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Dame Angela Eagle (in the Chair)
I remind hon. Members that there have been some changes to normal practice in order to support the new hybrid arrangements in Westminster Hall. Timings of debates have been amended to allow technical arrangements to be made for the next debate. There will be suspensions between debates, which is slightly unusual. I remind Members participating physically and virtually that they must arrive for the start of a debate in Westminster Hall and are expected to remain for the entire debate. I must remind Members participating virtually that they are visible at all times, both to one another and to us in the Boothroyd Room; that is something to be aware of when you are sitting in front of your screen. If Members attending virtually have any technical problems, they should email the Westminster Hall Clerks’ email address. Members attending physically should clean their spaces before they use them and before they leave the room; you will see that there are hand wipes in front of you. I remind Members that Mr Speaker has stated that masks should be worn in Westminster Hall.
Jack Dromey (Birmingham, Erdington) (Lab)
I beg to move,
That this House has considered the proposed closure of GKN Automotive plant in Birmingham.
It is a pleasure to serve under your chairmanship, Dame Angela. I declare an interest as, for 47 years, a member of, first, the Transport and General Workers Union and then Unite, and ultimately its deputy general secretary.
Manufacturing matters to the success of the UK. Manufacturing, the genius of science and the national health service have seen more than 30 million people vaccinated against covid. Manufacturing will be key to recovery. Manufacturing—green manufacturing—is key to combating climate change. Manufacturing getting it right is key to the recovery of Brexit Britain. And manufacturing is key to levelling up.
Automotive is the jewel in the crown of British manufacturing, and key companies in the automotive supply chain exemplify that excellence. GKN is one of them. GKN has a remarkable history. The company goes back over 262 years. It made the cannonballs for the battle of Waterloo and built Spitfires for the battle of Britain. The Chester Road plant has been operational for more than 50 years. Historically, it made parts for the original Mini Cooper. Throughout its history, GKN has been central to iconic moments in British history and British culture. Today, it is a major supplier of drive shafts and prop shafts to the automotive industry, supplying almost every car manufacturer in the UK.
In 2018, GKN was subject to a hostile takeover by Melrose Industries, a City firm with a reputation for buying companies, breaking them up and selling them on. For example, in July 2008, Melrose acquired the FKI group, of which manufacturing firm Brush is part. Melrose began selling off parts of the group in 2009 and sold off about 15 businesses between 2009 and 2014. It implemented severe job cuts at the Brush plant in Loughborough, taking the number of employees from 1,200 down to 600, with a further 270 redundancies in 2018, and, in the process, moving production overseas and hollowing out a once great company. Today, global field service engineers still employed by Brush are balloting against fire and rehire pay cuts of up to £15,000.
In 2018, that chequered past mobilised the GKN workers, their union, Unite, and a cross-party group of MPs—I stress that it was a cross-party group—in opposition to the takeover to demand assurances from Melrose that there would be no repeat of that experience if it acquired GKN. In return, Melrose promised that it was “ambitious for GKN’s future” and wished to make it
“an engineering and manufacturing powerhouse…We are British and work in the national interest.”
Following a hard-fought campaign, Melrose then won the shareholder vote by 52% to 48%, with the support of the hedge funds being critical as they sold GKN short. In the years since the takeover there have been some job losses at GKN Chester Road. However, the workers’ union, Unite, had been in discussions with the company about investment in the plant, and GKN Chester Road appeared in good stead, ending furlough in July last year. It was producing, and then out of the blue in February this year the closure of the Chester Road plant was announced by GKN with the loss of 519 jobs, and twice that number in the supply chain. It is now clear—the company has acknowledged this—that it had been planning the closure of the site for two years, with no consultation whatever with the workers. Its intention now is to export production and jobs from Birmingham to Poland and France. The European sites will be the beneficiaries of the loss of 519 well-paid, skilled jobs in an area with twice the national unemployment rate. I often say about Erdington, “It may be rich in talent, but it is one of the poorest constituencies in the country.”
The consequences of closure will be grave, not least the human cost. I visited the site again two weeks ago. One worker in his late 20s has three kids, including two young children. His partner stays at home to raise their children and he is the only breadwinner in the family. The kids go to school locally. Their whole family life is based in Erdington. What will his young family do if the plant shuts? No other well-paid jobs in the area can replace his current job. Another worker in his mid-20s is a single parent with two young kids. His father and grandfather worked at the GKN plant, with 60 to 70 years’ experience working for GKN in the family. What will he do if the plant shuts?
There are also wider consequences for the British automotive industry. What happens to GKN in the coming months will be a litmus paper test for the Government’s commitment to stand up for the industry. On supply chain consequences, GKN supplies nearly every major car manufacturer in Britain with drive shafts and prop shafts. It is the only firm in Britain with the capability to fulfil the orders that it does. What will be the cost to British automotive of losing a British supplier to Europe, particularly as we emerge from the European Union?
On building up supply chain resilience, there is now a welcome and major debate raging about supply chain resilience and certainty. The continuity of supply chains during periods of disruption are vital, as the past 12 months have shown. It is crucial for the resilience and competitiveness of British automotive over its international rivals that we have British-made parts supplying British car plants. At a time when the debate is raging about onshoring jobs and production back to the UK, here we have a company that is offshoring. What will be the consequences for British automotive if we lose the domestic production capacity of such vital components? Do we really want to move from a just-in-time supply chain of a matter of hours to a supply chain four and five days long, stretching all the way to Poland?
