can be examined. And, for me, the tests are: does it maintain the sovereign asset that I think primary steel making represents? What is the economic impact in terms of not just the direct and indirect job losses, but that broader point about value to the economy of steel making? And then what are the requirements for investment and transition, and who needs to be part of that support?
Now, we're very clear the UK Government needs to be part of that support. From the Welsh Government's point of view, we are happy to carry on supporting and investing in the skills of the workforce for a transition that could take place, and, if there are people that move into different sectors, then there are other parts of the economy that are growing that would want some of those workers, and the challenge then, I think, is about relative wage levels.
What I'm trying to find out from you is—. Obviously, you believe that the current deal is unacceptable, but what I'm trying to find out from you, and what we'd like to know as a committee, of course, is: what is your alternative, what alternative would you like to support, would you like to see?
That's why I'm trying to set out that any credible plan that maintains blast furnace steel making, so we don't end up reliant on other parts of the world, is what I want to see. And the credibility of that has to be tested, doesn’t it? So, the credibility has to be tested in dialogue with the company, and indeed with the trade union side and the experts that they have, and then also the UK Government need to be part of that as well. Now, we were never part of the examination of the solely electric arc steel-making proposal, but you can see the consequences that flow from that. I think that if you’re going to set out, as the Senedd did yesterday, that blast furnace steel making should have a future in Wales, that isn’t just about our own narrow economic interest, it’s also because other parts of the world are investing in more blast furnace steel making. So, there isn’t a green gain from this—the emissions will simply be generated somewhere else, with jobs that are generated somewhere else, and it’s very hard to move away from that. So, if we’re going to have a future, it’s got to be credible, it’s got to be credible about how you can deliver it in practical terms, and it’s then got to be credible in terms of the amount of investment it requires, and then that can actually be delivered, alongside the continued investment in electric arc steel making, which is absolutely part of the future.
I think at various points people have been confused, that we’re saying we don’t want electric arc of any sort at all. There is one really not very far away from here—you can see it when you walk out of the building. It’s in my constituency, which is why I don’t make decisions on that particular site, but electric arc steel making will be a larger part of the future, which is why we do talk about scrap and recycling, and I’m sure the committee itself may find that interesting, about current methods of recycling and the need and the imperative to do more on scrap. But it would also require some blast furnace steel making, and if you think about not just Wales, but about the UK, I’m not sure that the current blast furnace that’s left in Scunthorpe, how much life that has got. You could potentially see no blast furnace steel making anywhere in the UK, and that’s why we’re pointing out that there’s a sovereign risk, that it’s a sovereign asset, and of course that’s what the Senedd agreed yesterday.
Because in your Plenary statement on 23 January you said that the UK Government has
'failed to set out the case for a £500 million subsidy that results in 2,800 job losses and the loss of virgin steel-making capacity',
and that you were unclear what outcomes were being prioritised. In that case, then, how would you want outcomes prioritised?
I'd like outcomes prioritised about UK security. That is why virgin steel making or primary steel making—. The two terms are used interchangeably, but I'll try to stick to 'primary steel making', just so I'm not using different terms in the committee session. Primary steel making to be maintained—I think that is an important outcome, because, otherwise, you have all of the things that flow from that, and that is both a sovereign risk—. And you heard in the Chamber yesterday that, actually, on the defence capability point of view, some of the things you would need to do in the future would require primary steel to be part of the mix. So, if you're then reliant on other parts of the world, you're lessening your bargaining power across the UK. Now, I know Luke has a different view about the future of the UK, but anyone would say, actually, that's a risk, and should we really get to the point where you can't generate that steel within the UK? So, that is one of the things that I think should be a parameter within this.
The second should be the point that comes from direct and indirect jobs within Wales and the wider UK, because there's a potential flow for steel making outside the UK, or rather outside Wales—our primary concern is Wales. So, what does it mean not just for Port Talbot but for all of the downstream businesses as well? Because the current proposals do talk about 18 months for there to be significant job losses in Port Talbot, but then, within three years, for there to be 300 further job losses in Llanwern, which would have a very real impact. So to think about what are the direct job outcomes that you are prepared to accept, and I think the balance has not been struck in the right place, because, as we’ve rehearsed many times before, Port Talbot is not a wealthy town. Steel-making communities are not particularly wealthy parts of the UK overall, and there isn’t an employment market with lots of similarly well-rewarded employment. There may be more employment that people may need to travel further afield for, but actually it’s unlikely to be at a commensurate wage level. And as we went through yesterday, the age range of people in the workforce—I think that lots of the public would have thought that most steelworkers are older men north of 50, and there are some of those people who work in the steelworks, but the average age is 37 in Port Talbot, and it’s 31, 32, in Llanwern. So, these are people who have liabilities and responsibilities and a long part of their working life ahead of them. So, the jobs part is important.
And then I think you also have to think about, if there is going to be any dislocation, what are you prepared to do and is it commensurate with the likely need. Now, there is a transition board; to be fair, Luke Fletcher and Tom Giffard have been approved to become members of the sub-committees. The challenge is that the £100 million is unlikely to cope with north of 2,000 job losses in 18 months. I don't think anyone should pretend otherwise. And that's why it's then important for that to work around those other interventions and investments that exist in the economy. So, I think the jobs, the relationship with what's devolved, what isn't devolved, to see that that works properly, and then, ultimately, setting a path to what a genuinely more sustainable form of steel making looks like, because, at the moment, I think we offshore jobs and emissions. So, steel making in the UK may be greener, but, globally, I don't think it will be.
And no doubt we'll come on to talk about the transition board in due course, later on. Now, very, very quickly, Sam, you'd like to come in on this.
Yes, just one point. Thank you, Chair. On the point around primary steel-making capabilities—and I'll be asking Tata this question as well, and future evidence givers—is it your understanding, then, that the current proposal between Tata and the UK Government is that primary steel making will not be able to take place in Port Talbot?
Correct.
Okay. Thank you.
In your discussions with the UK Government, have you covered potential terms and conditions of the grant to Tata, and what conditions would you expect to see?
I'll try not to be unproductive, Chair, but, in the conversations with the UK Government, they have not been what I would describe as satisfactory. We've essentially got a position where, at the moment, the UK Government are saying, 'We've done a great deal and you need to get on board', and it's not been what I would think of as the most constructive conversation around the deal itself.
In the transition board, there are pragmatic conversations about what to do and how to make sure interventions can work as well as possible together, if we get to the current proposals being implemented. I've not had a direct conversation with Kemi Badenoch on any matter since her appointment. I've had one meeting with Nusrat Ghani since the deal was announced, and that was after the proposal was formally announced just a few weeks ago. So, it's not been a great exercise in inter-governmental relations, and I would have thought that a more constructive and earlier conversation would be to the benefit of all of us, even if we end up still disagreeing. Because I do accept it's entirely legitimate for different Governments to take a different view on the same issue, but I'd much rather be able to have a discussion, be able to agree what we can agree, and to make the case around where are the parameters.
Essentially, there's £0.5 billion to deliver a large electric arc and the dislocation in jobs, the significant job losses, that causes. And that's essentially it. There aren't any other criteria. There's been no expectation that we can see around procurement, for example, either, in terms of what would happen from the steel produced by an electric arc in the future, if that were to come to pass. There's been no expectation around procurement for the construction phase or the decommissioning phase. The limit of the expectation has been the money that has gone into the transition board and the broad commitment that Tata have made that they will maintain their responsibility to remediate land if it's turned over to alternative uses now. That's their current legal responsibility.
So, I know your colleague, Chair, in the Welsh Affairs Select Committee, in his questioning, asked Tata if it was the deal of the century to get £500 million without needing to have job guarantees. I understand why he put the question that way. I think it is worth going back to look at the investment that is being proposed and the outcomes that Wales expects and the UK Government expects, because, as I say, this is a sovereign issue, and the amount of capital fire power can only come from the UK Government to reach a better future that we all voted for yesterday.
But, as far as you're concerned, there are no conditions attached to this deal at all.
The only condition is that the money will be provided once the electric arc is built.
Okay.
As far as I can see, that's the only condition.
Okay. I'll now bring in Hefin David. Hefin.
Thank you, Chair. I'd like to focus on the role of Government in some of this. First of all, picking up on your question that this is about the UK Treasury, and the UK Treasury are hugely responsible, in your discussions with Tata, have you made any reference to the fact that we're currently in something of a year of electoral flux in the UK and that things may change later down the line? Trying to be politically impartial, whatever happens, that is significant. Have you emphasised that to Tata and have they responded and understood that?
I should say, in all of the proposals, I should recognise the impact for Members and for their constituents. There'll be lots of people in this room—in fact, I think probably every member of this committee—who will have steelworkers or contractors, or other people directly affected. I say that because I recall that, of course, in Llanwern, there'll be a good number of Hefin David's constituents who work there, so I appreciate that you've probably got your own constituents watching this and contacting you as well. They will understandably be talking about the fact that this is a year when there will have to be a general election—well, it could, technically, go into January, so within the next 12 months—and that is a point that we have repeatedly made in our conversations with Tata.
We have—I and the First Minister—regularly said, 'This is an election year; do not make any irreversible choices during this year, before, potentially, a different Government may be in office that may take a different view about the level of investment it is prepared to provide.' I think it would be entirely reasonable for any UK Government to say, 'If we're going to invest more, we expect more in terms of the conditionality'—some of the points that I was rehearsing with the Chair. So, that's a point that we've made, and Tata have understood and they've listened, and they've had direct conversations with the leader of the opposition as well as UK Ministers, so there's an understanding about that. The scheduling of the proposal means that a second blast furnace—blast furnace 4—they would look to be closing that towards the end of this calendar year, which is when, if you're looking at the speculation from The Sun or others, there could be a general election, in the autumn.
So, it's a point we have made regularly, and everyone in this room should recognise, regardless of what party you are in, if there is to be an election in October, for the sake of argument, and Tata are proposing to close their blast furnace at the end of September, it would be an enormous election issue, and there would be huge pressure and lots of anger around that. So, my own view is that it would be better for the company to reconsider that and to think about the scheduling, about what they are proposing to do, and to maintain relationships with the Welsh Government, the UK Government and, indeed, the opposition frontbench, as we will still be here at the end of the year and they will need to deal with the current UK Government, which may be the future UK Government, and who could be the UK Government in the not-too-distant future.
Yes, that was well done politically as impartially as possible, given the nature of the committee. But, what I'd really like to understand is: have Tata understood that? Do they understand? They could hear it, but do they recognise that doing something irreversible during or before a general election would be a tragedy, should the alternative options arise afterwards? Have they understood that?
