Examination of Witnesses (Questions 80
THURSDAY 1 MARCH 2001
80. We understand that you have restructured
the debts of the company so that Corus now has a combined debt
of 2.4 billion euros. Is that right?
(Sir Brian Moffat) Correct.
81. Does the Dutch division of the company still
retain separate financial arrangements under this new structure?
(Sir Brian Moffat) The Dutch and the English have
separate bond issues which are not due for repayment for another
six or seven years.
82. It is unfortunate that you start talking
about the English when you are talking before the Welsh Affairs
Select Committee. Presumably you mean the British?
(Sir Brian Moffat) The British.
83. The reason I ask that question is, if there
are these separate financial arrangements, is it going to be possible
for Hoogovens to do exactly what they did before and walk away?
(Sir Brian Moffat) No. It is a British company.
84. In your memorandum, Sir Brian, you suggest
that the need for restructuring was brought about by the lack
of growth in the United Kingdom demand and the consequential need
to export an increasing proportion of the United Kingdom flat
product. World demand for steel is increasing steadily. Yes?
(Sir Brian Moffat) Correct.
85. Most major steel producing countries of
the world are increasing capacity. Yes?
(Sir Brian Moffat) No.
86. Therefore, my information is wrong. Are
you saying that most steel producing countries in the world are
not increasing capacity?
(Sir Brian Moffat) None of the OECD countries is increasing
capacity in the world.
87. Why is Corus reducing capacity in the United
Kingdom while at the same time taking a leading role in the consortium
to re-establish steel making in New South Wales?
(Sir Brian Moffat) We are not.
88. You are not involved in the plant at Newcastle?
(Sir Brian Moffat) We have consultants involved in
advising the Australians, were they to build, what sort of plant
they should build, but we are not involved with the building of
89. You say that the situation up to this point
has been dramatically worsened "by the weakness of the euro".
Looking at the short term problems facing Corus in Wales, three
factors have been mentioned at various stages of the proceedings
and in various ways. Firstly, the exchange rate; secondly, the
climate levy; thirdly, business rates. Would you indicate the
cost of the non-competitive exchange rate to Corus over the past
12 months and the anticipated cost of the climate levy and the
new business rate over the next 12 months?
(Sir Brian Moffat) I am not sure what you mean by
the cost of the uncompetitive exchange rate.
90. I think it is a fairly plain question. You
have made great play about the euro vis a vis the pound. It has
been accelerated from factor number three to factor number one
recently. I am asking you what effect in money terms that has
had over the last 12 months.
(Sir Brian Moffat) I do not know what effect in money
terms it has had. I know what effect in market terms it has had,
which is unfortunately that the strength of sterling or the weakness
of the euro has made it impossible for us to make money against
the price background that we have, and the geographical situation
we are in, as far as basic flat products are concerned in northern
91. What interests me is exactly how much that
is in money terms. Surely it is possible to evaluate that, especially
as you give it as one of your main reasons for these job cuts?
(Sir Brian Moffat) If what you mean is what is base,
what is a competitive rate, to be able to make money, I would
guess at the present time we would have to have an exchange rate
nearer DM2.50 to the pound than where it is today at just over
3. It is as significant as that. It is not as simple as that either
because prices for steel in Europe are following, and always have
done since we have been in the EU, the German domestic price.
You have to look at the relationship not only with currency but
also with prices. Ironically, although we have seen some easing
up to a couple of months ago in the sterling price vis a vis the
euro, at the same time, we have seen a significant decrease in
steel prices, which has overtaken the sterling/euro situation.
One has more than neutralised the benefit of the other. That is
why I say it is not easy to give you a single answer.
92. We took evidence a few minutes ago from
people who had commissioned independent, expert evidence on the
subject and they said that Corus could be making money at a DM2.9
to the pound rate.
(Sir Brian Moffat) No, not with the basic products
in the market that we have at the present time.
93. Do you think it is wise to base long term
restructuring decisions on variable factors such as exchange rates?
(Sir Brian Moffat) These are not long term. Based
on the United Kingdom demand, the currency situation has merely
aggravated that scene for over two years, but the basic problem
is the lack of demand for steel in the United Kingdom against
the size of the business we have in the United Kingdom.
94. Can I take you back to my question and ask
you, please, to respond about the climate levy and the new business
(Sir Brian Moffat) The climate levy will cost us between
£8 million and £10 million. I am sorry; I cannot remember
your question on the new business rates.
95. Previously you said eight million as a flat
figure. It is eight to ten today, is it?
(Sir Brian Moffat) It is of the order of eight to
ten. It can vary.
96. The other question was on the new business
rates over the next 12 months.
(Sir Brian Moffat) I cannot tell you our rate. I will
if you wish by all means let the Committee know in writing.
97. Was that not a factor in your decision at
(Sir Brian Moffat) No.
98. You did not discuss having a rate holiday
from the National Assembly for Wales or government here?
(Sir Brian Moffat) Nobody suggested we could have
a holiday of rates, either from the National Assembly or the government.
99. Did you ask for it?
(Sir Brian Moffat) We have appealed, as is our right,
and we answered also to the Trade and Industry Committee. We have
appealed for rate rebates. We eventually got them after seven