Closure is also a threat to the Government’s global Britain agenda. Part of the Government’s agenda is that, post-Brexit, the UK must look to international markets beyond Europe. The Government have sought trade deals with the likes of Japan and Australia. Aside from the merits or demerits of such deals, to benefit from such free trade agreements UK carmakers such as Jaguar Land Rover need enough local content in their cars to qualify to avoid paying tariffs. A driveline or e-axle equates to 15% of an electric vehicle, a significant part of their value. If we lose GKN’s British-made parts, car makers such as JLR could face significant tariffs on the cars they export to international markets. That poses grave risks to the international competitiveness of the industry. What signal does that send about Britain as a place to do business? We run the serious risk of iconic British cars potentially not being considered British-made, because of the lack of local content in them. Surely that cannot be the global Britain that the Government advocate.
There is a potential solution. We must now act to protect the workers, British manufacturing and the national interest. The consultation between GKN and the workforce is ongoing. I pay tribute to the union convener at the plant, Frank Duffy, and his shop stewards and members, for the admirable leadership that they have shown throughout what has been a difficult period for them. They have my unending support and solidarity.
During the consultation process Melrose’s case for closure has crumbled under the weight of scrutiny from the union. Despite Melrose’s claims, the Chester Road site is not unprofitable, but its accounts have been unduly impacted by transfer pricing within the business, so that other plants appear more profitable. The estimated savings from closure have also been shown to be hugely inflated. It is now clear that modest investment in the plant would allow it to be more productive than GKN’s other European plants. It already is more productive than a number of them. Alternatives to closure must therefore now be assessed in good faith by Melrose. Unite, Frank, and Steve Turner the assistant general secretary have all worked tirelessly to develop a cast iron business case for the future of the Chester Road site and they now rightly expect the company to respond in good faith.
Part of their plan would make the Chester Road plant fit for the future of the electrification process in automotive, so that it can play its part in the transition to electric vehicles, by also manufacturing what are called electric drive units. The chief executive of Melrose, Simon Peckham, made a commitment before the Business, Energy and Industrial Strategy Committee in February to assess such alternatives to closure during the consultation with the workers. Melrose must now honour that commitment. In parallel, together with the workers’ union, Unite, I have had constructive discussions with the Secretary of State and the Minister responsible, Lord Grimstone. It is important that the Government now match words with action and show their resolve to protect GKN and its workers. All parties must play their part in finding alternatives to closure, and all options must be considered to save the 519 jobs, and for the continued prosperity of British automotive, which is so vital to the economy of the west midlands.
From what I have outlined today it is clear beyond doubt that the moral argument is on the side of the workers at GKN, but I am the first to recognise that ultimately what matters to save GKN Chester Road is the business argument. That is why it is so important that Melrose should fulfil its commitment to consider Unite’s alternative business case, and that the Government should also act to ensure that that happens, playing their part to the full at the next stages. The Government are not a powerless bystander in the situation. When the national interest is threatened in this way, by the harm that the loss of GKN would inflict on British automotive, it is incumbent on the Government to act swiftly and decisively. It would be churlish not to acknowledge that the early discussions have been positive, and what the Government do at the next stages will be crucial.
I want to end on a positive note, from my years in the trade union movement. People develop an instinct about when battles can be won or lost, and I am steadfast in my belief that, with good faith on all sides, disaster for 519 workers in Erdington can be avoided. I pay tribute to their strength and courage. I can guarantee that they, the workers, will do their utmost to save the plant from closure. They are the living embodiment of all that is great about this country and British manufacturing. We can walk around the floor, as I have many times, and see generation after generation—for 10, 15, 20, 30 or 40 years and more—serving this nation well. They are truly the best of Britain and the best of British manufacturing. It now falls on Melrose and the Government to match their courage to save thousands of British jobs and to act now to secure the future of the great GKN Automotive plant on Chester Road, Birmingham.
Mark Pawsey (Rugby) (Con) [V]
It is a pleasure to follow the hon. Member for Birmingham, Erdington (Jack Dromey) speaking up for a manufacturing facility in his constituency. He and I have a great deal in common. We are joint chairs of the all-party parliamentary manufacturing group and we both want to see a strong future for manufacturing in the UK. I am, like him, an MP in the west midlands, where automotive manufacture and the components used in automotive are a key part of our local economy.
I am also a member of the Business, Energy and Industrial Strategy Committee and was a member of it in the last Parliament when Melrose gave evidence on 6 March 2018 ahead of its acquisition of GKN. As the hon. Member said, Melrose also gave evidence to the Committee on 23 February this year. I support his interest in supporting manufacturing in the UK, but as a former business owner I believe there must be occasions when we, Government and broader society should respect the ability of business owners and managers to take the action they consider necessary—often difficult and challenging decisions—in the best interests of their company, and accept that those decisions are being taken for the right reasons.
When GKN came before the Select Committee ahead of Melrose’s acquisition, it is fair to say that there was a pretty strong challenge by my colleagues on Melrose’s plans for the future of GKN. There were questions to the three founders of Melrose amid concern that Melrose was attempting to buy the company on the cheap and then sell off individual bits. In that session, Melrose set out its reason for the acquisition, which was principally to improve a business that in recent years had been only poorly run. As a member of the Committee, I was able to ask the witnesses what their plans were for the long term and what reassurance they could give that they would not simply sell it off. Simon Peckham, the chief executive, said:
“We say we have a three to five-year strapline, and we have always said that.”
He added:
“We are quite happy to hold businesses for longer. We are quite happy to go back to our shareholders if necessary and say, ‘This is the wrong time to do something now. We will keep this business.’”
So there is evidence that where the business is right, they will keep it. I therefore asked:
“Could we be confident that in five or 10 years’ time the structure…would be broadly as it is today?”