I think I can only partially answer that question, because I can't tell you what's in the minds of all of the people at Tata. I've met T.V. Narendran, the chief executive of Tata global, who's based in Mumbai, and I've met the UK chief executive, Rajesh Nair, and our conversations are always polite and constructive. They understand fully the points we're making. They understand that if they were proposing to close the second blast furnace in the run-up to a general election, it would be extraordinarily difficult and heated, and they do, I think, still care a bit about the reputation and the brand of Tata.
I couldn't tell you if they fully understand the level of hurt and how long that would carry on if the numbers that are being proposed were actually dealt with, and people were going into that election knowing that their jobs were going and they were only looking at decommissioning. I couldn't honestly tell you that they understand all of that. If you think of it this way, if you're Tata, and you've announced these proposals, you're unlikely to sit in this room or another and say in a public forum, 'Actually, if someone asked us loudly enough or put some more money on the table, of course we'd rethink'. I don't think they're going to give that sort of clear-cut, 'Yes, we'll do that'. But, equally, I don't think they're going to be, 'It doesn't matter what the UK Government says or does, this is what we're doing'. So, as I say, I know that there are direct conversations taking place with us, with the opposition frontbench on a UK level and with the UK Government—
[Inaudible.]
I know. I think it is important to recognise I don't think this is a done deal and I don't think this is something where there is absolutely zero chance of a different future.
Thank you. I'd like to talk about the practicalities of discussions. One thing I remember from the previous crisis in 2016, which, of course, did happen during a Senedd election, is that Carwyn Jones, as First Minister, spent a significant amount of time visiting Mumbai and almost camping outside Tata headquarters. There seems to be a different approach this time. Is that deliberate and do you see any value in taking that approach that the previous First Minister did?
I think what is also different is the way that Tata have spoken directly with us. I've met the company 16 times in the last two years and, on six of those occasions, I've jointly met the company with the First Minister. So, we have met the global chief executive, who has come from Mumbai to meet us in Cardiff and in Port Talbot on a number of those occasions. So, there hasn't been a need to go and camp outside Mumbai, because Mumbai has come to Cardiff.
Now, coincidentally, it's the Year of Wales in India this year, so you can expect at least two ministerial visits, I'd say—that'd be a reasonable assumption—and as this is ongoing, it is entirely likely that a Minister, whoever that Minister is who is going to India, is going to have a conversation directly with Tata. Now, we also need to understand when and where we get in the process. So, at the end of a formal consultation, there may be a harder, firmer set of proposals with a harder, firmer set of timelines, and, actually, there may still be things to do as we get through what is taking place, where a direct engagement with a Minister, whether it's the economy Minister or the First Minister, flying out to Mumbai would be the right thing to do. So, I wouldn't tell you that there is no prospect of anyone going to Mumbai, but, as we sit here today, we have regular and direct engagement with the most senior leadership in the global Tata enterprise and not simply Tata UK. What we need to do is understand where and how we influence that, but I wouldn't rule out a future visit to Mumbai, to Tata headquarters.
But a visit isn't in the diary at this point in time.
No, because I don't think it needs to be at this point in time. But, as in all of this, we're still in a state of flux with some uncertainty, so I don't think anyone should rule it out, or think that the Welsh Government is saying that this is not going to happen. But it is markedly different; we've had those 16 meetings over two years with senior Tata leadership, which I don't think was taking place in the run-up to 2016, where there were conversations about what the future might be.
And we've been talking with the UK Government about this. I know that Kwasi Kwarteng announced yesterday that he's not going to stand for Parliament again. The last time I saw him was when he chaired the Steel Council here in Cardiff. And I've been talking to him about this issue since my appointment as the economy Minister. Even then, when he came down to the Steel Council, he acknowledged that there was a potential deal to be done with Tata, but that it required sign-off at No. 10 and No. 11. And the challenge is that the balance of that deal has moved around. I think a better deal would have been available if that deal had been done earlier. But that's where we might have been and this is where we are. But the reason I mentioned Kwasi Kwarteng was to point out how long, just in my tenure, this has been a very active conversation, so Members shouldn't be surprised that we've had that regularity of contact with Tata, as well.
Thank you. Chair, have I got time to ask about floating offshore wind turbines?
Yes, by all means.
Okay. Just to go back to the detail of negotiations with Tata, have you spoken to them about whether moving to an electric arc furnace would have any impact on the potential for steel from Port Talbot to be used to construct those floating offshore wind turbines in the Celtic sea? And if so, did they respond to that?
That's been part of previous conversations, and, indeed, last Thursday, when the First Minister and I met with the Tata leadership, we went through this very question again. The First Minister was able to point out that he had been to a meeting with the Crown Estate and potential people in the supply chain, talking about floating offshore wind, and they had described the first round of licences being the start and they expected there to be, I think, four times as much power generated ultimately, with a huge amount of the UK's energy need being generated off the Celtic sea. Now, that's a real positive in terms of decarbonisation, and, crucially, from my point of view, as well, as the economy Minister, a huge economic opportunity. It would be very odd if the steel that was going into those turbines was made in another part of the world, because you're much more likely to have the larger manufacturing process created there as well.
When we've spoken with Tata, we've spoken previously about investing in a plate steel mill. We've also spoken that if they believe that electric arc steel making is going to be able to deliver more of the steel in a way that can be generated, well, not only does investment in the research and development need to take place, but there's got to be direct engagement with developers now. This is the point that we tried to make, that it was great to hear that they think there are possible answers for the future. The problem is if the future's being created at a slower pace than other people are making choices, then you may find you can say in three years' time, 'We can deliver the sort of steel that you want through an electric arc,' and if the supply chains have solidified in two and a half years' time, then, actually, you've missed the boat. So, actually, the engagement on this is so important from Tata with us, with the UK Government, but also with that wider supply chain, and it goes into the free-ports bid, as well, where lots of the value from free ports is about capturing the economic value from floating offshore wind. So, it's an active part of the future that we see for steel making in Wales and the wider UK. It's an active part of the case that we make to Tata. I don't think we have a definitive answer yet about how they'd see their plans and proposal for Port Talbot aligning from a timeline and capability point of view with what we currently understand floating offshore wind manufacturers will need. But it's still a large area of opportunity that we are keen to see pursued and realised.
Diolch, Cadeirydd.
Diolch, Hefin. I'll now bring in Vikki Howells. Vikki.
Diolch, Cadeirydd, and good morning, Minister. Arguably, one of the most important asks that you and the unions are putting forward to Tata is to keep that second blast furnace open while the electric arc furnace is being constructed, but I understand that Tata have said that an engineering report that it commissioned found that it wouldn't be possible to continue blast furnace production while building an electric arc furnace on the same site. So, have you discussed this with them, and do you think that it is possible to continue to operate the blast furnace, which would, obviously, safeguard a lot of jobs in the short and medium terms while that electric arc furnace was being constructed?
There are a number of technical aspects to what might be possible. There's the capacity within the steelworks to actually roll and deal with the steel that's produced by whatever means. I don't want to get into using technical subjects as if I'm actually a steelworker or somebody who runs a plant, but, in broad terms, capacity to deal with the steel that was generated is one of the issues. There's then the issue of, technically, what you can do in operating on the footprint, in terms of space and how you use the space. That would also include how you'd get the power lines in, as well, because they've got an offer from National Grid, but delivering that is sometimes different to the offer. I found out to my cost that, sometimes, the offer from National Grid gets changed as you get closer to delivery. There's then the point around the ground surface and what you can actually deliver on it, as well.
So, you've got all of these different factors to be taken account of. Tata have said that there'd be some engineering solutions that would be difficult. They've never said definitively to me or, indeed, to the trade union side, 'It is impossible; you cannot run a blast furnace and construct an electric arc' on the footprint they have available. I know that that is one of the things that is going to be discussed and is being discussed as part of the consultation. So, I think, from an elected Member's point of view, the difficulty always is: do you take a view that, 'I know better than anyone else what is happening there, and I can give you a definitive guarantee about what it is and isn't possible to do on that land with that physical footprint and with the power connections'? But our understanding is that it is a matter of lively debate between all the interested stakeholders, and I'd be very interested in seeing the technical outputs from all sides about what it's possible to do. My understanding has been it could be difficult, but not impossible.
I'm sure Tata will give you their view today, and I'm sure that the trade union side will give you their view in due course as well, but I expect that'll be one of the significant issues, as part of the consultation. Anyway, if it is possible to deliver an electric arc at the scale they’re talking about with the capacity that’s there, that’s one thing; if it isn’t, then there’s a potentially different choice to be made. But in any of this, you still come back to, from a Wales and UK point of view, if you get rid of blast furnace capacity, we’re the only G7 country that doesn’t have primary steel making, and we’re still reliant on imports from other parts of the world, and what is the right strategic choice to make, in addition to what is the right choice to make for steelworkers and steel communities.
Thank you, Minister, and this is obviously a key issue for us as a committee to keep an eye on moving forward. We know that Tata told the Welsh Affairs Committee last week that it would consider future investment in Port Talbot if more Government funding was made available, and you described that as encouraging. So, what additional investment would you like to see in the future?
I think it’s the balance of capital investment compared to operational investment. So, the running costs: Tata have always been upfront with us; they don’t expect the Government to help them with their running costs. What they are looking for is a deal on capital investment, and that’s where we’re talking about the questions—going back to the start with the Chair—about what is the deal that any UK Government is prepared to make to invest in those capital investment costs. And that’s where I think a deal can be done, because you can decarbonise a significant amount of UK steel production without taking out blast furnace capacity, and I also think there’s a deal to be done around future research and development as well, around the sorts of steel you can produce with electric arc and what you can continue to do to address the impact of blast furnace steel making. Not all of those things have been done in other parts of the world, so, actually, what do you do with the gases that come from production? And I think those things are potential areas to think about a more circular approach in any event, so I’m interested in how we get to that point of view. And if you can generate gas and hydrogen production, then, actually, you can significantly decarbonise the whole of the south Wales industrial corridor, all the way down from Pembrokeshire—and there are Pembrokeshire representatives in the room—all the way across through south Wales. And it would actually be good for south-west England as well, so I think there’s a real case for investment in that infrastructure piece, again by the UK Government, and what that could do to significantly advance the decarbonisation of industry here in the south of Wales, and that would then not come at an extraordinary cost in the transition. And I think that is a long-term investment that I would like to see made, because it would be good news for Tata, but good news right across our industrial base right across South Wales.
Thank you, Minister, and thank you, Chair.
Thank you, Vikki. I’ll now bring in Buffy Williams. Buffy.
Thank you, Chair, and thank you, Minister, for joining us this morning. I have some questions around the workforce and local community. Have you made any estimate of what level of additional Welsh Government funding might be required to support workers through initiatives such as ReAct+ and Communities for Work Plus if the proposed job losses happen?
