Examination of Witnesses (Questions 180
THURSDAY 1 MARCH 2001
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 postponementideally
a cancellationof 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 countriesthis
country or any other countryis 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.
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
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
(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.
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.
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.
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
(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
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
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
194. Have you put that information to the trade
(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
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