Simon Peckham was straight. He said:
“No. We have said, between years 4 and 5, we will sit down and work out what the right thing to do is. I cannot give you a commitment about 10 years’ time, but we have set out very clearly in our offer document exactly what we mean.”
I also asked Mr Peckham about how the acquisition of GKN was in line with the Government’s industrial strategy. Mr Peckham replied:
“At the end of the day, we want to invest in R&D. We want to develop these businesses. We want to grow them. We want to improve them. We want to take a GKN business that we think is currently underperforming.”
He said that Melrose had access to the ability to raise finance
“to build GKN, if it is the right thing to do”.
He added:
“I accept we are not saying we are going to hold these assets for ever. We are not sitting in front of you misleading you.”
It is therefore clear that Melrose intended to acquire the business, have a look at it and see what it thought needed to be done.
Mr Peckham appeared before the Committee on 23 February this year—three years into its ownership of the business—for a session that was essentially about Brexit, but the opportunity was there for the Chair to ask a question about Erdington. Simon Peckham replied:
“Erdington is one of the difficult decisions that we were presented with. As well as the good stuff we do, when we inherited GKN it was basically a troubled business. Your Committee spent quite a long time talking to them about that and the profit warning they did at the time. As a business, it needed improvement.”
Additionally, he said:
“Let me turn to Erdington, because it is a difficult position. It is one of the difficult things. We have complied with the spirit and the word of every undertaking we gave, but we also said we would make difficult decisions from time to time. Unfortunately, Erdington is one of those.”
Ahead of that session, Melrose sent its “Briefing note: Melrose meeting its commitments”. That set out legally binding undertakings for five years to ensure that Melrose remained headquartered and listed in the UK, that the board would have a majority of UK residents, and that GKN Aerospace and Driveline businesses would retain the same rights to the GKN trademarks. Significantly, rightly or wrongly, there were no undertakings in relation to jobs, employment or sites of any of the GKN businesses.
It is important to consider the business environment since that acquisition took place. In the past 18 months, businesses have had to face the pandemic and the uncertainty of Brexit. There was a huge fall in car sales: the Society of Motor Manufacturers and Traders reported 2020 sales were down 30% ,with showrooms shut for several months. The biggest decline was in diesel cars, but petrol reduced, too, due to a fast growing switch to electric. That sector is not currently served by products from the Erdington factory. That must have played a part in Melrose’s decision to wind down the factory over the coming 18 months.
I have listened carefully and know very well the case made by the hon. Member for Birmingham, Erdington. I am keen to see a strong future for UK manufacturing. I share his concern about the loss of the facility and the impact on his constituents. However, to be fair to Melrose, it made its position pretty clear on acquisition. That was accepted by GKN’s shareholders. The challenging business environment has brought forward a difficult decision. I believe the company must be able to take the action it deems to be in its best interests, while honouring the commitments it has made.
I hope that the phased approach that Melrose proposes over the 18-month period will minimise any impact on those affected individually, and the broader area in Birmingham. I have heard from the hon. Gentleman some of the alternatives proposed for the facility, and I hope that they might provide the basis for retention of some activity there, perhaps under the Melrose ownership or the ownership of others. I very much look forward to hearing from the Minister what steps she may be able to take to assist in that regard.
Mick Whitley (Birkenhead) (Lab) [V]
It is a pleasure to serve under your chairmanship, Dame Angela. I congratulate my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) on securing this debate. I thank him for all he has done to secure the long-term sustainability of the GKN Birmingham plant and to support the 519 workers whose livelihoods are now under threat.
First, I should declare an interest. For 27 years I worked at the Vauxhall car plant at Ellesmere Port, before serving as the north-west regional secretary of Unite the union, of which I remain a member.
The automotive sector is truly the jewel in the crown of British manufacturing. It is deeply distressing to see its future thrown into jeopardy as a result of the pandemic, Brexit and a neglectful Government whose pledges to level up and build back better are worth less than the paper they are written on. We should be very clear: the closure of the plant is not an inevitability, as shop stewards of the plant have demonstrated in their two-part alternative plan. GKN Birmingham remains financially viable. With the right investment and direction, the plant can soon be returned to profitability by improving productivity and transitioning towards the production of parts that will be essential if the UK is to become a world leader in the electric vehicle revolution. The proposals are a testament to the expertise and imagination of workers on the shop floor, whose views are so often disregarded by management, but deserve serious consideration.
As my hon. Friend the Member for Birmingham, Erdington said, the alternative of shuttering the plant doors for good would devastate his constituency, which, like mine, already suffers some of the highest levels of deprivation and joblessness in the country.
The consequences of the plant’s closure would also be felt much more widely. The offshoring of a vital part of the automotive supply chain, and a loss of precious jobs, skills and infrastructure, would be a body blow to an industry struggling to recover from the worst year in its history. As a member of the International Trade Committee, I am acutely aware of how the pandemic dramatically exposed the vulnerabilities of international supply chains. Now, more than ever, we need to invest in domestic industry, and build up skills and well-paid jobs at home. That must begin with the Government investing in the future of Britain’s automotive industry at GKN Birmingham and Vauxhall’s car plant at Ellesmere Port.
When it comes to protecting a critical part of the supply chain at GKN, no option should be off the table, including part or whole state intervention or nationalisation, or any legislative measures that safeguard the plants from asset-stripping venture capitalists. If the Business Secretary fails to act now and make the crucial investment needed to allow the transition of plants like GKN and Vauxhall towards the production of electric vehicles and parts, it will not only condemn hundreds of jobs to the scrapheap, but fatally undermine the Government’s commitments to phasing out diesel and petrol vehicles, and achieving net zero emissions.
