Business and Trade Committee
Oral evidence: Export led growth, HC 649
Tuesday 3 June 2025
Ordered by the House of Commons to be published on 3 June 2025.
Members present: Liam Byrne (Chair); Antonia Bance; John Cooper; Sarah Edwards; Alison Griffiths; Charlie Maynard; Gregor Poynton; Mr Joshua Reynolds; Matt Western.
Science, Innovation and Technology Committee member also present: Chi Onwurah.
Questions 222 - 257
Witnesses
I: Russell Codling, Director, Markets Business Development and Commercial Services, Tata Steel; Andy Richardson, Managing Director, Special Melted Products; Murray Paul, Public Affairs Director, Jaguar Land Rover; and George Drakos, Director, Bridgnorth Aluminium.
Examination of Witnesses
Witnesses: Russell Codling, Andy Richardson, Murray Paul and George Drakos.
Q222 Chair: Welcome to today’s hearing of the Business and Trade Select Committee, as we open our inquiry into the trade deal with the United States ahead of the Committee’s visit to Washington DC next week. Murray Paul, perhaps I could start with you. From Jaguar Land Rover’s point of view, is this a good deal from what you can make of it?
Murray Paul: It is the very best deal that the UK could have hoped for under the circumstances. We have seen a complete change in the landscape internationally. Where the UK has found itself, in the relationship that it has established with the Administration, from an automotive perspective, is the best that we could have possibly hoped for.
Q223 Chair: If you send some fantastic Land Rovers on a ship to the United States tomorrow, are you clear today what tariff you are going to be paying by the time they land in the United States?
Murray Paul: No, not entirely. The deal is not implemented, as it stands at the moment. We are working very hard with the Government to help them get that done. We understand that action needs to happen on the US side, but we are also working under the assumption at the moment that, when that implementation does happen, we can expect it to be backdated to 8 May, echoing the immediacy of the language that was used by the White House at the time.
Q224 Chair: Do the sticker prices on your products on the forecourts in America today reflect the tariffs that you think you are being charged or the hopes that you have for the tariffs being lifted in the future?
Murray Paul: That is a bit of a multidimensional question because the price on the forecourt today reflects the whole market position. Different manufacturers are affected in different ways. There is an element of pricing change that reflects what we hope to achieve, but there will also be an element of it that reflects how the whole market has reacted to it as well. It is quite difficult to pull those apart.
Q225 Chair: Presumably the prices, then, have gone up on where they were in, say, January?
Murray Paul: Yes. We are in a position where everybody in the motor industry has tariffs of some sort or some direction. While as a business we do not pass that all directly to the customer, there is a limit on how much we can do in the background to absorb some of that pricing. Some of it does, unfortunately, have to be passed on.
Q226 Chair: If you have Land Rovers rolling off ships tomorrow, will you be paying tariffs on those Land Rovers?
Murray Paul: We will be, yes.
Q227 Chair: But you do not know for how long?
Murray Paul: No, there is a level of uncertainty around that at the moment.
Q228 Chair: That is a business risk that you have taken?
Murray Paul: Yes, that is the operating environment that we are in, and we understand that. We are working as hard as we can to get clarity on that with the British Government.
Q229 Chair: At this stage, you do not have clarity as to when the tariff problem is going to be lifted?
Murray Paul: We have direct dialogue with both the trade team and the Secretary of State. We have every expectation of the sort of timeframe, but nobody knows the exact date yet.
Q230 Chair: At board level within your company, do you have a planning assumption for when the tariffs may get lifted in, say, a worst-case scenario?
Murray Paul: We have an expectation that it will happen within this quarter.
Chair: This calendar quarter?
Murray Paul: The first quarter of the financial year, yes.
Q231 Chair: Russell Codling, what is the position for your firm? Do you know what tariffs you are on the hook for today?
