Select Committee on Welsh Affairs Minutes of Evidence


Examination of Witnesses (Questions 180 - 195)

THURSDAY 1 MARCH 2001

SIR BRIAN MOFFAT, MR TONY PEDDER AND MR DAVID JACKSON

Mr Paterson

  180. You were quoted as being very emphatic on Friday 2 February in The Independent, when you said, "We have got high energy costs, high transport costs and increasing government regulation which has meant a decline in the UK industrial base." As this is a very high profile case, you do have a chance to go to the government and help the whole of British industry by calling for a postponement—ideally a cancellation—of the climate levy, a drastic reduction in duties on fuel, possibly suspension of rates for businesses and a wholesale bonfire of regulation afflicting all British industry. As a long term investor, would you be more likely to invest in a country which had no climate levy, lower fuel duties, hopefully with drastically reduced corporation tax.
  (Sir Brian Moffat) We are here. It is our main market. We are a British company and while we have assets abroad our main market situation is in the United Kingdom. We are a highly capitalised industry. We are stuck with the situation we have. We have to protect that as best we can. If there are opportunities, the likelihood is that we would look elsewhere to grow the business were we to put more iron and steel capacity in. Frankly, I think that is highly unlikely because there is too much iron and steel capacity in the western world at the present time.

  181. 40 per cent of the world's steel makers are in countries which have not signed up to Kyoto. Those countries are extremely hungry and they are building new plant. What is the long term future of mass market products like steel in this country if we do not reduce our costs and get government burdens off industry's back?
  (Sir Brian Moffat) The only way that heavy industry like ours will succeed in the longer term in developed countries—this country or any other country—is to have a competitive edge. We need all the help we can get to get that competitive edge. What we do not want are obstacles in the way, the likes of which you have mentioned, among which are high energy costs, for example. I personally asked the Secretary of State over two years ago to do what he could to reduce the costs of energy as far as electricity was concerned. He said he would look at it; he was sympathetic to it; he would go and talk to the Regulator, but we are still waiting for an answer.

  182. Have you given the government a clear memorandum of areas where they could reduce these costs?
  (Sir Brian Moffat) Yes.

Mr Llwyd

  183. If your thesis is correct, over-production is the big problem, not cost.
  (Sir Brian Moffat) If we had a significantly lower cost base, we would be more secure as a company. The 22,000 people in the rest of the business going forward would be more secure because their cost base would be better than it is today.

  184. Yes, except that you led off this afternoon by saying that the inevitable is happening. The market share is shrinking. The demand is shrinking in the United Kingdom. Therefore, cost has not that much to do with it, has it?
  (Sir Brian Moffat) I did not say that. I said the size of the market was such that, with our relative size and the competitive situation offshore, we could not make money offshore with exports of basic flat products. We can make money supplying the United Kingdom manufacturing base with those same products in this country. It unfortunately is not growing; it is getting smaller.

Chairman

  185. One of the problems I came across discussing matters particularly with the Shotton workforce is that there are two plating lines, two electro-galvanising lines, one of which is being kept open and one of which, under your present proposals, is being closed. If that one is being closed, there are significant numbers of customers who are going to have no alternative. You are going to lose a section of the market by closing down the line. If you were to be given a proposal by the workforce there for that specific problem, apart from the package which has been put to you under the 90 day proposal, what would be your view of that?
  (Sir Brian Moffat) If the workforce have ideas for overcoming the problems, we will look at them and explain to them what we think about their ideas, hopefully positively. If not positively, we will certainly explain to them the reasons why we are not positive. The EG line you are talking about is effectively the export load that we are going to shed because we cannot make money on that proportion of the business, roughly the 50 per cent which is exported.

Mr Paterson

  186. You said you had made a formal submission to the government on the proposed costs. As you are indicating that the future of your other plants in the medium or even short term must be at risk unless we get these costs down in this country, could you let us have a copy of those submissions?
  (Sir Brian Moffat) Yes. Our customers have also made submissions. If you were to ask the departments concerned, I am sure you would get copies of them from there too.

Mr Caton

  187. Getting back to consultation and our concerns about your position, it seems that you are saying you are prepared to talk to government at any level and the trade unions about helping you make your cuts but if they are coming up with proposals to save jobs you are not very interested.
  (Sir Brian Moffat) I have said we will listen to any constructive suggestions to try to overcome the problem we find ourselves in. That is totally opposite to what you are suggesting[7].

  188. I am very pleased to hear that. You have criticised other people for not sharing information with you. You mentioned earlier on that you had been mulling over options for something like two months before that week that Mr Edwards cited.
  (Sir Brian Moffat) We have been looking at different options intensively for that period since 5 December right the way through. I personally have been heavily involved with it.

  189. Have you shared those options and the information that goes with them with the trade unions?
  (Sir Brian Moffat) No.

  190. Why not?
  (Sir Brian Moffat) Because that is a matter of price sensitive and commercially sensitive information. We can explain to them the reasons behind it.

  191. That is not really consultation, is it? Unless you share information, how can your workforce make a contribution to a positive outcome?
  (Sir Brian Moffat) We can share with them the reasons why and what the results of the different options are against the knowledge which the workforce has about what their relative costs are, one plant against another, and they know that. The workforce is fully informed. We have works councils. We meet regularly. We have even a European Works Council. There will be a meeting next week to talk about it. We consult with the workforce on a regular basis.

  192. You have just said you are not prepared to share the information on which you make a decision to put forward particular closures with representatives of the workforce.
  (Sir Brian Moffat) I said I was not prepared to open the books.

  193. I did not ask you about the books; I asked you about the options and the information behind them.
  (Sir Brian Moffat) We are prepared to talk about the options, what the options were and why we got to where we got to.

  194. Have you put that information to the trade unions?
  (Sir Brian Moffat) We are meeting the trade unions at their request later next month, when they have got the feedback from their workforce on the details and results of their suggestions as to what they would like to do or have us consider. We have not got to that stage yet. That work is going on with the trade unions.

Mr Smith

  195. The trade unions in the earlier evidence we took said, as I understood it, that if similar proposals were put forward in your sister country the trade unions there would have had to have been consulted in the period leading up to the final decision. Is that true? If it is true, was that a factor in your company's consideration of closures in the United Kingdom?
  (Sir Brian Moffat) The trade unions would have had to be consulted, as our trade unions were consulted, in exactly the same way.

  Chairman: Sir Brian, we are running late and we have a lot of other questions for you. I think we will have to come back on another date. Thank you for coming today.



7   See page 36. Back


 
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