The Government face a major test—are they serious about levelling up left behind communities such as Birmingham, Erdington and Birkenhead, or is their pledge to deliver a green industrial revolution just another empty Tory promise? In Birkenhead and Wirral, thousands of jobs hang in the balance.
Grahame Morris (Easington) (Lab)
Thank you for accommodating me and allowing me to be here in person, Dame Angela. I congratulate my good and hon. Friend the Member for Birmingham, Erdington (Jack Dromey) on securing this debate, which is not just important for Birmingham and the west midlands, but is of national significance because of the nature of the issues. I declare an interest as a long-standing member of Unite the union and chair of the Unite group in Parliament.
My hon. Friend has described what Melrose is doing to the GKN automotive factory in Birmingham. Frankly, it is an absolute disgrace. Out of deference to the procedures of the House, we do not curse and use foul language, but what is happening to the loyal workforce at this plant is an outrage. Over 500 jobs—my hon. Friend says 519—many thousands of jobs in the supply chain, and more than 50 years of proud history at the site are in the firing line. If this plant is allowed to close, and I am looking here at the Minister—we do not want just warm words but definite actions—it will be a nail in the coffin of UK manufacturing. We look to the Government for a response and a reaction.
GKN is a living, breathing symbol of a great British company. It has been building critical equipment, including for the defence of the realm, for over 260 years. My hon. Friend mentioned that it was involved in building Spitfires, and cannon balls that were used by the British artillery at Waterloo. Surely that is a history worth defending and a future worth saving.
I express solidarity with Steve Turner, assistant general secretary of Unite, who has been involved in plans to save jobs at the plant and Frank Duffy, Unite convener there, and his members, who have fought valiantly and continue to fight. Despite company promises to build a “British manufacturing powerhouse”, many Members of Parliament, including my hon. Friend and others present, and the trade unions, warned what would happen when Melrose launched its hostile takeover bid three years ago. Sadly, despite the comments, made I am sure in good faith, of the hon. Member for Rugby (Mark Pawsey), those predictions have proved correct. I do not accept the argument that the plant is not viable. Melrose’s directors have been heavily criticised for excessive bonuses and profits. I will not quote a figure, but it is eye-watering.
It strikes me that there are some parallels with what has happened with the European super league, where an elite wring out value from an organisation—in this case, GKN. As we have heard, Melrose is already closing one factory in Birmingham, and now it wants to throw the other, on Chester Road, on the scrapheap with the intention of stripping it of its assets, because that is what asset strippers do: they buy companies cheap, break them up and sell them off, and they throw away what is left. I had some experience of it in the north-east many years ago with Helical Bar, a property company that bought up the capital assets that were sold off cheap from Aycliffe and Peterlee Development Corporation, then sold them off, making a huge profit for Michael Slade, the chief executive, and walked away without adding any value to the community or to the local economy.
The more than 500 skilled engineering jobs under threat at Birmingham are good jobs and part of the backbone of British manufacturing, but apparently they are not valuable to Melrose, because the company just wants to throw them away. However, these jobs are valuable to the workforce themselves—of course they are. They are valuable to the families who the workers support. They are valuable to the communities in the west midlands where the people live. They are valuable to the trade union. They are also valuable to the economy, to us here in this room; well, I hope they are. The question I put to the Minister is: if they are valuable, what are Ministers going to do to save them? What are they going to do to save British manufacturing, especially the automotive sector, as we shift rapidly to electric vehicles? I look forward to the Minister’s comments later in the debate.
The key issue with the GKN plant in Birmingham is whether it is viable, as my hon. Friend the Member for Birmingham, Erdington touched on. Unite the union has worked through the figures and looked at the numbers with independent experts that have been recognised by the company. They looked at whether it is viable, and at Melrose’s claim that, in fact, the plant has been losing money for several years. According to the information I have seen, this seems to be a case of what we would call creative accounting. It is called transfer pricing, where large companies that operate over several sites, often based in different countries, pretend the different sites are buying and selling from each other while building a product. In that way, they can say that some sites are theoretically profitable while others are loss-making, depending on what prices the company chooses to charge itself or elements of itself.
It seems to me that that is a fiction, and it is often used to reduce the tax paid in some countries because the profits made in another are higher. In reality, all the sites contribute to the value of the product made, and that is certainly the case with GKN in Birmingham. Melrose bosses think they can just get the work done cheaper in Poland and France, an appalling attitude for a company that promised the Business, Energy and Industrial Strategy Committee only a short time ago to build a British manufacturing powerhouse.
Unite has developed an alternative plan with the independent experts, and they make it clear that it is possible not only to make a profit on the site but to increase capacity by 50% and deliver annual savings of up to £8 million for GKN. Most importantly, this will save those valuable jobs and create more jobs for the future, but it seems that Melrose is only interested in short-term profit. We need the Government to make Melrose see that this is an offer it cannot refuse. That will mean support for the rapid shift to electric vehicles, which the factory is perfectly placed to take advantage of, as my hon. Friend said.
GKN Birmingham Chester Road produces Driveline components, including side shafts and prop shafts; small, specialist components. According to Unite, the e-axle, known as the eDrive, which is an existing GKN technology that was developed at its UK innovation centre, is a key product that can secure the Birmingham site’s long-term future, as well as the UK’s critical manufacturing capability. The demand for that product will only increase as we move towards full electrification, but Melrose must get serious about supporting its manufacturing base, and so must the Government.