Russell Codling: We supply something like about £100 million or £150 million of business a year into the United States. We have had an arrangement where we have been supplying into the US over the last couple of years under a quota system. Obviously, that has now been withdrawn. We have an outstanding structure where we have exemptions on specific products that are applied for by our customers in the US. They come to an end progressively over the course of this year.
In terms of your question about whether we know precisely what tariffs we will be incurring, that depends on which part of that arrangement we have. Clearly, the big bulk of our sales at the moment goes without that quota anymore.
I am sure you are aware that over the weekend the tariffs were increased from 25% to 50%. That was quite a shock to us. It comes into effect as of tomorrow. Anything that goes through customs into the US after tomorrow will incur a 50% tariff, if it is not subject to an exclusion under the structure that I just described.
Q232 Chair: Just so we are clear, for particular kinds of products from you that are landing in America on Friday, your assumption at the moment is that they are going to be hit with 50% tariffs.
Russell Codling: Indeed, yes, unless they are subject to an exclusion under the old arrangement, which is coming towards its end.
Q233 Chair: How on earth are you planning, as a business, for this kind of volatility?
Russell Codling: It is extraordinarily difficult. Clearly, the 25% tariff, as it was applied earlier in the year, was a big shock to us. There have been market changes, agreements with customers and a resetting of the structure that we are in at the moment. The shock, over the weekend, of seeing 50% applied was really quite devastating, particularly to our ability to plan. Where do we go next? What is the future for our business? What is the future for our customers?
We have longstanding arrangements with our customers in the United States. These are not customers that we obtain on a spot basis. They rely on us for their business. Broadly speaking, the steel products that we provide are not available domestically in the United States. Suddenly having a tariff applied has a big impact either on us, in some circumstances, or our customers in terms of what they have to pay. Ultimately, that translates into huge levels of uncertainty in terms of their planning. How do they plan their businesses into the future? Likewise, for us, how do we plan for future arrangements with packaging customers and customers that are household names in the United States? It is a very difficult time for us, for sure.
Q234 Chair: It seems like the deal that has been signed does not provide you with any protection at all.
Russell Codling: Not at this point, no. I am very grateful for the work that the Government have been putting into this. We are getting to a point where we can see a pathway towards a much more solid arrangement for the future.
Our imports into the US are a fraction of a percent of the consumption of the US market, but they are very important to our business and very important to our customers. If we can get this deal enacted as quickly as possible—my ask is for the Government to please act as quickly as possible on this—it will mean stability for us and stability for our customers in the US, and ultimately it will be beneficial to both the US and UK economy as a result.
Q235 Chair: George Drakos, from your perspective in the aluminium sector, can you tell us what tariffs you think you are paying today?
George Drakos: First of all, thank you for having me here. Thank you to the Government because their effort to make a quick deal was very positive. Of course, we do not think this is a closed deal, in the sense that there are still many questions. What is the quota of aluminium that can go into the country? We do not know. When will the quota start working? Again, we do not know.
Before this mess, we had two types of customers in the US. We had customers who had exemptions to the section 232 quotas. They had those exemptions because the aluminium that they bought from us could not be sourced in the US. These exemptions are still active. Most of them expire in the last quarter of this year. We are still working with them because those exemptions are still in place, which means they have no tariffs until the exemptions end.
We also have general customers. As soon as these announcements were made by the US Government, we stopped all business. On the same day that the announcement was made, all these customers called us. We told them what I am telling you. We do not really know what the quota is. We do not really know how much aluminium we can sell into the US with 0% tariffs.
Until the moment we know this, we have diverted all this business elsewhere, which has a significant impact on our business. There is no way to make this work because a 25% tariff is not something that can work in our industry. Our products are not consumer products as is the case with my colleague from Jaguar Land Rover. Our products go to factories. It is a coil of aluminium. At the end of the day, the end user does not know where that aluminium comes from. They do not really care. The customer wants good quality and good service. The customer is another factory somewhere in the US. As soon as those tariffs were put in place, business stopped.
Q236 Chair: Murray Paul, the Trade Secretary is seeing the US Trade Representative at about 6 o’clock tonight at the OECD. What do you need out of that meeting for Jaguar Land Rover?
