Burton’s Foods (Moreton)

Lord Field of Birkenhead Excerpts

Wednesday 26th January 2011 Commons Chamber

[Ms Angela Eagle (Wallasey) (Lab)]

I draw the attention of the House to my entry in this year’s Register of Members’ Financial Interests.

The Burton’s food factory in Moreton is the largest private sector employer in my constituency and has been a mainstay of employment in the communities of Moreton and Leasowe for well over half a century. The site currently employs 342 people on permanent contracts, but biscuit making is a seasonal activity so there is the potential for an extra 200 seasonal workers during busy production times. It is not unusual for seasonal workers to work for up to 10 months of the year. During the production peak last year, for example, 566 employees were working in the factory.

Last year the company announced a supply chain review, but only days into the new year it announced the shocking news that it intends to close down the entire site by the end of 2011 with the loss of all jobs. It wishes to outsource chocolate refining for Cadbury, a specialism long performed to a very exacting standard in Moreton, to an unspecified supplier. It plans to invest £7 million in two other sites, Llantarnam in Wales and Edinburgh, as well as consolidating its distribution operations, again to an unspecified place.

We are at the beginning of the statutory 90 days of consultation that must by law precede redundancies. The work force, their representatives and I are determined to use that period in the most constructive way that we can to try to persuade Burton’s Foods to change its mind about this disastrous decision. My first priority is to work with all interested parties to win the battle to save these jobs, which why I am so pleased that the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), is here to answer the debate tonight. I have given him advance notice of the questions with which I hope he can help me, so that we can give the work force the best chance of saving their jobs and avoiding the devastating effects that closure would have on the communities I represent. I shall return to those considerations, but first I want to deal with the developing situation in more detail.

I am grateful to Burton’s Foods for agreeing to make available the information on which it is basing its decision, but unfortunately it has not yet delivered on that commitment. The so-called data room that will house the information was due to be opened by Monday of this week, but the most recent information I have is that it will not be open until Thursday. That means that two weeks of the 90-day consultation period have already been wasted in waiting for the promised information to be provided. There are also serious worries that the quality, accessibility and level of detail of the data will not be good enough to facilitate a testing analysis of the company’s approach to the closure decision. I make this plea to the company: for speed and transparency, please co-operate with us and make available all the information in an easily accessible way. We aim to generate different proposals that offer a viable alternative to the decisions that the company has made in its supply chain review.

Sadly, we have been in this position before with Burton’s Foods. In 2007, the company earmarked the factory for total closure, but that was just months after the expiry of legal obligations it had agreed to in 2001 to access £4 million-worth of regional selective assistance from the regional development agency and rates rebates from the local authority. After that closure announcement, the work force were escorted off the site by security guards who had been hired specifically for the purpose. After that rather difficult beginning, we, together with the work force and their representatives, and after a successful campaign in the local community and this House, persuaded the company to change its mind. On 15 August 2007, a memorandum of understanding between the management and the Unite union, on behalf of the employees, was signed, saving manufacturing at the site and safeguarding a total of 437 jobs. In exchange for an undertaking that there would be no major restructuring on the site before May 2012, the work force accepted the proposed changes, some of which were painful, including new working practices. More painfully, there were 500 job losses despite evidence that the company’s productivity had been increasing consistently year on year.

The Moreton work force have more than delivered on their side of the deal in the MOU. They have increased their productivity still further, despite having had pay freezes in four of the past 10 years and very modest increases in the other years. They have delivered £12.7 million-worth of cost reduction to the business and have agreed major changes in working practices to achieve that transformation. Let me give two examples that illustrate the nature of their commitment.

The Moreton factory produces the Christmas selections at the high-value end of any biscuit manufacture, and have been responsible for increasing the sales of seasonal products by 16%. That is four times greater than for Burton’s main competitor and is an astonishing achievement in a tough and competitive environment. Likewise, the new Duels product, which was introduced relatively recently, was first made in Moreton and is now manufactured at the factory. The plan was for that new product to break even in 18 months, but due to the hard work and commitment of the managers and the marketing team, as well as the undoubted skills of the work force at Moreton, it has grown from nothing to a £20 million turnover business in just 12 months. None of the work force could have done any better—and what is their reward? The sack.