When the company’s chief executive, Simon Peckham, gave evidence to the Business, Energy and Industrial Strategy Committee in February, he put the blame squarely on electric vehicles. He claimed that
“electrification is a threat to jobs as well as an opportunity to grow jobs.”
He also said:
“For GKN Automotive as a whole, electrification is an opportunity; unfortunately, for”
the Birmingham plant “it is not.” We do not accept that. The workers do not accept that, and nor does Unite.
The question is: do the Government accept that electrification will not be an opportunity for those highly skilled engineers, who make parts for top brands, including Jaguar Land Rover, Toyota, and Nissan in my part of the country? Are Ministers, who promised a British manufacturing powerhouse, prepared to let Melrose throw those jobs on the scrapheap? Are they giving up on those skilled workers at a time when they need support most of all? I hope the Minister will let us know when she responds to the debate, because we will not give up on them, and neither will their union. We will fight all the way, because we are fighting for the future of British manufacturing. It is a fight that we are determined to win, even if it takes strikes, protests and other ways to disrupt Melrose’s disgraceful plans. The battle for the Birmingham plant has only just begun.
It would be useful if the Minister let us know which side she is on. Is she on the side of the skilled, productive workers, or that of the short-term, greedy bosses? I imagine the whole country would like to know the answer, especially as we go into the local elections in May. I hope the Minister will tell us.
Dame Angela Eagle (in the Chair)
Before calling Rachel Hopkins, I remind Members who are physically present to put their masks on when they sit down.
Rachel Hopkins (Luton South) (Lab) [V]
It is a pleasure to serve under your chairship, Dame Angela. I congratulate my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) on securing this extremely important debate. I am a Unite trade union member, and all of us in the Labour and trade union movement fully understand, particularly on International Workers’ Memorial Day, that an injury to one is an injury to all. That is why I am speaking in this debate as the Member of Parliament for Luton South, a constituency in my home town of Luton that has a long history of car and van manufacturing at the Vauxhall plant, which provides skilled jobs. I know how important those jobs are to our local economy and our communities’ livelihoods, so I send my solidarity to the workers at GKN in Erdington, whose jobs are at risk.
Manufacturing matters, and GKN is a vital strategic supplier to our automotive sector. It has the capacity to transition to new products for electric vehicles, as we have heard. That green capacity will be essential in the future for plants such as Vauxhall in Luton South. Since acquiring GKN, Melrose has sought to offshore manufacturing and transfer—
Dame Angela Eagle (in the Chair)
Order. Rachel, could you hold your microphone a bit closer? That is much easier for us to hear. When it is dangling, you are going very quiet. If you hold it closer to your mouth, that would be fantastic, because we will hear you much better.
Rachel Hopkins
I am very sorry, Dame Angela. Apologies for that.
Since acquiring GKN, Melrose has sought to offshore manufacturing and transfer successfully won contracts for UK work away from Birmingham. We know that it wants to offshore production to Poland and France to maximise profit, showing a total disregard for its loyal workers and the surrounding community. As my hon. Friend the Member for Birmingham, Erdington said, the GKN plant is based in an area where unemployment stands at 12.5%, which is significantly higher than the national average. The loss of 519 skilled jobs at the plant in the middle of a pandemic would devastate the community.
The closure of GKN would also have a hugely damaging impact on our domestic automotive supply chain. As we have seen with other forms of manufacturing during the pandemic, it is important to have a robust domestic supply chain. That is increasingly essential for the automotive sector, due to the new rules of origin requirements with regard to tariffs.
It is economically illiterate of the Government to allow the closure of GKN in Birmingham and the offshoring of production. The loss of GKN—a critically important tier 1 supply chain manufacturer—will have a knock-on impact across our automotive sector. What I and others here find astounding is Melrose’s lack of discussion with the workers’ trade union, Unite. Unite’s two-stage plan for the GKN plant, formed through work with shop stewards and independent experts, outlines how productivity can be improved with additional savings, followed by a plan to produce eDrive components for electric vehicles. Estimates suggest that would save more than Melrose’s proposal to close the plant in Erdington, as independent experts believe Melrose has underestimated the cost of relocation.
We need companies such as GKN with eDrive technology based in the UK to help facilitate the sector’s green transition. Demand is increasing for electric vehicle components, with global electric and plug-in hybrid cells expected to rise to 40 million vehicles annually by 2025. Expansion of the eDrive could secure the site’s long-term future and play a pivotal role in the UK industry’s critical manufacturing capability. The eDrive equates to 15% of electric vehicles, comparable to next generation batteries. By 2030, that is expected to increase and make a significant contribution for exporters to meet new rule-of-origin thresholds. The room for GKN’s expansion is there, ready and waiting, and may not only save jobs, but could create them in the long run.
If Melrose intends to push on with this decision, it poses a critical temperature test of the Government’s industrial strategy, because what is levelling up if it is not protecting, promoting and creating skilled, well-paid jobs that are rooted in communities across the UK? If the Government allow GKN Birmingham to close, it will undermine and further expose the UK automotive industry’s supply chain to risk.
The Government must intervene and work with all parties to prevent the closure of GKN in Birmingham, and preventing the closure must be part of a wide interventionist green strategy to transition the automotive sector, ahead of the 2030 ban on new petrol and diesel vehicles. We need an electric vehicle revolution that backs manufacturers and creates new jobs. The Government must lead this step change by creating new gigafactories, protecting and enhancing the domestic supply chain and making electric vehicle ownership affordable. The UK has the skills and capacity to be a global leader in the electric vehicle market, but the Government must create the foundations for the sector to flourish.