Murray Paul: We need to know when the executive order will be signed for implementation.
Chair: Timing is what is really needed?
Murray Paul: Yes, absolutely.
Q237 Matt Western: I am just interested to know, in terms of the general terms of the trade agreement, what you have been pleased with relative to your sector and where you think there are any gaps or what is missing. Perhaps, Russell Codling, I will start with you.
Russell Codling: The devil is often in the detail in these agreements. Certainly, for our business, as you are probably aware, at the moment we are going through a radical transformation of our organisation, such that we are transforming to produce steel using electric arc furnaces. That allows us to produce steel with much lower CO2 emissions, in line with our own and society’s collective goal of reducing those emissions. In the intervening period, we are importing material from our sister companies in the Netherlands, India and other parts of Europe, and from other key suppliers.
Against that, we need to make sure that the deal with the United States continues to respect that requirement at least through the transitionary period over the next few years. I know that various trade agreements have constraints on the rules of origin of the material, or on where the material has been melted and poured in the case of steel and aluminium. It is very important for us to make sure that any deal covers those specific dynamics, at least for the next few years.
Andy Richardson: It is very important that the deal is very clear about which commodity codes are affected. Special Melted Products produces double and triple-melted speciality steels, stainless steels and nickel‑based superalloys for the civil aerospace and nuclear industries and for energy industries, such as oil and gas drilling. At the moment, it is very unclear as to which commodity codes will be affected.
Previously, when tariffs were in place under the last Trump Administration, nickel-based superalloys were not affected. They are a significant part of Special Melted Products’ business. They are often components. SMP produces mainline jet engine shafts for Pratt & Whitney and for the Rolls-Royce supply chain, which are shipped all over the world, including the USA. Under the last situation, the products in component and article form were not captured under the tariff. This time it has been significantly more of a blanket. Special Melted Products’ raw materials and components are caught today by the 50%. Hopefully, that goes back to a lower number, but we need to get clarity on what form, what alloy and what components will be caught by the tariff. It is really important we get clarity on that quickly. Special Melted Products has basically had a complete cessation of order activity in the USA.
Another thing that I would like to add is that Special Melted Products, and other metals producers within the UK, also supply semi‑finished products and raw materials into Europe. Because Europe is being affected by the threat of a 50% tariff, our business activity in Europe is also significantly affected. For H2 this year, our business plan is something like 50% of our volumes into Europe compared with the first half of the year. The sooner we get clarity on the UK-US situation and the Europe-US situation, we will have clarity as to what our business plans will be for the second half of the year and, moreover, into 2026 and 2027.
Murray Paul: What the deal delivered was that we dealt with the US on an equal footing, in terms of the reciprocal tariffs that the rest of the UK economy, not captured by section 232 tariffs, is facing. That was the positive that the deal had. What we will hopefully be looking for in the future is an opportunity for further growth within the US market from an automotive perspective. The deal was done on the basis that British luxury cars are not competing with US-built products and therefore do not substitute US-manufactured volumes.
Growth should be something that both sides could achieve in the future when raising the level of the quota. Of course, we were at 2.5% before. We would like to continue to work on the barriers that prevent it from coming down to an equally low level, or being removed entirely on both sides of the fence.
George Drakos: The one thing that interests us at this point is to understand what quotas on aluminium will be agreed with the US. How much aluminium will we be able to sell to the US with a 0% tariff? That is the question that we want answered. We also want to know when this will be applicable and what happens after zero tariffs. Let us say that we agree with the US to sell 30,000 tonnes. If you sell one tonne more, what will the applicable tariff be then? Will it be 50% or 25%? There is a very big difference between 25% and 50%.