It really does depend on the pace of the job losses as well as the scale of them. So, redundancies of this nature will leave a very long tail economically within the communities—I was rehearsing earlier. There is alternative work. There are alternative investments that are taking place. I’m very keen that we deliver investment in the Global Centre of Rail Excellence. Our challenge will be how quickly does that come to fruition and how many jobs does that deliver; the same thing with the work that going on in both the capital region growth deal and, indeed, the Swansea growth deal. They both have projects that are in delivery, but I don’t think we’re going to see an extra nearly 2,500 jobs created within the next 18 months, and that’s the challenge. There are vacancies in the economy—particularly the manufacturing sector is looking for people, and a range of others as well. A number of the people in the steelworks actually have not just engineering, but they also have skills that could transfer to some parts of the digital economy.
As I said, it’s the pace and the scale that’s the challenge. So, bearing that in mind, if all of this were to happen, then I think for ReAct+, for example, we’d probably need to treble the programme. Now, actually, that’s probably an extra £6 million in terms of the budget ask, so if that were to happen, if I were still in my current role, or indeed in an alternative, I would think that we could within the Welsh Government find the money to do that, if that’s the level of job loss that takes place. And that’s why I think it’s a fairly sterile debate around the transition board moneys than what we have, because, actually, if job losses on this scale happen, then of course Welsh Government resources will be deployed. Our starting point, though, is how can we avoid job losses on this scale and how can we actually deliver a transition that takes people with us rather than up-ends people's lives and livelihoods and then try to fix the damage that's caused in the decade and more to come? And I am sensitive about the fact that there are people in this room who represent communities that have seen what has happened with previous industrial dislocation without a plan for the future. And that's what I'm very keen that we don't do here.
Thank you. Professor David Worsley from Swansea University suggests that there are
'at least three additional jobs reliant on every one direct job in the steelworks, and, on some counts, potentially up to five.'
How are you factoring contractors and workers in the wider local economy who may be affected into your plans, and those of the transition board?
So, I've said on several occasions that I think the real economic impact would be north of 10,000 jobs, if these proposals go ahead. Having 10,000 jobs essentially lost or reduced in 18 months is a really significant impact. That's why I think that the £100 million for the transition board can't be seen in itself as the answer. I think it's both wrong in terms of the public messaging to say that £100 million is going to be adequate to deal with everything that comes, but I also think that, in all good conscience, you're setting up the transition board to fail if you say that £100 million can resolve all these things. So, whichever side you come at it from politically, practically, I don't think it's a credible answer to say that £100 million will resolve all that, if those jobs are lost in 18 months.
In the last transition board, and also previously in our own estimation and thinking about wider impact, we have thought about contractors and the wider economy. So, I've made suggestions that have been taken on board about the direct engagement with the Swansea bay deal—to look at what they're already doing, what's in delivery and to understand realistically what's in the job market.
We've agreed on a number of people to help with the work of the transition board and its sub-groups. So, it's also been useful in balancing up the gender mix around the table. So, we've got Kate Bennett, who was formerly at Airbus—she's now at High Value Manufacturing Catapult, and manufacturing is a big part of the economy in south Wales. We've also got Anne Jessopp, who is a chief executive at the Royal Mint, so she brings the ability of a business that is itself transforming, and, actually, the Royal Mint also uses metals from Tata to make coins. But she is bringing some expertise around what transformation looks like within a workplace and also a range of contractual relationships. I think that's really useful as well. We've got Sarah Williams-Gardener from FinTech Wales, who is not just bringing her perspective from the fintech sector, but also thinking about what could transformation look like in the wider economy, when people, place and skills are in the mix as well.
So, I think that's a really helpful way to have a rounded conversation together with the council. And I should say that the council's chief executive has been really helpful about connecting different people around to those opportunities, both locally within Neath Port Talbot, but also as part of the Swansea bay deal. At the last meeting I suggested, and the board took on and agreed, that we should also invite someone from the two neighbouring local authorities who would have the biggest direct impact. So, there's an approach that's being made to the senior officers in Swansea Council and Bridgend County Borough Council. My suggestion was to ask if the economic development director, or that equivalent post, would be engaged in either of the sub-groups, because that's both about the two local authorities with the biggest impact—people who travel into work as well as contractors and others—but also, the thing that I think is then convenient is, in a deliberate way, that they're both part of the growth deals that are around this—the capital region and, indeed, the Swansea bay region—to make sure that the links are still there, to look at what those different opportunities look like.
The danger would be, I think, that if you have someone who is only from the deal—and I say 'only'—those people are already busy with what they're doing, there isn't the same direct impact, and, actually, I think that you could potentially overload what they're doing, whereas, actually, the economic development directors in Bridgend and Swansea are going to be looking on anxiously in any event in terms of what this means for them and their own local economies, and they're directly connected into the deal. So, I think my view was that that is the best way to connect to those individual authorities, with their own powers and responsibilities, and the wider perspective, with their colleagues within the region as well. And that's—.
You know, it does show that we're being practical and pragmatic in our relationships with the transition board. You know, I'm not going in there saying, 'This is dreadful and I hate David Davies, so let's not even have a discussion.' You've actually got to be prepared to sit down and work through what you practically can do with all the different people in the room, knowing you come in with a range of disagreements—you've got to try and find a way to make things work, and it's why I'm trying to think about what I say and do in that board and how all those devolved interactions around it—. For example, mental health, the health service—I've regularly talked about that. So, there is proactive work that's being done. That's a consequence of potential job loss, but I'm also interested in opportunities to think about what you can do around the wider economy itself as well. So, it's not a counsel of despair, but it is a practical, pragmatic exercise on how you bring people together to try to make sure you have the best possible outcome from the proposals themselves.
Thank you for that answer, Minister. You told the Welsh Affairs Committee last week that there is a possibility of using the gas connection to the disused Baglan bay power station as a connection for a directly reduced iron plant. Have you spoken to Tata about this yet? And if so, how are discussions progressing?
There's been a direct discussion—I raised it with them on Thursday, when the First Minister and I met with them, pointing out that Baglan has a gas connection and they would need to look at the amount of gas that could be generated, what that might mean and the ability to produce DRI in the future. Now, that is a way of producing a different mix of steel. A DRI plant could be useful, but in terms of jobs, we're talking about a few hundred jobs—you're not talking about 2,000 jobs from a DRI plant, but it would be a way of doing something about the steel mix and what can be provided. So, they have said they will look at that as options; their first port of call is going to be the current proposals they have. But I think it goes back to what would a future UK Government of any shade be looking to be investing in. And I think DRI is likely to be part of the future; it's really about how much of the future it's going to be. And, indeed, then, you have a question about capital investment, you have a question about what you're going to do with procurement—so, where DRI production actually goes—and also, then, about the certainty in that investment and the footprint on the current site as well.
Thank you, Minister. Thank you, Chair.
No problem.
Thank you, Buffy. I'll now bring in Luke Fletcher. Luke.
Diolch, Cadeirydd. If I can focus a bit more on the transition board in my line of questioning? You've made it very clear that £100 million on the table isn't enough, and then, of course, you've had—well, yesterday in the debate—Tom Giffard saying the Welsh Government haven't contributed any money towards that. You've just said in response, then, to Buffy that, of course, if there were job losses, Welsh Government resources would be deployed. So, what exactly do you mean by that?
So, we've got our employability programmes—the support we roll out through ReAct+, through Communities for Work Plus—but it's also about what we do with apprentices. Now, I would expect Tata to honour the commitments they've made to apprentices, but we may have to do something if they weren't prepared to do that—what would we do to try to make sure that they can still fulfil their apprenticeships? It's also about what we're doing in broader economic development as well. So, you know, in all of that, there is real resource that would be deployed from budgets, as we have done with every significant unemployment event that has taken place.
So, we're talking—?
And in that, we've worked constructively with Jobcentre Plus, who gave a presentation to the transition board as well about the likely jobs market in the area.
So, we're talking, essentially, indirect resource or cash, if you want to term it that way, towards that transition board, rather than a direct cash flow into the transition board?
I think the mistake that is made in running this argument is that it's as if the transition board is the only intervention, whereas, actually, the transition board has to work alongside all those other interventions—
And that, of course, is the point I'm trying to get out here.
Yes. And so the transition board is one thing, and the transition board isn't going to run in and sort of take control of all interventions and say, 'We are now in charge of everything.' That wouldn't work. It couldn't work either. There isn't the capacity in the board to do that. So, it's got to be seen as: how do you most usefully deploy the resource that is available to that board, the understanding of what's going on in the local jobs market, the opportunities to improve around that? And that means, even just on that level, you've got to take account of what is taking place around, where, of course, the Welsh Government and local authorities are significant players in creating and trying to generate a better economic environment for the future. And, to be fair, the UK Government part fund the growth deals. The free ports come from a UK Government initiative that we have had to work with pragmatically to get to a position where we can work alongside it. The commitments around fair work and others we have rehearsed in this committee before. So, there are interventions that are already being made, and I want to see whatever takes place in the transition board work alongside those, rather than be seen as something that is the only intervention that could take place and everything must be seen through the prism of what takes place there. I think that would be a mistake and, as I say, I think it would set up the board to fail in a way that I don't think would help anyone who was involved around it or in it.
So, everything working in tandem is the message here. I take it, then, that you've made the case, of course, to the UK Government that more funding is required.
Yes. We've been clear that we don't think that the current sum on the table is enough, if the job proposals go ahead with the redundancy that's talked about. Our primary ask, though, is to look again at the proposals and the level of investment and the value that could be generated with different capital investment from the UK Government.
Thinking about the possibility that job losses could happen, because it's important that we do prep for the worst case scenario, what would be your key priorities, then, for the transition board in terms of reskilling the workforce?
We need to understand the current skills and how those current skills actually match up to economic opportunities. Some work is being done. Neath Port Talbot are leading on a commission to look at a local economic action plan that will try to identify, within that, what has already taken place and potential growth sectors within the area. That will help all of us to understand the likely future mix. The difficulty is that whilst manufacturing businesses are regularly saying they have vacancies and want people to come in, and manufacturing is a good career, normally unionised, normally significantly above average wages—the same thing with construction; construction is above average earnings within the sector—the challenge is that for lots of steelworkers those wages will still be a step down.
The point I made earlier about the responsibilities and liabilities is real. But without that more intensive look at the local economy and the skills mix, you can't then say, 'Here is a plan for future skills.' You've also got to understand the skills of the actual workforce in more detail as well. And you still come back to what's going on in the consultation as well. I think it is worth reminding ourselves that Tata said directly to me and the First Minister, and to the trade union side, that the consultation period has a minimum, but that will not be the end point and that they will continue to consider and discuss any credible proposals that come to them. They want to work that through. They want to assure all partners that the conversation will be meaningful, so we may end up with a different set of proposals and a different skills mix retained in the business, as well as what might happen if there are any job losses.