Lucy Powell (Manchester Central) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Dame Angela. I add my congratulations to my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) on securing this extremely important debate on the future of GKN, a vital employer in his constituency, in a vital industry for the UK economy. He is a really energetic champion for the communities he serves, as I know very well first hand, and he gave a passionate and important speech, which set out perfectly the issues before us today and, crucially, the alternative to closure. We have heard some excellent speeches today that also made those points very clearly. I declare that I, too, am a member of Unite the union, which I will be mentioning in my speech today.
I want to express my solidarity with the workers at the plant in Erdington and in the supply chain who are at risk of losing their jobs. Yesterday, I met Frank Duffy, the Unite convener. Like so many others working at the plant, he has decades of service. The announcement of closure earlier this year came as a devastating blow to him and hundreds of families across the region who have given their lives to GKN over the decades.
I put on the record my deep and profound concern about the decision by Melrose; I hope very much that it will think again. The decision flies in the face of assurances Melrose gave to the House via the BEIS Committee only three years ago. I heard what the hon. Member for Rugby (Mark Pawsey) had to say, but I disagree. This is what is wrong with corporate law and public policy in this country; it is about so much more than simply shareholder return—it is about UK plc. I will explain that a little more.
Let us be in no doubt, as tragic as the proposed closure would be for workers such as Frank, this issue is about so much more than this important and historic plant in Erdington. What is happening here is a canary in the coalmine for UK manufacturing, automotive and decent jobs that level up. How the Government respond is a huge test. Its significance cannot be overstated.
What kind of Government are they? Are they one that actively supports and, where necessary, intervenes in British industry; one that has a real and meaningful plan to transition to a green new deal in key sectors such as automotive; one in which global Britain leads the way in the development and production of new electric technologies, providing decent, high-paid jobs for the future; and one for which levelling up is about a lot more than rhetoric and piecemeal pots of cash handed out on mates’ rates? Or are they a Government—which I fear the Business Secretary wants them to be—who are unashamedly free market and laissez-faire, one in which people, place and opportunity are the fall guys for globalisation and free-market forces?
Ministers might talk the talk of sharing prosperity in every part of the country, of a global Britain, of championing manufacturing and of greening our economy, but what actions they take here will show whether they are actually prepared to walk the walk as well. Be in no doubt at all that we are in a high-stakes global race for green jobs, the technologies and the production capacity, a race in which Britain is being massively outgunned and outmanoeuvred by other countries prepared to invest and intervene on an unprecedented scale to ensure that their domestic industries and workers reap the gains of that new drive.
The status quo does not exist, as the GKN situation shows. Either we fight hard to retain the capacity, the jobs and the opportunities, or they go elsewhere. Let us not forget that GKN is a British company, now proposing to offshore its last UK automotive manufacturing base, against the commitments made by Melrose at the time. Do the Government think that Germany, France or even the US would allow the move of one of their key industrial businesses? Not a chance. This is a key test of Conservative industrial strategy—if indeed they have one.
The Government’s actions so far suggest that they do not believe in an active industrial strategy. They scrapped the Industrial Strategy Council. Through covid, they have had an aversion to sector support, and we have seen a rebranded plan for growth that does not appear to create any growth. There can be no growth for communities in Erdington and beyond if Ministers do not press the company to change course and to invest rather than close the plant.
There is an alternative here, as we have heard so well during this debate. Unite and the workforce, with industry experts, have developed a compelling alternative to closure, which involves an improved productivity plan and a major shift to new products for electric vehicles for their main customers, Jaguar Land Rover and Toyota—which, by the way, lead the way in electric and hybrid vehicles. GKN’s only remaining automotive plant specialises in technologies that are critical to the development and expansion of UK vehicle production—here, just in time, domestically produced, which would not get tied up in rules of origin and the new red tape that we are seeing.
Surely it is a no-brainer for a Government committed to British industry, to British car manufacturing and to Britain leading the way in electric vehicles to do whatever it takes to retain that capacity here in the UK. Or do they stand by and watch it move to Poland and France? This is the real test for this Government, and I really hope that it is one that they will not fail. Will the Minister tell us today, will her Government do what it takes and put pressure on the company thoroughly to explore the alternative business plan, or does she think that that is not her role?
This is also a test of what kind of economy the Government want post Brexit. We were promised the freedom to support and intervene in British industry, outside the EU and free of the constraints of state aid rules. What is the point of that freedom if it is not used? We were promised an economy that could be at the forefront of seizing new opportunities, not one in which key assets were being offshored back to the EU. We have the EU trade deal, but there are clearly issues with rules of origin and the fact that the Government’s much boasted tariff-free trade is anything but, particularly for manufacturers caught up in a web of more red tape and bureaucracy. There is no doubt that this is a factor here.
The planned closure of GKN is also a test for the kind of recovery and economy we want post-covid. If the pandemic has taught us anything about industry, it is that we need more than simply ingenuity and leading innovation; we also need domestic and resilient production capacity. We have seen that long supply chains are not resilient, and that the lack of domestic capacity is bad for our country. Automotive production is a delicate ecosystem—once one part of the system is gone, it weakens the entire thing.
That is why GKN is the canary here. If Ministers are going to follow through on creating a more resilient domestic manufacturing sector, they must protect the automotive supply chain. This plant is right next door to one of its main customers, JLR. The plant in Poland that will take over production if these plans go ahead is four and a half days away. We are seeing the impact of long supply chains already, where production at two of JLR’s plants has recently had to stop because of delays in importing microchips.