There are serious issues about whether the memorandum of understanding has been honoured by the company. No one is saying that conditions are anything other than tough in the £2.2 billion biscuit sector. Commodity prices have risen substantially and the retail environment makes it difficult for manufacturers to pass on extra costs to their customers. The company has changed hands in the year following a restructuring that converted into new equity £137.7 million of borrowing that had been loaded on to the company by a string of private equity owners. That has reduced the group’s interest burden to a manageable level. The previous private equity owners, Duke Street Capital, passed ownership on to a number of parties, none of which now individually has a controlling interest, but I understand that they include the Canadian Imperial Bank and Apollo Asset Management.

Although the company is clearly experiencing difficulties in the market, the 2010 annual report shows positive figures over the past year. Its turnover was up 4%. Earnings before interest, tax, depreciation and amortisation were up slightly, as was its gross profit margin. Although that was a modest performance, I note in passing that the directors’ remuneration increased by a staggering 97.5%, with a 119.9% increase for the highest paid director. That makes a startling contrast to the years of wage freezes inflicted on the work force at Moreton.

So there are tough conditions to contend with in the market. We all know that this requires an imaginative response, but I do not believe that the supply chain review is the right one. There are good grounds for believing that the production costs at the Moreton site have been overestimated, whereas the closure costs have been underestimated. There is much in the company’s figures to contest.

Since the factory opened in 1953, it has been a dominant employer in the Leasowe and Moreton area. It is not uncommon for entire families to work at the factory, sometimes with more than one generation on the production line at the same time. If the closure were to go ahead, it would be devastating for many of my constituents. It would decimate the local economy at a time when it is already fragile. The human cost cannot be overestimated.

[Mr Frank Field (Birkenhead) (Lab)]

I applaud my hon. Friend for initiating this debate and for her concentration on the impact on Wallasey, but despite the divisions between our two areas, people move over the borders from Birkenhead to work. My plea to the Minister is that he does not address only the points that my hon. Friend is making. The Government have a welfare reform programme and want people on long-term benefit to move into work. It is difficult anyway to achieve that. It is doubly difficult if the job market disappears for those wishing to make the transition.

[Ms Eagle]

My right hon. Friend is right. I shall come to that.

There are many local families who would lose more than one breadwinner and face serious hardship if the closure goes ahead. A closure would cause the local economy great difficulty. As an article in the Wirral Globe recently pointed out, many local small businesses benefit from the custom of so many employees on the site, and others, such as Abbey Supplies, deal directly with Burton’s.

My first priority is to do all I can to save those jobs. That is why I am glad that the Minister is here, listening to the debate. It is important that in parallel I work to safeguard the interests of those whom I represent, which is why I have written to the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) seeking a meeting with him to discuss the implications for our local employment market, should the closure go ahead. However, I would prefer the Minister to work with me to stop that happening.

Any potential closure of the site would have ramifications beyond the workers and their families who work at Burton’s Foods. Two other companies, Manor Bakeries and Typhoo Tea, share the site with Burton’s. These factories between them employ 620 more people. Executives at Typhoo Tea have highlighted how any potential closure of the Burton’s factory could cause them at least £1.5 million in extra costs as they have shared agreements on electricity, gas, drainage and stock rooms. It is crucial to avoid a domino effect on the site, and I wish to know what the Government could offer in the way of support to prevent that from happening in the event of a closure going ahead.

The week before Burton’s Foods dropped the jobs bombshell on Moreton, the Prime Minister and Michael Heseltine had been visiting the docks in Wallasey. Indeed, the Prime Minister referred to that at Prime Minister’s questions today. The visit was part of their growth tour. Although the Wirral Waters development is potentially very exciting, it is a plan which by its nature cannot make progress quickly. The Government’s contention has been that the private sector will grow to fill the gap caused by the decision to cut public spending so quickly and deeply, but I am sad to report to the House that we are already experiencing public sector job cuts announced locally. Wirral borough council has decided to cut 1,100 of its employees this year—one sixth of the total—but the private sector has not filled the gap. By its announcement, Burton’s Foods has piled on the agony.