You must understand that the system for monitoring how much is being sold to the US is not very accurate. When you get closer to the end of the tariff, you have to stop selling because you may exceed the tariff and then end up with a 50% duty to pay at some point. Let us say it is 50% and your quota is 30,000 tonnes. When you reach 25,000 tonnes, you will stop selling because of the risk of what happens when you exceed the quota. If over and above 30,000 tonnes the tariff is 20%, you may stop at 27,000 or 28,000 tonnes. You may be more willing to take the chance of selling a little bit more.
It is the same thing for the customers, because the customers also monitor this. They will not be buying when you get closer to the quota because the risk of being over the quota is massive.
Q238 Antonia Bance: Murray, you mentioned the quota. One of the questions that I had about the deal was whether the 100,000 quota was too restrictive for British manufacturers. Would you have preferred it to be higher? Does it give you adequate headroom? In the long term, will it need to be higher? What is your sense?
Murray Paul: Of course, we would prefer for it to be higher. If we are honest, it is there or thereabouts what the current market volume is producing from the UK into the US. We expect that it will be administered fairly and, if there is a small amount of pain, it will be distributed equally among British manufacturers.
We would like it to grow in the future because we think there is a growth opportunity in the US market, as the incredible cars that we produce in this country are admired around the world. For now, it works.
Q239 Chair: What happens when we go one or two cars over the 100,000 quota limit?
Murray Paul: The tariff is 27.5%.
Q240 Chair: Among the suppliers, how are you going to know whose car was the car that took you over the 100,000?
Murray Paul: That has yet to be determined. Our understanding is that the US Administration are quite happy for the UK to administer how the quota is managed. While it has not been decided yet, most car manufacturers are advocating that we should take our percentage shares of 2024 sales volume into the US, apply that to the 100,000 and distribute it back out to the manufacturers, so you will essentially have an allocation to work within.
Q241 Chair: We are going to end up with the central planning of car exports to the US.
Murray Paul: It is probably the fairest way, if there is some mechanism for new entrants that want to enter the British luxury market and export to the US, yes.
Q242 Sarah Edwards: If I could start with you, Russell, I was just wondering whether you have clarity and confidence in whether you can benefit from the terms of this US-UK trade deal?
Russell Codling: Thanks for that question. The proposed structure is a quota-based system structured along the lines of specific steel products. In a similar way to the automotive arrangement, that will set out a defined quota for specific products being sold into the market. At this point we do not know what that quota would look like, but that is really important for us.
As I said earlier, the products we supply, generally speaking, are not available from US producers. Making sure that we have the right volumes associated with that is important for making this work for us. We also need the details of the conditionality, such as the melted and poured or rules of origin arrangements, to be correctly in place.
Furthermore, like Andy, we are also very concerned around the impact of this quota arrangement. The US is a big consumer of steel. The actions it is taking are probably driven by the oversupply of steel in the world and the unfair trading arrangements that prevail globally. In the UK, we suffer from that very badly as well. Alongside making sure that the appropriate quota system is arranged for the US, we need to make sure that the UK is also protected against the diversion of steel flows from the US and other countries into the UK. At the moment, we are extremely exposed.
At the moment, we can see the exposure that we have in comparison, for example, with the steel that is supplied into the EU. Prices in the UK have been similar to those in the EU for many years. At the moment, we are seeing them diverge. That divergence is currently leading to a loss in revenue of something in the order of around £100 million to £150 million a year in the UK compared with Europe.
For us, it is not just about making sure that this deal is the right deal. It is also about making sure that the UK’s trade protection measures are the appropriate ones and are at least as good as our other trading partners around the world.
Q243 Chair: Can you just explain that £150 million loss again, just so that we are really clear about it?
Russell Codling: When you compare the relative prices in northern Europe and the UK for steel over many years, broadly speaking we have similar supply-demand balance challenges. The result of that is the price levels follow each other at a similar level over time. At least since the first part of this year, when the US trade measures were applied, we have seen a divergence between UK-based prices for steel and prices in northern Europe, which is alien. It is completely unusual.
Fundamentally, that is a diversion of steel trade flows around the world. It was triggered initially by the US action to protect the US market. The flows into the UK are more free-flowing than they are into mainland Europe.