Furthermore, the economic hit we have taken during the pandemic—one of the worst in the G20—requires more intervention and stimulus to kick-start recovery and seize the opportunity of the green transition for a more productive, higher skilled, technology-driven economy. That simply will not happen by chance or by market forces. The costs and investment required are too high, and the infrastructure and skills needed would never be met by the private sector alone. All the while, our global competitors are pump-priming their recovery; just look at what is happening in the US under Biden.
The situation at GKN also tests whether the Government really do have a recovery plan, or if it is just more rhetoric. If the Government are serious about levelling up, then that has to be about safeguarding good, decent jobs in the midlands and across the country; investing in people and places; and ensuring we see a transition to green which is just and fair. Letting this plant close on the basis of short-term decisions by private equity flies in the face of levelling up.
This plant has a proud industrial heritage, with over 50 years’ history at the site. It is the only British automotive plant owned by GKN, but now it threatens its future. This is a UK company planning to close its only UK automotive plant and move the jobs overseas. Frankly, it is a disgrace. If the Government care about people and places and levelling up, then it starts with anchor industries and companies in places such as Erdington, where unemployment is twice the national average. The Government must stand up for workers in Erdington and across the country in the supply chain, not stand back and let vulture finance destroy jobs and decimate the proud history in this community.
This is also a test of the Government’s commitment to communities and places in levelling up. That is why we need deeds, not words. While the Government are high on ambition, they are low on action. Labour backs our automotive industry, and we have set out an ambitious three-point plan to safeguard the industry’s future through investment in gigafactories and measures to make owning an electric vehicle more affordable.
Make no mistake, the eyes of workers and voters across the midlands are on the future of GKN and our world-leading automotive sector. If the Government allow the plant to close on their watch, so many more jobs and businesses will be threatened going forward, from Vauxhall at Ellesmere Port to the production location of that iconic British car, the Mini, going electric. Many are watching to see whether or not the Government are really serious about their rhetoric. This is a big test for the Government, one that none of us want to see them fail. The consequences are too great.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Amanda Solloway)
It is a great pleasure to serve under your chairmanship, Dame Angela. I congratulate the hon. Member for Birmingham, Erdington (Jack Dromey) on securing this really important debate today. I have an awful lot of respect for him, as he knows. I agree with the hon. Member for Manchester Central (Lucy Powell) about the passion with which everybody has spoken in the debate. It has been absolutely crucial.
The hon. Member for Birmingham, Erdington is a long-standing advocate for the UK automotive sector and champion of the world-class automotive businesses in his constituency, including GKN and Jaguar Land Rover. The proposed closure of the GKN Automotive plant in Birmingham is deeply disappointing. I myself have a background in manufacturing of over 20 years, as the hon. Gentleman probably knows, and I feel a great connection to British industry—in fact, my great-uncle flew Spitfires, so I absolutely appreciate that aspect. I am really sympathetic to the difficulties associated with a situation such as this.
The Government are supporting manufacturing. “Build Back Better: our plan for growth” sets out the Government’s plans to drive growth and build on our competitive advantage through significant investment in infrastructure, skills and innovation. We will pursue growth levels in every part of the UK, enabling the transition to net zero and supporting our vision of a truly global Britain.
The proposed closure of the GKN plant was a great shock to the employees and will be hugely concerning for them and their families. The plant is part of the fabric of the local community, producing components, as we know, for vehicle makers including JLR, Nissan and Toyota. It is a really important part of the UK automotive sector, which provides 149,000 manufacturing jobs. There are examples of employees spending most of their lives at GKN, with some of them being there from the time they leave education until retirement. As we have heard, there are also people in their 20s with young families to support.
The Government are committed to doing what we can to save those high-skilled jobs. The Minister for Investment, Lord Grimstone, met with Liam Butterworth, chief executive of GKN Automotive, last month. That helped the Government to understand the rationale behind the proposed closure and explore options for securing a long-term, sustainable future for the Birmingham plant. At the meeting, welcome assurances were given that all viable alternatives to closure will be considered. Also, my right hon. Friend the Business Secretary and the Minister for Investment met with the hon. Member for Birmingham, Erdington and representatives of Unite the union regarding this issue last month. The mandatory employee consultation provides a platform for alternative proposals to closure to be presented. Unite has developed its sustain-and-transition proposal, and we encourage it to table the proposal formally with GKN if it has not already done so.
The hon. Members for Birmingham, Erdington and for Easington (Grahame Morris) referred to transfer pricing. We have been told by GKN that sales between its plants are carried out on commercial terms, and that is independently audited.
Ultimately, the future of the plant is a commercial decision for GKN management, but we stand ready to discuss viable alternative proposals with GKN management. That could involve investment in capital equipment or skills to stoke the plant’s competitiveness. In the event of closure, with production carefully wound down over the next 18 months, the priority will be to find new jobs for those people who lose their jobs. GKN has committed to supporting its employees through this difficult time. The Minister for Investment will follow that closely.
As we know, the Melrose takeover of GKN in 2018 faced considerable opposition, with cross-party calls for it to be blocked on national security grounds. The takeover was considered by the then Secretary of State fairly and impartially, in accordance with the legal powers provided through the Enterprise Act 2002. Under the 2002 Act, the Government have the power to intervene in mergers on public interest grounds. There are, however, strict and limited grounds for intervention. Ultimately, the review determined that there were no grounds for objecting to the deal. Melrose was required to make commitments to the Ministry of Defence to address matters relating to national security.
In March 2018, the then Business Secretary wrote to Simon Peckham, chief executive of Melrose Industries, setting out additional binding commitments that would be needed in the event that the takeover bid was successful. A copy of the letter and the response from Melrose are available in the House of Commons Library. As we have heard today, there are differing views on whether those commitments have been met. The legally binding post-offer undertakings made to the Takeover Panel are independently verified every six months by third party advisers. The advisers provide a report to the Takeover Panel confirming Melrose’s compliance.