In terms of mapping out where those skills gaps are, is that work happening? And what I mean by that is actually looking at where we have those gaps and how we then might be able to fill them, in partnership, perhaps, with the FE colleges. We launched the cross-party group on apprenticeships last night, and one thing that came through quite clear again is that when we talk about those skills gaps and the economy and green skills and high tech skills, FE colleges and other providers are still unclear as to what we mean by that. So, I'm just trying to understand if that work is being done in preparation for being able to fill those gaps if it's needed.
We're doing that work anyway, regardless of the situation in Tata. That's what we're doing in our net-zero skills approach. We're trying to get a clear idea on the skills that will be required, what businesses are telling us they require now, what we might require in the future, and how that then links into what providers deliver. FE colleges are obviously a significant part of that provision. We also do have FE colleges involved around the sub-groups on the board as well. Again, that was a point that I made, that we needed to directly engage colleges, to try and understand what they're already doing, where they see opportunities with their own engagement with the private sector. There may be opportunities for people who work in Tata and want to go into FE to help train the next generation as well, because there will be skills that those people have. I think the danger is to try and come in and say, 'There is already a plan that is finite and it's set out.' That can't be right, because we don't know yet what the end proposals are going to be, or the time frame for them, but it is both making the case for a different future and at the same time preparing for what might happen. It's uncomfortable. That is what some of the work is doing already, and it's driven by the urgency of the situation, as well as the work we've already been doing across the Government.
Thinking down the line, then—and I'll end after this one, Chair—there's the talk around what happens in Tata's downstream sites, Llanwern being one of them—you've mentioned it yourself this morning. Do you see a role for that transition board, with its current funding, potentially looking at Llanwern, and do you think that that's feasible?
The current remit is only set around Port Talbot. It isn't set up to deal with downstream business impacts. So, if it's going to expand its remit to other sites, then it's got to think about whether it has the capacity to do that in terms of people, whether it's the right construct to do that in any event, and resource as well. Llanwern, Trostre and Shotton are all downstream businesses. If you maintain the supply to Shotton and Trostre, they're profitable entities, well regarded, and people are positive about the quality of the product as well. And, as I said earlier, the steelworkers are really proud of the product they deliver as well.
We heard yesterday about the auto industry and the metals that are produced at Llanwern at present. That's part of the consultation when we talk about the fight for the future, because a lot of people say, 'Actually, there's an order book here, how does that get fulfilled if these jobs go? Where does that work go? Does it get fulfilled somewhere else, and what does that mean from a Wales and UK point of view about where the work is delivered, or are we content that that would be delivered in another part of Europe or the wider world?' I think that would be the wrong choice, but there are consequences of wanting to invest in the future to make sure that those workers are still delivering the excellent products that they currently do today. I don't think just expanding the remit, and not doing anything about the resource level, would be the right answer. I think you've got to look again at who the actors and players are in and around Newport. So, I'm not sure that a transition board is the right approach; I'd rather focus on trying to avoid 300 job losses in the next two to three years around Llanwern.
Diolch yn fawr.
Diolch, Luke. I'll now bring in Sam Kurtz.
Diolch, Cadeirydd. Minister, just going back to a previous answer you gave to Hefin David around opportunities in the Celtic sea, which you know that I'm an advocate for, is the steel currently made by Tata at any of its footprint in Wales relevant and suitable steel for the creation of floating offshore wind?
In a previous conversation, Tata have said that they think they make about 40 per cent of the materials that could go into floating offshore wind currently in Port Talbot. The challenge then is where is that, how much of it do they make, and how does it match the opportunity. Of course, at the moment, they make primary steel as well, so the challenge is investment in the future. And Tata themselves have talked about whether there's enough need for plate steel for them to invest in a plate steel mill, and where and how they'd do it, and to think about whether that investment would deliver a return for them. And then, there's a Wales and UK point of view about is that something where we would want to say, 'We want you to do it, so we'll have a conversation with you about the capital investment required to do that.' But that also still goes back into what is going to be the metal mix that is required to deliver those floating offshore platforms, and then you're getting back into the conversations that matter around—
But not just the platforms, the actual turbines themselves.
Absolutely. The turbines are often made of composite materials, so they're not 100 per cent steel, but the columns and the platforms are. So, you're going to need to make those somewhere, and, as I've said on more than one occasion, workers in Rotterdam have delivered and floated a platform from there off the coast of Scotland. So, it isn't an idle risk that another part of the world could do this and generate lots of the economic benefit that I think everyone in this room and beyond wants to see generated in Wales. That's why understanding the investment profile that's required around ports, to make sure they're ready, is really important, why understanding decision-making certainty for permitting is really important, and understanding where the steel mix is to create those platforms, and, then, to see how do we make sure that manufacturers are looking to deliver that, ideally in Wales. I totally see why a UK Government would be interested not just in Wales but in other parts of the UK, but, actually, we need to make sure that we don't buy ourselves into a future where the greater part of that value is delivered somewhere else. And why would we? Why would any government sign up to a future like that?
Let's fast-forward 18 months or so. You may be or may not be in a new role, there may or may not be a Labour Government in Westminster, no further funding has come forward for a proposal with Tata to secure the jobs and we, inevitably, see what is the current proposal take effect. What would be your key priorities for the wider economic development of Port Talbot, that region, and the downstream locations to ensure that job losses are minimised or moved across and that there is succession so that people have employment to go towards? What are your main priorities, should this worst-case scenario, as Luke put it, come to effect?
There are three hypotheticals in there, at least. If both blast furnaces close before the end of the calendar year, before a general election, then we will see significant job loss within 18 months, and my priority would be how do we support people in this 18 months ahead of us, how do we look to do as much as we can to think about reskilling people and what the industrial opportunities are. That's actually a really big piece of work, because you've got to think about the contractors, the wider supply chain, and there are lots of businesses bound up in this. You're going to need to be able to gather those people together, together with businesses that are looking to employ people, together with what will be an extra urgency for the growth deals that are rolling themselves into their corporate joint committees. So you're going to have local authorities partnering together to think about what can we do, together with the Welsh Government, and I hope a constructive approach from whoever the UK Government is to work with us on what the future of that economy looks like.
If you go back to previous iron, steel and coal communities where those jobs have been lost, the biggest challenge has been the pace of change without there being a plan in place. And, actually, 18 months isn't a great time to have a plan in place. It's not the sort of length of transition you'd want. To be fair, the Chair made a very thoughtful contribution yesterday, I thought, in the debate about the fact that the length of transition is actually really, really important. So, what I don't want to do is to get tied in to—and I understand why you ask the question—just accepting this is going to happen. But it is about the scale of it, what you can do to invest together in skills, what you can do to try to advance areas of potential growth in the economy, how quickly can those come onboard, and then at what wage level. So, the big priorities are skills and jobs, and trying to give a sense of hope for the future.
So, would you concur with me—not to paraphrase you—that you are planning for the worst, but hoping for the best?
We're planning for the worst, but also arguing and fighting for the best deal for steel. I think it's more than hope.
Moving on to the Port Talbot Waterfront enterprise zone, I'm just wondering if you've done any work or are planning to undertake any work around incentivising employers to relocate or expand in the waterfront enterprise zone in Port Talbot.
The biggest intervention we're still working through is what's taking place with the free port, with the range of tax incentives that are going to be available there as well. So, it is about the successful delivery of that. I think trying to run almost a competing programme is not helpful. I talked earlier about wanting the transition board to be coherent with other things that we're doing, so it is about work alongside the current enterprise board, work alongside the free port proposal, work alongside the growth deal, to try to make sure that we understand where opportunities are. In normal economic development, we put potential additional resources to try to make the investment make sense for the Welsh Government, for potential workers, and indeed for the business as well. So, it's not unusual for us to add something to an economic development project. It depends on what the proposal is, what the value of it is, and the guarantees that we regularly look for in terms of jobs created and jobs retained, which is going back to the Chair’s opening questions. What we don't see in the current £500 million proposal is where are the jobs, either created or retained, and where are the guarantees about the lifetime for those jobs. Because that is a standard part of what we look for for any economic development assistance that companies come to us for.
In terms of the Port Talbot Waterfront enterprise zone, though, is any preparatory work going on there now, or is it reliant on what happens with the Celtic free port?
No. So, we've actually had correspondence from the chair of the enterprise zone this week, and so there is a conversation that is continuing with my officials about what they are looking to do and how that is part of the coherent whole. That's my point: it's not an individual intervention in itself; it is, what are they doing and what's a coherent whole picture. So, that is—. As I said, I had correspondence from the chair of the board, I think last week, and so there are active conversations going on with my officials about what the current picture looks like as well as what the future could look like. If we get this right in Port Talbot, I think there is real opportunity across south-west Wales.
Okay. Thank you. Thank you, Chair.
Diolch, Sam. I'm afraid time has beaten us, Minister, so our session has come to an end. Thank you to you and your officials for being with us this morning. Your evidence will be very important for us as a committee in scrutinising this matter, going forward. As usual, a copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know, but once again, thank you very much.
Thank you. Diolch yn fawr.
We'll now take a short break to prepare for the next session.
Gohiriwyd y cyfarfod rhwng 10:31 a 10:38.
The meeting adjourned between 10:31 and 10:38.
Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr i eitem 4, sef sesiwn gyda Tata Steel. Dyma'r ail o'r sesiynau heddiw yn trafod dyfodol dur yng Nghymru. Mae'n gyfle i drafod y cyhoeddiadau diweddar gan Tata Steel gyda chynrychiolwyr y cwmni, nawr bod y broses ymgynghori ffurfiol gyda'r gweithwyr dur wedi dechrau. Gaf i groesawu'r tystion i'r sesiwn yma? Cyn ein bod ni'n symud yn syth i gwestiynau, gaf i ofyn iddyn nhw i gyflwyno eu hunain i'r record?
Welcome back to this meeting of the Economy, Trade and Rural Affairs Committee. We will move immediately to item 4, which is a session with Tata Steel. This is the second of today's sessions considering the future of steel in Wales. It's an opportunity to discuss recent announcements by Tata Steel with representatives of the company, now that the formal consultation process with steelworkers has begun. May I welcome our witnesses to this session? Before we move to questions, can I ask you to introduce yourselves for the record?
Thank you. Thank you, Chair, and Members. Good morning to all of you. I'm Rajesh Nair. I'm the chief executive officer for Tata Steel UK. I have been with the company for 35 years, and more—and a bit—mainly in Jamshedpur and in India, and I moved into the UK in November 2021.
Thank you.
Thank you and good morning. My name is Chris Jaques. I'm the chief human resources officer for Tata Steel UK.
Thank you for those introductions. Perhaps I can just kick off this session with a few questions. First of all, is your decision to close the two blast furnaces and build an electric arc furnace purely a financial one?