Q244 Chair: So we do not have the right defences against trade diversion in the UK, but Europe has?
Russell Codling: That is correct.
Q245 Chair: We need to get those defences in place pronto.
Russell Codling: Yes, absolutely.
Q246 Chair: Why do we not have those defences in place?
Russell Codling: At the moment, the Trade Remedies Authority is undertaking an investigation.
Q247 Chair: How long has it been doing this?
Russell Codling: For a couple of months. We really appreciate the work that it is doing because it is working hard and we are feeding it with lots of information, but the processes are challenging.
Q248 Chair: Does it need to go faster?
Russell Codling: It does indeed need to go faster. We are seeing the EU taking action to defend its markets much faster than we experience in the UK.
Q249 Chair: We are going much more slowly than the European Union in defending our steel markets?
Russell Codling: That is correct.
Q250 Sarah Edwards: Andy, I will ask you the same question. Do you have confidence in this UK-US deal?
Andy Richardson: I do have confidence. Again, I come back to the point that it is very important to know what commodity codes are captured. If the tariff drops to 0% on the products that Special Melted Products makes, nickel-based superalloys and speciality steels, there should be an element of free trade with the US, like there always has been, for those products.
I do have confidence. Again, it comes down to speed. We are losing business rapidly. As I said, we have had a complete cessation of activity and orders with US customers and the damaging effect of losing business in Europe as well. I have confidence. It needs to happen really quickly.
Q251 Sarah Edwards: George, how do you feel about the deal?
George Drakos: I am not going to say anything very different. It is a very positive first step, but it is a first step. It is not a complete process. We need to see the complete process, which will enable us to do business. Right now, it is not helping us as it stands, but we understand that the US is having these discussions with the whole planet. It cannot happen very quickly.
The Government are trying. The people at the Department for Business and Trade with whom we talk are very helpful. They are really trying and pushing. There is a lot of information coming our way. It is understandable. To have one trade deal takes a lot of time. It is not something that can happen overnight. The sooner we can resolve it, the better it is for everybody.
Andy Richardson: Could I just add to that? Even if the trade deal were fully clarified tonight, my opinion is that geopolitical events, whether it is the pandemic, 9/11 or the financial crash, have long-lasting effects. This is of that nature, in my opinion. I have significant concerns about job security for the people who work in my plant and other metals producers around the UK. These seismic events, such as announcing a 50% tariff at the weekend, are likely to be a catalyst for a recession in the metals industry. It is not a good thing that is happening at all. It is leaving a huge amount of uncertainty for normal people working in the metals industry.
Q252 Sarah Edwards: Perhaps I could pick up on that point. What do you think about the supply chain? Are those firms at risk from this type of announcement? Are they ready to take advantage of this deal, if we can get beyond this hump? Do you have concerns about that as well?
Andy Richardson: Today, the aerospace market, the likes of Rolls-Royce in Derby building large civil engines, is very buoyant. Passenger numbers are up; flight hours are up; aircraft backlog is very high. It seems to be incredibly robust at the moment, but that industry, on which SMP thrives, is very fickle. It does not take much to push that into a recession and for people to stop flying.
The supply chain is there today. At the moment, the global aerospace supply chain is incredibly robust. Whether you are talking GE Aerospace, Boeing, Pratt & Whitney or Rolls-Royce, there is a very buoyant supply chain. This situation needs resolving quickly because it is a very fickle industry. It will soon move into a significantly less buoyant supply chain. That is my concern.
Russell Codling: I would endorse my colleague’s statement. When I look at the big disturbances that we have had over the last few decades, with the global financial crisis, covid and all these big events, every single time that we incur one of those, our metals industry takes a step down in its demand levels. Effectively, we are seeing a very fragile manufacturing sector in the UK. As soon as it takes a hit like this, we see a big step down in fundamental demand.