As my hon. Friend the Member for Rugby (Mark Pawsey) said, these are challenging times for the automotive sector. In 2020, 920,000 cars were produced in the UK, which was 29% down on 2019 levels. Businesses across the automotive sector, including GKN, have had to restructure to maintain competitiveness.
The Government have stood shoulder to shoulder with businesses and workers to support them through these challenging times and have provided an unprecedented level of support, including the furlough scheme. That helped protect the income of around 60% of the automotive sector’s full-time employees when production was temporarily suspended last year. In addition, £4.6 billion of liquidity has been provided to the sector through the coronavirus loan scheme. The Government are committed to supporting the sector through these challenging times, so that it can exploit future opportunity.
The global automotive sector is undergoing significant change, as production shifts to zero-emission vehicles and supply chains are restructured to produce new technology. Modern developments in production plants are being accelerated and creating a once-in-a-lifetime investment opportunity for the United Kingdom. To be clear, this is not just about protecting the status quo and retaining the manufacturers that we have in the UK, including JLR, Nissan and Vauxhall, but about stimulating a high-tech market that cements our global position at the forefront of mobility.
The Government have announced £500 million of funding as part of a commitment of up to £1 billion over the next four years through the automotive transformation fund. That will help build, at pace and scale, an internationally competitive zero-emission vehicle supply chain in the United Kingdom, including in key regions where levelling up is crucial, such as the north-east, Wales and the west midlands, as highlighted so well by the hon. Member for Manchester Central.
The UK-EU trade and co-operation agreement provides a phased introduction of the rules of origin requirements for zero-emission vehicles. That was welcomed by the UK automotive sector as it allows manufacturers time to increase local content—an issue raised by the hon. Member for Birkenhead (Mick Whitley). GKN will be an important part of that future supply chain. It is developing cutting-edge vehicle technologies at its innovation centre in Abingdon. Securing investment in gigafactories is a priority to meet demands from UK-based vehicle makers. The Government are in advanced negotiations with several potential investors.
The Government are committed to ensuring that the UK continues to be one of the best locations in the world to research and develop the next generation of vehicle technologies and to manufacture zero-emission vehicles. GKN is at the forefront of these technological developments through its innovation centre in Abingdon. Our aim is that the Birmingham plant also continues to be at the heart of GKN’s manufacturing operations.
As I explained, the Government are ready to discuss alternative proposals that could include investments in capital equipment or in the skills needed to secure future vehicle technology. That would help provide long-term, secure jobs for the dedicated and skilled employees.
Jack Dromey
I thank all those who have spoken in what has been a powerful debate. We have heard about experiences from Luton to Birkenhead in traditional areas of engineering and motor manufacturing. My hon. Friend the Member for Easington (Grahame Morris) made a powerful contribution and pointed out that the four directors of Melrose have done rather well out of what has happened in the last three years.
Let me go straight to the heart of the matter. This is a great plant with a great history that must not now become history. That would be a betrayal of the workers concerned, but also a betrayal of the British national interest. As the shadow Minister, my hon. Friend the Member for Manchester Central (Lucy Powell), said and the Minister acknowledged, there are serious implications if the remaining domestic producer of vital components for the industry closes and we become dependent on supply chains from France, Poland and beyond. There are serious issues in terms of the British national interest.
It is fascinating that today, in its interesting report, the Covid Recovery Commission talks about
“the Great British Supply Chain”.
A fundamental rethink is under way in terms of vital strategic capabilities, and certainly the Chester Road plant is an absolutely vital strategic capability for companies such as Jaguar Land Rover and Toyota.
Crucially for the next stages, as a former trade unionist I always used to say that ultimately it is about getting to an outcome, a result, for the workers and for the country. That involves three parties. First is Unite, whose work on a well thought through and creative alternative I applaud. Let us be clear: it stands ready to have whatever discussions are necessary. In my experience, they can be difficult discussions, but Unite stands ready to play its part.
Second is Melrose. As I think has become widely known, I am not its greatest fan in terms of how it has conducted itself, but it has committed to looking at alternatives to closure and we must hold it to that commitment. Third is the role of Government to defend the British national interest and unashamedly recognise that the loss of 519 directly employed jobs and all those in the supply chain will have devastating consequences for the industry in the midlands in one of the poorest parts of our country.
The Minister has said some interesting and helpful things about our preparedness to look at a range of options for capital equipment and skills. These things always go in two phases. The second phase—God forbid—I never want to get to, and that is what happens if closure takes place and we have to pick up the pieces. Believe you me: it would be absolutely heartbreaking, were that to ever happen. The first phase is the one that we must concentrate on, so that the plant does not close and so that creative, well thought through alternatives are found and negotiated with assurances given. That is eminently achievable.
The Minister is right that we both have strong backgrounds in the world of work, and I have been involved, sadly, in many, many workplace closures over the years, some of which we have won, such as Rosyth Dockyard. I know what it takes to get to a result; it is eminently achievable. Forgive me if I stress this for one final time: the role of Government will be absolutely key in holding Melrose to its commitments. If they do that, it is possible for a plant with a great history to have a great future. If we meet the workers or talk to car industry executives, we come to recognise just how important this is. It would be utterly heartbreaking, and a betrayal of the British national interest, were the plant to close. That must never happen.
Question put and agreed to.
Resolved,
That this House has considered the proposed closure of GKN Automotive plant in Birmingham.