Thank you for that question, Chair, and thank you for giving us the opportunity to share our views and thoughts on the transformation. So, it's not exactly completely financial, while the financial is playing a very important part in our decision and in our proposals that we have made. I will, if you bear with me, lay out two or three principles that have led us to make these proposals as part of the transformation.
The first one is the state and the stage of the assets that we currently have, particularly in Port Talbot. We are towards the end of life of most of the assets that we have in Port Talbot, particularly in the heavy end, which are the blast furnaces and the steel-making shops. And as you all would know, as we get to the end of the life cycle of the assets, the predictability of these assets is compromised. Despite all the efforts of our people, their motivation and their passion, and the money that we are putting into it, the reliability of the assets is compromised. So, it also then compromises our commitment to our workforce to ensure safe and reliable operations, and also compromises our ability, or our commitment to our customers to ensure reliable, timely, quality deliveries. That's the first point, and so that's the criticality.
The second one is the financial. Over the past few years, the business has been losing a tremendous amount of money, and you've heard about the numbers. We heard about the last quarter announcement where, just for the last quarter, the business turned a loss of about £160 million, and for the first nine months of this financial year, it's about £330 million. If nothing else were to go wrong and if everything else were to be in the same state of affairs, which it is not and we know it will not be, we are likely to turn up with a loss of nearly £500 million. That's £0.5 billion of loss in just one year. And this is just not sustainable nor viable for any company to handle.
The third important point is that we talked about the two blast furnaces in operation, and you will all probably be aware of our proposal, which was to shut down the blast furnaces and the steel shop. The multi-union proposals, the fundamental element in their proposal was running at least one blast furnace. While they accept that one of the blast furnaces and the coke ovens need to be shut down because of the impact they have on the business and the nature of the asset, it was essentially running one blast furnace all the way to the transition. But I just want to clarify here that our proposal involves building the electric arc furnace, which is the main part of our proposal, inside an operating steel shop, and that has been done to optimise and to make sure that the proposals work in a manner in which we utilise our assets most efficiently.
So, getting to run the steel shop is the most critical part. If you run the steel shop, we will not be able to build the electric arc furnace. At the outset, even if you were to take that on board of running the steel shop until the transition, we will have to go back to the layout that we have designed, and today the layout has been optimised for efficiencies, to reduce complexity and to improve the cost position of the company. Going back to the layout significantly compromises our ability into the future to have a steel facility that is designed on the principles of efficiency, reducing complexity and cost. So, we basically compromise the future by even considering the option of trying to build a new steel facility inside an existing steel shop.
The other part is—. And going further, even if you were to compromise the layouts, we will come very shortly to a time when we would just not be able to build the new asset in a steel shop that is operating, where—. You know how a steel shop operates: nearly 300 to 320 tonnes of hot metal and liquid steel are moving around in the shop. We are looking to build a huge EAF steel facility inside that bay, which is then fraught with a tremendous amount of safety risks, operational risks and costs.
So, essentially, these are the three fundamental reasons, and even if we were to ignore everything else, the fact that we would have to build in an existing shop—the basic analysis which the unions have also been made privy to—has a further impact of nearly £200 million on the costs from £600 million that is already worse off if you were to run a single blast furnace against shutting it down. And it further delays our projects by nearly 10 months. So, this, in a nutshell, Chair and Members, is the rationale and is the background against which we are looking to consult on these proposals and move forward.
So, the key thing is there is this urgency bit, and we need to move at pace if we want to get this transition done in a manner in which we secure steel making in Port Talbot and steel making in the UK. I hope that clarifies it.
Clearly, from your answers, obviously the financial one is a significant factor—
Yes, it is.
—in your decisions. So, if the UK Government offered you more money, would you be prepared to look at alternative measures?
Chair, with due respect, as I mentioned, this is the urgency and the imperative for us to take action, and as you would probably have heard in the recent discussions that we had, and where our global CEO was also present, he has clearly reiterated that if there is more financial support available, and if there are incentives provided, and if there’s a business case and the markets in the UK support it, we are more than happy to look at investments into the future—additional investments that can help. But, fundamentally, the moot point is the electric arc furnace and the proposals that we have, we believe, are the best proposals for us to move to a place that can ensure sustainable steel making in the UK, which means, at the end of it all, on the other side of the transformation, we will have a viable business, which the UK steel business has not been for the past 15 years. So, the EAF is just the first step, and the most important step to ensuring sustainable, viable steel making in the UK. Everything else will be looked at, and can be looked at, as I said, against incentives available, financial support available, business case, et cetera.
So just to be clear, then, if more money was on the table, you would actually look at alternative measures.
Not alternative measures—additional measures to what we are doing.
What would you mean by 'additional measures'?
It can be anything on the upstream. We have often, in the last few weeks, spoken about things like direct reduced iron, which provides solid iron as an input to the EAF. That is potentially an option. And anything else that helps us to improve the product mix or pivot ourselves against a new product, and so on, downstream we can look at, if it makes a business case and if there's financial support available.
And in terms of the current deal, are there any specific conditions attached to this deal? Did the UK Government attempt to attach conditions to the deal during the course of your negotiations with them?
Chair, the current grant funding agreement is still in the process of being negotiated and signed off, so I might not be able to give you all the details because of the sensitivity involved around that funding. But suffice it to say that the £500 million, which we all know about, which the Government has committed, is essentially for building the EAF, and to make sure that we deliver on the goals of carbon dioxide reduction. I mean, that's fundamentally the principle. The only other point, which has been made very clear to us, is the Government will not support any loss funding. All the loss funding that we have to do—and we know the company is going to continue to be in a state of loss for the next few years, as we have seen—all that loss funding is onto the account of the company, in addition to the £750 million that we are bringing as part of the investment in the EAF, which, added to the £500 million coming from the Government, is a £1.25 billion transformation package.
So, is it your understanding that the grant of £500 million would actually be paid after you've built the electric arc furnace?
What I believe and what is generally agreed, which, again, is part of the negotiation, is it will be milestone based. As we progress with the building of the EAF, those milestones are being discussed. As we progress with those, we would expect that there will be some milestone payments to help with the cash flows of the company as we go along.
Okay, thank you. Before I bring in Vikki Howells, I know that Hefin David would like to come in. Hefin.
Yes, I think the alarm that we would feel as a committee is the categorical way in which you've stated the running down of the second blast furnace in the second half of this year, given the fact that we are in the UK at the moment in a state of political flux, a state of political change. There's going to be a general election this year, and a new, incoming Government may offer a significantly different package and a different offer that may chime with at least some of the Syndex proposals. If you go ahead and close that second blast furnace and wind down the second blast furnace in September, whatever that incoming Government does or offers, it will be incredibly difficult then to enact anything that is positive for those steelworkers. That is the concern we've got, and any decision you take this year will be in that context. Is there any way that you would consider, therefore, delaying decisions on the second blast furnace post the political flux that we have going on in the UK at this moment, perhaps into 2025?
Can I come in, Mr Davies?
Yes, please.
So, Mr David, I completely appreciate your point of view and we understand where you're coming from. But, as I just now articulated, there are multiple imperatives that we are working with. Based on the three points that I just now mentioned to you about the state of the assets, the worsening financial condition of the business—as I said, £500 million this year is a huge amount of money—the imperative for us to get going with the EAF—. I also made the case of how the EAF is, in our judgment and in our assessment, the best possible first step to ensure steel making in the UK. Given all this, it is important that we progress with the proposals we have made. Of course, after the due consultations and making sure that the fallout from it in terms of the difficulties to the people who are likely to be made redundant, we've said that we will deal with it in a responsible manner.
As I mentioned to you, the single most important criticality is, if we consider all this, we have come to understand now, after a detailed analysis of the proposals that the union has given us, that we will not be in a position to build the EAF in an existing operating steel shop. So, that becomes the imperative, Mr David, and, by default, if you don't have a steel shop that is operating, there is no way the blast furnaces can be kept going.
So, that goes beyond the financial package that the Chair was asking you about. Is there any financial package that would enable you to produce an alternative plan on site, rather than downstream or upstream? Is there any financial package that will enable you to develop this on site, whilst keeping the second blast furnace open for a period of time?
To be clear on this, as I said, no government would be willing to fund losses. So, anything that we do in running the blast furnaces—as I said, it's £500 million this year; it's likely to be more next year, if the markets are where they are—we're looking at a state of affairs where the ticket on managing the business in the existing set-up is going to be a huge burden on the company and on the shareholders. And I don't think any government, Mr David, with due respect, would be willing to fund losses. I'm sure they would be willing to spend money on a transformation that is built for the future—let's say, taking care of sustainability, carbon, et cetera—and that's going to be the problem. We are more than happy to work with the Government to find new avenues of investment that can help the future, but funding losses, I don't think any government is willing to put the money. And that becomes the crux of the problem here.
Have you had conversations with the leader of the opposition, Keir Starmer?
Yes, Mr David. I and Mr Narendran, the chief operating officer [Correction: 'chief executive officer and managing director'] of the company, have had more than a couple of conversations with Mr Starmer, including the day before we made the announcement of the restructuring on 19 November [Correction: 'January'].
Thank you, Chair.
Thank you, Hefin. I'll now bring in Vikki Howells. Vikki.
Thank you, Chair, and good morning to our witnesses. I'll start with the fact that Tata recently announced a statutory consultation with trade unions on 2,423 redundancies. Could you confirm, please, how many redundancies are proposed at each of your UK sites, and set out how you decided on the balance of proposed redundancies between those different sites?
Before I ask my colleague Chris to come in, Ms Howells, as we have made in an announcement, this is not just about Port Talbot. We have announced a larger restructuring in the UK business to make ourselves fit for the future. So, while a major portion of it is because of Port Talbot, where we are going to wind down and retire some of the assets and build new, it is also looking at other sites to make sure that we can manage our costs and we can make ourselves viable and sustainable for the future. Broadly, that's been the approach, and may I then request that Chris gives us more details on the numbers? Chris.
Thank you. Yes, so, as Rajesh has mentioned and outlined, the proposal, whilst primarily focused and heavily focused around Port Talbot, is actually a proposal to restructure the whole of the UK business and, therefore, there are a number of sites. All of the sites—. If I were to list them out, I would actually be providing you with numbers in this meeting for about 15 or 16 different locations, but I'm happy to share a breakdown of that with the committee, if that's a better way forward.
Yes, that'd be helpful.
The largest impact is, clearly, anticipated to be in Port Talbot, where it's proposed that there would be over 1,900 role reductions in the Port Talbot area. That would not only impact the operations and engineering aspects of the business, but there would be an impact across the functional support areas of the business as well.
Thank you. Could I ask, then, in developing your proposals, how did you seek to minimise potential job losses?