Coming back to the point that I was making earlier about the Trade Remedies Authority, the quota arrangement that is in place to try to protect the UK industry at the moment is based on demand that we saw back in 2016-17. Certainly, in the products that Tata Steel produces, we have seen a market demand reduction of about 30% since the pre-covid period. The quota arrangement, the protection mechanism, that we have for the UK market at the moment is based on the quotas for that pre-covid market scenario.
It is quite a complicated position. It is very complicated for the TRA to navigate its way through this. It fundamentally needs Government to work in conjunction with the TRA to understand the constraints that we have within our legislative arrangements to make sure we have the appropriate protections for industry in the UK. Otherwise, we will start to lose further aspects of our industry.
Q253 Sarah Edwards: George, is the supply chain able to take advantage of lower tariffs under this deal? Do you have other concerns?
George Drakos: There is an opportunity, yes. The whole challenge is adaptability. That is the key word for all of us in business, because things can change overnight. We went to bed on Friday night and there was a 25% duty on aluminium and steel. We woke up on Monday morning and it was 50%. We have to be flexible and adaptable. There is no other way around it. We think the trade deal with the US definitely gives us an advantage.
Q254 Mr Reynolds: Murray, beyond the announcement on 8 May, what are your priorities for the next stage of the negotiations with the US?
Murray Paul: The priority will be getting that implementation done and getting the quota arrangements agreed across the industry. Longer term, it will be looking to those opportunities to further improve the deal. Our understanding is that the deal is a framework within which the annual rates and targets will be set. They are set at 10% and 100,000 cars at the moment. We will be working with the British Government to see whether we can improve that in the future and create those growth opportunities.
Q255 Mr Reynolds: For next year, if we are at 10% and 100,000 at the moment, what is your ask or pitch to the Government for what it needs to be next year?
Murray Paul: It is a little early to do that because everything is relative in the car industry. Where exactly that priority lands will very much depend on who else makes a deal with the US and what the shape and size of that deal with the US looks like.
Q256 Mr Reynolds: George, what is your view in terms of where the next stage of the negotiations with the US needs to go? What are your priorities for that next stage? Is it about implementation or is it about changing?
George Drakos: It is really about fixing the quota so we understand what the opportunity is, but what my colleague just said makes a lot of sense. We have to see where we stand in the world balance. It has to do with what other deals the US signs. If they give Europe a much better deal, that could be a problem. As we understand now, this is a very good deal. If we get a fixed quota and we can start sending material to the US, it is going to help our business significantly.
Q257 Chair: I just want to come back to one very quick point, Mr Richardson, which is provoked by your response. If this is such a seismic impact on the metals market, are the Government going to need to begin developing industry support packages to ensure that the industry is able to navigate the next few years, regardless of how things unfold in the White House?
Andy Richardson: Yes, absolutely. At the moment, Special Melted Products is trying to expand and make a £60 million to £80 million investment in Sheffield to produce the nickel-based superalloys that are predominantly produced in the US, by the likes of Carpenter Technology and Allegheny Technologies, and are used heavily in jet engines. A jet engine is around 50% nickel-based superalloy. Those alloys cannot really be made in the UK effectively at this moment in time. There has been huge investment in the USA in developing and producing those alloys over the years. The amount of Government support and interest in that investment within Special Melted Products has been difficult to garner.
I am just giving you my personal experience. It is really important that we start to onshore and reshore some of those capabilities. With regard to Special Melted Products, those alloys are not just used in civil aircraft. They are used in military aircraft, whether that is military transporters or jet fighters.
Chair: This has been a very helpful panel. Thank you very much indeed for your evidence. The deal has been broadly welcomed, but it is clear that the tariffs have not yet been lifted. It is unclear when they will be lifted. The distribution of quotas is unclear. We have acknowledged that it is a pretty seismic event for the industries involved. The protections that are enjoyed by our competitors in Europe have not yet been put in place for UK markets. There is a clear message that industry might need support to get through this extremely challenging moment.
That has been an incredibly useful set of evidence. Thank you very much indeed to our witnesses.
Sitting suspended for a Division in the House.
On resuming—