Select Committee on Trade and Industry Fourth Report


The Trade and Industry Committee has agreed to the following Report:—



Origins of inquiry

1. On 1 February 2000, we heard evidence from the Engineering Employers Federation on the November 1999 Pre-Budget Statement. One of the witnesses was the Chairman and Chief Executive of Sheffield Forgemasters, Mr David Fletcher. He painted an alarming picture of his company's prospects.[1] In our subsequent Report, we drew particular attention to his evidence in our conclusions on the sterling:euro exchange rate. During the first half of 2000, Corus, the largest steel producer in the UK, made a series of announcements of reductions in the workforce at many of their plants. The announcements in June and July 2000, the prospect of the closure of one or more major plants, and the evidence given to us in February by Mr Fletcher led us to call for evidence on the House's return from the summer adjournment. We heard oral evidence on 6 November 2000 from the United Kingdom Steel Association (UKSA) and from representatives of the workforce in the steel industry, including the General Secretary of the Iron & Steel Trades Confederation (ISTC) and the AEEU's National Officer for the metals industry. We also received a memorandum from the DTI.[2]


2. In the course of that evidence, one particular issue emerged: the proposed reduction in the workforce of Corus's rail mill at Workington in Cumbria. In view of the prospect of a major national programme of rail renewal in the wake of the Hatfield crash, it seemed to us peculiar that the only UK plant producing steel rail should be subject to reduced output and indeed the threat of closure. We therefore requested detailed written evidence from Corus and from Railtrack, its principal customer. Having received these memoranda by the end of November 2000, we sought further information from Corus on several points of detail, and on one specific point from Railtrack, and received answers in early January 2001.


3. In the late autumn of 2000, Corus went through an internal crisis as a result of poor trading results, leading to the resignation on 5 December 2000 of the two joint Chief Executives. An announcement was widely predicted in December 2000 that there would be major cuts in the company's workforce and capacity, with the prospect of closure of Llanwern in South Wales. On 19 December 2000 the First Secretary of the National Assembly for Wales made a statement to the Assembly on the prospect of the closure of Llanwern. We decided to await the outcome of the radical restructuring being considered by Corus before reporting to the House. On 1 February 2001 Corus published its plans. On 14 February 2001 we heard oral evidence from the Chairman and Chief Executive of Corus, Sir Brian Moffat.[3] We refer to Corus at greater length below (paras 38-52).


4. Evidence from the unions in November 2000 and again in February 2001 suggested that Corus, the Anglo-Dutch combination of the Dutch Hoogovens company and the former British Steel, had been unwilling to publicise the extent of its difficulties, or to seek Government help or to raise the burning question of the euro.[4] In evidence to us in February 2001, Sir Brian Moffat made it plain that he had not sought and was not seeking help from the Government, and that the difficulties facing the company arose essentially from the operation of the market.[5] It is of course the right of a company to seek to avoid public controversy and to keep its troubles to itself, whatever their source. We have a duty to inquire into matters within the remit of DTI, the supervising department for the industry, and to report our conclusions and recommendations. The DTI memorandum suggests that the department is well aware of the industry's concerns. Oral evidence confirmed that the problems confronting Corus are common throughout the industry.[6] Some may be susceptible to remedies in the hands of the public authorities. The symptoms of the state of the UK steel industry are all too apparent. Some companies are trading at a loss. Levels of capital investment are reported to be disturbingly low. The workforce is shrinking. There is nothing to be gained from papering over the problems facing the UK steel industry, nor their wider significance for the UK manufacturing base.

1  HC 51 of session 1999- 2000, Qq 398-9, 405 Back

2  Ev, pp 70-2  Back

3  Ev, pp 60-9 Back

4  Ev, p 6: Q 4; Ev, p 20, para 5.2 Back

5  Eg Qq 124-6, 131, 134 Back

6  Q 34 Back

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