I think, as has been well publicised, there have been discussions taking place with the multi-union trade unions for several months. Prior to those discussions, there were a number of comprehensive options that were evaluated by the company, and then, in the discussions with the trade unions, we've also looked at their proposal that they had developed in conjunction with Syndex. Indeed, as a direct consequence of those discussions, we decided that we would continue the operation of the hot strip mill, which secured a further 200 positions in Port Talbot.
We will, through the statutory consultation process, of course, continue to engage fully, look at all options for both supporting employees and looking at the scope of the proposed changes, and we'll progress that as well as the detail of the support that we'll be able to offer as part of the £130 million that the company has proposed as support arrangements for training, severance support and reskilling, and we'll pick that up as part of the consultation exercise. Some more details on that will come forward as we progress through that process.
Thank you. Given your answer there, would you be able to indicate to us for how long you propose to consult with the unions on redundancies and whether you intend to run a voluntary redundancy scheme ahead of making any compulsory redundancies? Any indication that you can give of intended timescales there would also be appreciated.
Okay. The consultation that we are progressing, and commenced last Friday, will be for a minimum of 45 days—I emphasise the 'minimum'—and we expect that that process will take longer in order for us to be able to discuss all of the complexities and the matters that arise. Yes, as part of this process, we will run a voluntary redundancy aspiration exercise. Indeed, we want to ensure that we endeavour to maximise the number of voluntary redundancies through this process, and that will be another aspect that we will discuss as part of the consultation exercise, as well as the proposed timing and phasing of any changes.
Thank you. As well as jobs being at risk of redundancy at your plants, the BBC is reporting that there are 22 jobs at risk at Swansea University. Could you explain to us why these jobs are at risk and what impact this will have on your research and development operations in Wales?
Ms Howells, as part of our engagement with research and academia, we are continuing to work with local universities, especially Swansea University. We have had discussions with them for them to help understand the new pathways we are looking to create and also the technological and research pathways that we will need to pivot to, given that the fundamental blast furnace basic oxygen steel-making technology would be replaced by EAF technology. So, we are, at this moment, in discussions with them to review the research areas and the areas of focus that we need to get into, starting soon, as we get down to our pathways. For example, some of the points that we've discussed are how do we work with the universities to start focusing on producing the right kinds of steel in the EAF furnace. In our proposal, as you would have seen, we retain all the downstream, starting from the casters, the hot strip mill and downstream, which means that we retain that knowledge and that capability, which means our learning curves can be significantly better than anybody who is going to put in an EAF with all downstream. So, we've discussed that we need to bring the focus here on the steel making.
There are other areas. We also have said that this will leverage the opportunity of value-adding the huge amounts of scrap that are available in the country—nearly 10 million tonnes, of which 8 million is exported. That's a great opportunity for us. So, there's a lot of work that we envisage in processing and upgrading the scrap value chain for it to be efficiently and effectively used. And then there is product development. We know that the UK is pivoting to green energy, particularly in things like floating offshore wind and offshore. So, we picked up discussions with them on how we can help the companies who are involved in this in terms of steel making and the right products.
So, these are some of the areas we have started to discuss with them. In terms of the numbers, I think it's a little premature to look at those numbers. In all likelihood, we would like to build an ecosystem that helps the local universities. Besides, you will have heard how we are bringing in other research companies also into this fold, to foster innovation and research in the new space that we are wanting to pivot to.
Thank you for your answer. Shall I move on, Chair?
Yes. Absolutely.
If I can move on to the issue of contractors, then, how do you anticipate the employment of contractors will be impacted by your proposals? And do you know how many contractors are likely to be affected? Did you consider the wider impacts on the community when developing your proposals?
I will want to request Chris to come in, after I give you a sense of—. So, this is also something that we have very, very carefully looked at as part of our proposals, and the impact that it has on not just our people, but also on our contractor partners and the wider community. We are in the process of assessing the impact. We are in the process of discussing with the potential supply and contractor partners who might be affected, but all this is in the context and the background of an ongoing consultation of our proposals with the unions. We are in the process of assessing the impact that it will have on contractors and what kind of contracts will go off, what new contracts, for example, will come up.
We are also working with our engineering teams to assess how the engineering and the construction activity will transform the landscape of labour and skills, albeit in the short term, in the next four years, as we start to build. We're looking to invest £1.25 billion, most of it in Port Talbot. While some of the money will go to the original equipment manufacturers, a large part of the money is going to be into the Port Talbot ecosystem in terms of construction, which is the demand for engineers, the demand for craftsmen.
So, all this is being currently evaluated and this is also at the top of our minds. We've also had conversations with the unions on this and we have kind of agreed that we will facilitate, and the union members also sit in these contractor partner companies. We also said that we will facilitate the right level of conversations and engagement so that they are also taken care of in a considerate and respectful manner. So, this is where we are on contractors. Again, we are in the process of assessment, we are in the process of understanding the size et cetera, but we are committed to making sure that the right amount of facilitation and discussions happen with the right set of people to make sure that they are also taken care of appropriately. Chris, I don't know if you want to add anything further.
Yes. If I could just add, Ms Howells, to Rajesh's answer. We do recognise, fully, that this is a very difficult time for many, many people associated with the business, whether it be employees who are employed directly, whether it be contractors who support the business, or whether it be the local communities in which we're based. And to add to the points that Rajesh has made, there is the transition board that has been established with a fund of £100 million, £20 million from the company and £80 million from the Government, and a key part of the scope of that piece of work is to ensure appropriate support in the short term, but also looking at regeneration options in the long term. Therefore, we would want to ensure, as part of the discussions through the transition board, that the contractor grouping is a particular focus of support and focus for that particular activity.
Thank you very much and, if I could ask my final question to Mr Nair now, in your evidence to the Welsh Affairs Committee, you highlighted the potential for local workers to be employed in constructing the new electric arc furnace in Port Talbot, in roles such as welding and fabricating. Based on your experience with other projects, how many jobs do you think this might create and how well paid might they be compared with the jobs that are likely to be lost at the steelworks?
Ms Howells, to be honest, we have not undertaken any project of the size and magnitude that we are looking to undertake in Port Talbot. So, if I were to just step back, the entire £1.25 billion of investment has a number of parts in it. It's not just the EAF, which is the substantial part of the £1.25 billion. There are other areas where we are looking to invest. For example, we are looking to upgrade our casters, which is a significant amount of work and money. We're looking to invest in the hot strip mill to upgrade some of the critical pieces of the equipment to make it fit for the future. We're looking to build a new pickle line, which is, again, a huge project.
One of the things, however, we have taken on board is to make sure that, as we plan our construction and our engineering activity, a key focus area with all our OEM partners and our engineering partners—some of them would be from outside of UK—is to make sure that we have it in our terms and in our agreements and in our discussions with them to make sure that we take care of the skills and the people that we have here, especially the people who are likely to be affected by redundancies as part of the proposals. It'll be our endeavour to make sure that they are given the best choice in terms of working with these projects, and there'll be substantial volumes of work.
In terms of wages and compensation, I'm not sure whether I can provide the answer. I don't know, Chris, if you could help on the comparison of wages.
The full scope of the work is still to be developed, and therefore the full scope of all the roles that will be able to be supporting the building and the commissioning is still to be progressed. So, I would prefer to revert at a future point with some specific information rather than speculate about what the potential salary levels are.
Okay. Thank you, Vikki. Before I bring in Sam Kurtz, I know that Luke Fletcher would like to come in. Very, very quickly—we are, obviously, pressed for time, so if we can be as succinct as possible, that's great.
Yes, I'm looking at the clock and conscious of time, but I did want to come back to a point where you mentioned the hot strip mill. That, of course, came as a revision of the initial proposals that were published. So, does that indicate that there's some flexibility, then, within those proposals that could come out through the consultation or otherwise?
Yes, Mr Fletcher. As we have been always saying, we will engage with the unions in a meaningful way, look at all their proposals, discuss them at length. That's why, as Chris mentioned, we've spent the better part of the last four or five months discussing with the unions and their advisers on the proposals. As part of the proposals, there are different aspects. One is to look at what does it mean in terms of the financials and the future viability of the business. So, the first thing was to make sure that everybody got on to the same page to understand that we really know what it means for those proposals from a financial perspective, because, at the end of the day, our fundamental objective is to create sustainable steel making and to preserve steel making in Port Talbot. But also this is probably the only opportunity where we are trying to make sure that the business in future can be viable. And the reason why we have not been making money is because, structurally, the business is not designed, and this is an opportunity to change all that. So, that’s one part.
The other one is to look at the proposals from the point of view of the best outcomes for the business in terms of what it means for the customers and, more importantly, what it means for our people in terms of the redundancies. And as part of the exercise, we took on board the hot strip mill suggestion, evaluated it and said, ‘Yes, it’s good to have. It reduces some of the risks’, and so we’ve brought it in. And as far as the future stuff, and we talked about a single blast furnace, which we are continuing to deep-dive, this week we continue to have the discussions with the unions and their advisers, which is, basically, Syndex, to reinforce some of the points that I just now made in terms of why the blast furnace—not really the blast furnace, but how the steel making is the biggest bottleneck or the reason why we cannot run—. All this will get discussed with the unions and we will arrive at a conclusion. And we are committed to continuing meaningful discussions. If, as part of those discussions, there are ideas that help us to better the case, for sure, we will include them in our proposal. But discussions are ongoing and we hope to move them at the right pace and in the right manner.
It is welcome that there is some flexibility there. But, listening to the exchange between yourself and Hefin David around what we are facing this year and that political instability, essentially—because we are in a general election year—does that mean then that there are circumstances in which Tata would consider delaying moving forward with proposals before the general election and actually delaying until after the general election when there's a new Government?
I think, Mr Fletcher, as I mentioned to you, the imperative and the urgency of taking action to prevent a situation that is a counterfactual to all that we are talking about, a situation none of us would like ourselves to be in. With the deteriorating financial situation that is arising from the way the assets are performing, from our inability to deliver our promises to the customer—. And just to give you a sense: in the first nine months, we have not kept our promise to deliver nearly 275,000 tonnes of material to our customers. And that is despite the efforts of the entire team, from the front line to the senior managers in the business, and the money that we have put in. That’s the state. So, that’s the imperative: we need to move forward on a transformation that helps us to not just look at a future that is sustainable, but also makes sure that we have a business in the interim. And that is the focus of the entire organisation, and that’s the message and that’s the imperative that we have and the urgency. So, anything that fits within that, we are more than happy to consider. And our effort with the unions and with their advisers is to help them understand this urgency, and all the points that I mentioned, so that we as a group, with all our well-wishers and stakeholders, are able to get to a part that helps us move there. And for a moment, I would like to say that we understand completely how difficult it is going to be. We completely understand that, we completely take on board the difficulties, and we are committed to dealing with this and approaching it in the most responsible and compassionate manner, because there are people who are going to be affected, we know, but this is the imperative.
So, what does that specifically mean, though, for delaying proposals until after a general election, where there's an opportunity to negotiate with a potentially new Government?
I'm not sure, given what I just now said. Delaying the blast furnace, as I said, it’s an additional £600 million, it's additional lost funding—I’m not sure that any Government would support that. Future investment on the back of new investment is probably going to be supported. So, I’m not sure we have a situation where moving this or delaying the wind-down of the heavy-end assets is really an alternative that can be pushed forward, given all the aspects of the business that I just now mentioned: criticality of assets, worsening financial stuff, obviously no support on losses, and then we have to meet our commitments to our customers, because our customers very soon will run away if we don't deliver our promises.
Okay. Thank you, Luke. I'll now bring in Sam Kurtz. Sam.
Thank you very much, and thank you for joining us this morning. I'm going to keep my questions very, very short, and if they're short and succinct answers, that would be helpful, given we're very pressed for time.
I asked the Welsh Government's economy Minister earlier if the current proposal would allow primary steel to be made in Port Talbot. He said 'no'. Is that correct?
Yes. We will change the technology from basic oxygen steel making to electric arc steel making. So, fundamentally, the way the steel will be made will be different. Because the world has been dominated by blast furnace and basic oxygen steel making, the words 'primary steel making', Mr Kurtz, have become a proxy, or synonymous with BOS steel making. But what will happen is, the primary steel making in Port Talbot's case will now be EAF steel making. We also have what is known as 'secondary steel making', which is further refining to get to the right steel properties. We are upgrading the secondary steel making from what we currently have to make sure that, at the end, when we put the steel on the casters, we hope to get very similar kinds of steels to those that we are currently producing.
Okay. That's very helpful. In an answer to Vikki Howells around R&D, you touched on this point, but I just want to explore it a little further. Mr Narendran said to the Welsh Affairs Committee that the technology is evolving around the use of potential electric arc furnaces to make complex flat products, such as those used in cans, cars, produced in Llanwern and Trostre, but more work is needed. So, is the steel produced under electric arc furnace ready to go to your downstream sites, or is further work required—investment or R&D—on that side?
Mr Kurtz, yes, that's exactly what Mr Narendran said, and that's off the back of what we are seeing in this electric arc steel-making space globally. The best example of how electric arc furnace steel making has evolved, progressed and, to some extent, accelerated is if you see what's happening in the United States. Seventy per cent of all steel making, which is about 85 million tonnes of steel, is made in the US. Seventy per cent of that today is electric arc steel making. And they are supplying the same industries that we are talking about—automotive, packaging, engineering, white goods—and it's been a very rapid development. In the UK, it helps us to leapfrog all this and get to a place.
While all this has been happening with the steel makers who have invested in electric arc steel making, the original equipment manufacturers who supply the electric arc furnace and the process control, they have been collaborating very heavily with the steel makers in the US and in other places to upgrade their offer. So, what we are in the process of discussing with the OEMs is to look at the equipment and the processes that we will install, which hopefully will be state of the art, incorporating these developments that have already happened in the electric arc steel-making space. The discussion with the universities has been—so far, the universities have not been engaged in this space—to give them the opportunity to get that head start right away, to start working on these areas, so that by the time we have the EAF, we have some significant amount of knowledge created in this space.
Okay. Helpful. Moving on to scrap metal, obviously you'll be aware that British Steel are proposing similar schemes in Teesside and Scunthorpe. On the reliance on scrap material, do you believe, firstly, that there is enough scrap material to satisfy your site and other sites? Do you expect the price of scrap, then, to increase, which would have an impact on the bottom line and the feasibility of Port Talbot, and if so, is all that factored into the electric arc furnace plans for Port Talbot?
To put it very simply: yes, the impact of scrap, scrap prices, scrap availability has been factored into the modelling to make sure that we have a business. But to come back to the larger point around the scrap, yes, the UK today generates about 10 million tonnes of scrap, of which 8 million is exported with very little value added to it. It just goes to countries like Turkey and other countries and it comes back in the form of rebars and flat steel, back into the UK. So, there is enough and more scrap, albeit, as I said, there has got to be work done to make sure that we improve the supply chain system to make it work for us, because, today, a lot of the scrap business is oriented towards export. We need to make them oriented towards supporting and supplying domestic steel makers, which is also where we would look forward to Government policies, et cetera, to see how we incentivise them to focus on domestic users. And, also, as several other countries who own vital raw materials are doing, how do we disincentivise the export of these raw materials—of these strategic raw materials—from out of your country with very minimum value added? So, these are some of the policies and things like that that we are discussing with the Government, and this is an area of engagement with future Governments that would be more than welcome. And the research will then include stuff like, 'How do we improve processing, et cetera?' which is also one of the conversations that we are having with the universities.
Okay, helpful. Now, the new electric arc furnace is planned to be operating by 2027—
That's correct.
So, there's a commitment, I think, been made by Tata, or you have a commitment from the National Grid in terms of a grid connection within that timescale. Given all other regulatory requirements that will be required, are you confident that all those will align for a start date in 2027?
So, on the grid, we are really pleasantly surprised by the commitments that the National Grid has made to us. After our announcement, they have gone back to the drawing board and come back and said, 'We will make this available to you by the end of 2027', which is more than welcome, and we appreciate that very much. Because that's one thing off the risk register, so to speak.
On the other aspects, yes, we are continuing to work on or we have already had some preliminary discussions with the Welsh Government, with Natural Resources Wales, with Neath Port Talbot council, with respect to planning permissions and stuff like that. We're giving them a heads up on what is expected. And I'm also pleased to say that some of these agencies are looking to beef themselves up in order to be able to help us speed up these planning processes. And, as soon as we get a green signal—. We've done a lot of parallel work in terms of engineering studies, et cetera. Once we get a green signal, we can step on the pedal in terms of moving the project forward.
Okay, excellent. And a final question from me, Chair, if I may.
Just very quickly.
Just at the Welsh Affairs Select Committee last week, Community, the union, said that by investing in a single large electric arc furnace, without either keeping a blast furnace or investing in a direct reduced iron plant, would mean that Tata would be an outlier in Europe. Do you agree with that assessment?
It's not the outlier. As you would have heard, while this is what the Community union said, you would have also heard Mr Narendran speak about the fact that all steel makers in Europe are moving towards electric arc furnaces, because, in the time period we are talking about, between the 2030s and the 2040s, the only way steel companies can get down the emissions, and with technology that is fit for the future, is the EAF. So, every company is investing in it, and the choice of transition pathways will depend on a number of things. As I said, it's the state of the asset. Some of the assets are far younger than what we have. So, they can't just write all of them off. So, these are the markets and the regulatory requirements, the customer requirements, and the segments in which they play. And the demand from those market segments will play a role in the transition pathways that each company adopts.
But suffice to say that all major steel players will have a significant proportion of their steel making in EAF to be able to reach their sustainable carbon goals, because the other alternative technologies are way away from the right technological readiness levels for it to make any significant impact in bringing down the carbon dioxide for the traditional pathways.
That's really helpful, thank you very much.
Thank you, Sam. I'll now bring back Hefin David. Hefin.
Diolch, Cadeirydd. A lot of what's been said today is not what the committee really wanted to hear. And I'd emphasise some of the views expressed by Luke Fletcher and Sam Kurtz about taking decisions too quickly, perhaps, given the situation we're in.
But let's look at the future. Mr Narendran described the agreement with the UK Government as 'step one' in discussions, and said that,
'If the Government is incentivising or encouraging more consumption of steel for instance in the UK, we are happy to grow.'
What do you think areas for growth may be, in the right environment, and how can a Government help foster that?
Thank you, Mr David. Yes, I completely understand that these are not the outcomes or the answers that we like to hear, but I would like to assure you and the Chair and the committee that these options, proposals, have been well thought through, have been very carefully examined, from all angles that we can, but primarily, as I said, with the primary objective of ensuring that we have steel making in south Wales, and the fact that we have a viable business. But, unfortunately, some of the discussions we've had are not pleasant to the ears just now, because that's the reality.
Coming back to your point on where the growth can be, I just want to make a point here that the UK, for the last decade or so, in terms of what we call 'apparent steel use', which is basically the steel that you produce plus the net imports, has been in the range of between nine to 11 million tonnes across the country, and steel production has declined to about 6 million tonnes. And this has been for the last decade.
Now, going forward, yes, we would welcome any policy or any approaches or any strategies that can help push this consumption requirement for steel, and I would imagine it is primarily going to be the focus on manufacturing. The UK will need to move to fostering and welcoming more manufacturing through industrial strategies to be able to bring more manufacturing into the country, which then can be supported by steel making, by increased steel making, and that gives us the opportunities to look at more additional avenues for investment and for growth. And one area, for sure, would be construction. The UK has been, traditionally, very strong on construction, in terms of the consumption of steel and in terms of the place where it is in construction technology. I would imagine that would significantly get uplifted on the back of policies and strategies. We know the energy grid, the electricity grid—. We know there is decarbonisation of the grid that is happening, particularly with renewables like wind power. That's another area of significant improvement.
And then if manufacturing as a whole were to pick up, Mr David, there are more than enough opportunities or avenues for steel consumption to increase. But, to me, these are the two fundamental areas where I think there should be a fillip in demand and therefore steel consumption.
Do you agree—? Lord Watson of Wyre Forest said in the House of Lords on 1 February that the UK needed a brand-new industrial strategy. Do you agree with that idea?
I would imagine so. An industrial strategy or manufacturing. We need to increase our contribution for manufacturing, for sure, if you want steel to pick up. We've been talking about the greening of power and the availability of electrical power. I think that could be a great boost for bringing back manufacturing, because it turns the grid—. The UK is anyway one of the greenest grids that we can find, globally. Greening that further gives manufacturers a great opportunity to bring back manufacturing because then it takes away a lot of the carbon footprint because of the energy consumption. So, there are more opportunities there, depending on the policies and strategies.
Thank you. Let's turn to that specifically. So, the future opportunities, for example, using steel in the floating offshore wind turbines that will be constructed in the Celtic sea. Would it be possible to use steel there from an electric arc furnace?
In short, yes, but just to make sure that we are clear here that there are two aspects of how we use a product in any application. There is steel, which is about the steel constituents, the steel chemistry, the steel properties, et cetera, and then there's the format, or the sections of steel that we use, whether it is hot rolled coil of a particular dimension, the thickness, weight, et cetera. Now, both these are important elements in the use of a particular kind of steel for a specific application. The EAF steel making will definitely be able to produce the steels that are required for floating offshore wind and such kind of applications from a steel perspective, but one of the things we need to keep in mind is as the designs of floating offshore wind are improved, the conversations with the steel makers in terms of using the right formats is something that we will need to work with. We've already started engaging with some of the potential builders of FLOW to find the right formats that can help them, and that can then help make sure that these formats can be supported from the current facilities that we have in the UK, Mr David.
In short, because I'm, obviously, no expert in this, are you telling us that the closure of the second furnace will not affect your ability then to provide steel for floating offshore wind?
We intend to produce exactly the same kind of steels as we are doing currently with the basic oxygen steel making and the blast furnace. I just gave you an example of how the entire paradigm has shifted in the US, where practically all the steel today is made through the electric arc furnace route, serving the same segments.
Okay. And finally—my last question—the Welsh Government has provided you and your partner organisations with support in areas such as skills, training, and research and development. What support will you be looking for from the Welsh Government in future if you do go ahead, and what conversations have you had with them about the future and the support they could give?
We really welcome and appreciate the support the Welsh Government has so far been providing us in the areas that you now mention, and that's been a great help in developing our people and developing the people in Port Talbot. We would welcome any more conversations and any more help that can come from the Welsh Government in different areas. I would imagine a lot of the help would be in things like skills and regeneration, et cetera. Some of it, anyway, will come through the transition board that has been set up, of which the Welsh Government is a primary, I would say, contributor, not in terms of the finances but in terms of facilitating and enabling decisions. And, as we progress, we will work with the Welsh Government to explore opportunities where the Government can help us.
One other area where we have seen the Government help is in the area of research and development, where some of the projects that the Welsh Government is supporting, we are already embedded in it along with the research partners. So, I would think, as we progress, we will start conversations in these areas to further develop those, Mr David. I don't know whether, Chris, you want to add anything else. So, that's what I would think will happen, Mr David.
Okay. Thank you, Chair.
Thank you, Hefin. I'm afraid time has beaten us, so our session has come to an end, but, on behalf of the committee, can I thank you for being with us this morning? Obviously, your evidence will be very important to us in scrutinising this matter, going forward. A copy of today's transcript will be made available to you in due course, so if there are any issues with that, then please let us know. But, once again, thank you for being with us.
Thank you, Mr Chair, for giving us the opportunity.
Thank you very much. We'll take a short break now to prepare for the next session.
Gohiriwyd y cyfarfod rhwng 11:34 a 11:39.
The meeting adjourned between 11:34 and 11:39.
Croeso nôl i gyfarfod Pwyllgor yr Economi, Masnach, a Materion Gwledig y Senedd. Fe symudwn ni ymlaen nawr at eitem 5, sef trafod model gweithredu targed y ffin. Mae cylch gwaith y pwyllgor yn cynnwys masnach, ac rŷn ni wedi bod yn dilyn datblygiadau gyda'r ffiniau a phorthladdoedd yn agos, gan gynnwys ymweld â phorthladd Caergybi y llynedd. Mae'r sesiwn heddiw yn gyfle i drafod model gweithredu targed y ffin y cytunwyd arno gyda Gweinidog y Deyrnas Unedig sy'n gyfrifol am ffiniau a'r ffenestr fasnach sengl, yn ogystal â goruchwylio gweithredu fframwaith Windsor. Rŷn ni'n ddiolchgar iawn i'r Gweinidog am roi o'i hamser i gwrdd â ni y bore yma. Felly, a gaf i groesawu'r Gweinidog a'i swyddog i'r sesiwn yma? Cyn ein bod ni yn symud yn syth i gwestiynau, gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record?
Welcome back to this meeting of the Economy, Trade, and Rural Affairs Committee at the Senedd. We'll move on to item 5, discussing the border target operating model. The committee's remit includes trade, and we have been following developments with borders and ports closely, including making a visit to the port of Holyhead last year. Today's session is an opportunity to discuss the border target operating model agreed with the UK Minister who has responsibility for borders and the single trade window, as well as oversight of Windsor framework implementation. We're extremely grateful to the Minister for giving her time to meet with us this morning. So, may I welcome the Minister and her official to this session? Before we move to questions, may I ask our witnesses to introduce themselves for the record?
Good morning to you all. I'm Baroness Neville-Rolfe and, as the Chair said, I'm the Cabinet Office Minister responsible for the borders work, and I very much welcome the opportunity to be here today.
And I'm Tom Smith. I'm the director for borders in the Cabinet Office, so my team designed the border target operating model.
Thank you very much indeed for those introductions. Perhaps I can just kick off this session with a few questions: what are the implications for Wales of the 'Safeguarding the Union' plans published last week by the UK Government?
If you would allow me, Chair, can I just make two or three general points—
Yes, by all means.
—before I answer your question?
Yes, certainly.
First of all, I'm very glad to be here, and to be here in person. I'd always wanted to come to the Senedd. I have Welsh connections—my grandfather was from Aberystwyth, and I'm from a farming background, so it's good to be talking to you. Ever since I took over responsibility for the border trade operating model, at the end of 2022, I've been very aware of the need to talk to the Welsh Government and, indeed, other devolved administrations, about how we develop it, because I think it's very much a shared effort. Borders are, you know, across the UK, as it were, borderless, and we need to protect both British industry and your farmers, but also to think about the consumer and make trade flow as freely as possible.
The key thing, before we move on to the Windsor framework, we're introducing a global risk-based model, and that (a) makes the checks easier and more targeted, but we're also able to exploit data and technology, to reduce the burdens on business. So, it's a forward-looking arrangement. And we're also trying to ensure that border agencies across the UK, including yours, have the intelligence they need to stop the wrong sort of imports that might cause harm. So, I think it's good news for the agri industry in Wales. It reduces the risk of plant and animal health pests and diseases, and also reduces the current asymmetry of trade, where, as you probably know, our exporters sometimes face quite complicated bureaucracy. And we've been working tirelessly with Welsh officials, also with your Minister for Economy, but with Peter Ryland and Helen John, who I'm sure you'll know.
As regards the announcement last week, it was obviously extremely welcome that, at last, we got a Government again in Stormont, and you will have seen the document that we published. Most of it, I think, was already well signalled, and we were able—and I think this has been welcomed—to actually make legislation in the House of Commons last week to deal with the qualifying goods arrangements, which your Government here had been very keen to see. We'd shown it to them in draft and got their comments some months ago, but that's now nearly through. And then we also brought in strong anti-avoidance mechanisms, which will help us to make sure that we can enforce the new rules properly, ensure the biosecurity that we're so worried about, to make sure that our islands continue to not get diseases like foot and mouth, which we all remember was so disastrous. But, obviously, there are other things—Polish chicken disease [Correction: 'salmonella in Polish chicken'] and things—which we need to worry about. Thank you.
Sure. Now, the plans state that the UK internal market guarantee will be introduced to protect historic trade flows between Great Britain and Northern Ireland. How will this apply to Welsh ports, including the UK land bridge through Holyhead?
Well, we're bringing in the target—. I mentioned the new statutory instruments that are coming in, and then we're also committed to the borders target operating model, which I'm here to talk about today, and its three phases. I think, on the west coast, it's going slightly slower, but it will be coming in, and we are now making progress. And Holyhead, which was always due to have an even larger facility on the original approach to borders, which was conceived in 2020—. We've gone ahead with that [Correction: 'the smaller facility'], and I understand that the building is now progressing on that. So, I was very glad to hear that from the economy Minister when I caught up with him this morning.
Now, trade diversions and trade dislocation away from Welsh ports have been a concern of the Welsh Government for some time now. What work is actually being done by the UK Government to monitor trade flows through Wales?
I think the good thing is now that we've got this pre-notification, so we're in a much stronger position to work out what's happening to the trade flows. Tom, do you want to come in on that, because you've, obviously, been talking to the authorities and also to the Irish Government about this?
Yes. As the Minister said, I think we're in a much better position now because, from 31 January, we have the pre-notification and export health certificate requirement for sanitary and phytosanitary goods coming in from Ireland. And we also have the full customs regime. So, that gives us a lot more data. I think where we are focusing our efforts is to ensure that all the workings, in terms of goods arriving in Wales from Ireland, just as goods arriving anywhere in Great Britain, operate smoothly. We did a lot of work with the Irish Government and the Irish authorities in the run-up to that, and we were monitoring this really closely last week. And what we've seen is that everything seems to be working very well at present, but, obviously, we will carry on this really close working and monitoring of the situation as we approach the next—. Obviously, we'll be looking at the next milestones, not on the west coast, for April. But it is very much our intention to keep the arrangements for trade between Ireland and Great Britain, much of which comes through Wales, as smooth as possible.
And what consideration has been given to extending the Windsor framework arrangements from GB-NI trade only to GB-Ireland-NI trade, which, of course, affects Welsh ports?
I'm trying to understand the question here.
Obviously, the Windsor framework arrangements are what they are. What consideration has the UK Government given to extending those arrangements, which could affect Welsh ports, effectively?
Tom, do you want to come in there? I'm not sure I understand the question.
So, obviously, goods from Northern Ireland are goods from Northern Ireland, regardless of where they arrive. So, obviously, we'll make sure that goods—. So, goods arriving from Northern Ireland benefit from the internal market—. Goods that are qualifying Northern Ireland goods benefit from the internal market guarantee, regardless of where they come through. So, what we will make sure is that those flows that are Northern Ireland-qualified goods can continue, and there will not be a heavy process for people having to prove that their goods are indeed Northern Ireland qualifying goods, say, in Dublin. But, obviously, goods from Ireland are goods from Ireland, and do not benefit from QNIG status.
I think you're actually interested in how we monitor that and find things out. Of course, the UK internal market guarantee will be overseen by an independent monitoring panel, and UK Intertrade will have access to data and the ability to challenge and test Government departments and agencies. And I think there's a lot of focus on all of this because we all want it to work well. We haven't got a Windsor framework expert with me today, because I thought the main focus of questions would be on the operating model, but if you do have follow-up questions on that, we're obviously very happy to write to you about those after this hearing.
Okay. Thank you very much for that. Sam, on this, you'd like to come in.
Yes. Thank you very much. And I would be grateful, because this question ties into the Chair's question around the Windsor framework, and if there is an opportunity for a written answer, I would appreciate it, if you're unable to give an answer. But in the way that the green and red lanes work for NI-GB trade—. I represent a constituency with a port to Rosslare—Pembroke Dock port to Rosslare. We've seen a decrease in the use of the land bridge. Is there a way of reciprocating the Windsor framework in a way that means goods originating in the Republic of Ireland destined for the European Union could start using a land bridge—as in a green lane on the land bridge—bringing back that route, rather than the direct, say, Rosslare-Cherbourg route, in a way that would allow—. For some hauliers, the land bridge is still the preferred option. If there was an opportunity for trade to commence, or to recommence at a greater level, directly by using the land bridge for goods originating in the EU and destined only for the EU, I think that would be a really welcomed opportunity. So, I'm conscious that this isn't today's session, but I just thought I'd flag that as a Member representing a port constituency. I think there's an opportunity there to explore the viability of the land bridge.