Even prior to these announcements, Wallasey was suffering high unemployment. In December, Government figures showed that 2,173 people were claiming jobseeker’s allowance. For every job vacancy, there are now 17 applicants, and that is before the job losses announced by Burton’s and the local authority have taken effect. That is why it is so important to fight to save these jobs. I implore the company to think again and work with the employees to develop an alternative proposal that can allow it to remain competitive in the market while securing jobs at the site.

I would be grateful if the Minister could lend his support by dealing with the following questions tonight. Work is going on to formulate alternative proposals that will meet the company’s requirements without closing the Moreton factory. Similar exercises have succeeded in the past, but only with active Government support. What support can the Government offer if we are able to put together a package that will convince the company to rethink its decision? What grants has the company applied for from the Scottish and Welsh Governments to support its proposals to move jobs from Moreton, and can the Minister promise to match any grant offered to secure those jobs in England? The company accounts for last year show a credit of £418,000 for

“the release of Government grants”.

Can the Minister explain what these outstanding grants are? Can he also explain what leeway, if any, the outstanding moneys may give in encouraging the company to think again?

As I have already mentioned, two other businesses remain on site, Typhoo Tea and Manor Bakeries, which employ 620 people between them. They have indicated the extra costs that they face if the Burton’s factory were to close. What support can the Minister pledge in order to prevent a domino effect, putting those jobs at risk too, if the closure were to go ahead?

The Moreton site is the only land in the area suitable for industrial development and zoned for that use. If there were a closure we would need significant public investment to ensure that it could be developed to create the potential for future jobs growth and enhance local job prospects. What support could the Department offer in those circumstances?

My constituents who work at the plant will fight for their jobs. They will not roll over, but they need the support and help of the Government to ensure that there is a level playing field in grant support in all areas of this country. We heard the Prime Minister today promise to support private sector businesses throughout the country, but particularly in Merseyside, and workers at Moreton are looking to the Government to keep the promise that the Prime Minister made earlier today and support private sector jobs and promote growth.

At a time when families in Moreton and Leasowe are desperately worried about rising unemployment, I ask the Minister to work with me to help save the Moreton site and to secure the jobs of one of Britain’s most established, dedicated and successful work forces.

--- Later in debate ---

[Mr Prisk]

I am trying to set out the context of where we are, because it is important for understanding why some factories are closed and others are prospering. It is important to remember that we are seeing record output levels in manufacturing as a whole, although clearly there will be individual factories, to which the hon. Lady has rightly alluded, where there are specific circumstances, such as the way own-brand goods are damaging the food and drink industry’s manufacturing side, that might lead them to close. We need to understand the reasons behind individual factory closures and why some parts of the manufacturing sector are prospering in the north-west and others are not. That is the context that I am trying to set out.

We feel at this stage that the crucial thing that industry needs more than anything is certainty and clarity on the overall picture. That is why we are cutting the corporation tax rate from 28p to 24p, which will result in the UK having the lowest corporation tax rate of the G7 nations. That matters for an important reason: by 2016 it will unlock £13 billion of investment that industry and business can reinvest. When we look at the past problems of the Moreton plant, which has received £3 million in direct grant assistance from the public sector, we must recognise that if the business itself says that it cannot make the plant viable, there is a challenge as to what the Government can then do to change that.

On the broader picture, I must say that we are focused on investing in programmes such as the manufacturing advisory service, which is expressly designed to help strengthen and improve manufacturers. We are also putting £200 million into an enterprise capital fund, which is good for growth businesses. The hon. Lady referred to Burton’s existing account balance, and that might be relevant, but we would also point to the importance of the enterprise finance guarantee, which seeks to generate up to £2 billion of additional lending—again, an important issue in that sector.

On the broader issue of adult apprenticeships, the additional investment of £250 million is very important, because, as the north-west economy restructures and we see good success—for example, in the aerospace and automotive sector—the need for more adult apprenticeships will be crucial. That is why we are seeking to expand their number, so that the opportunity for the hon. Lady’s constituents and those in neighbouring areas is significant, enabling them to retrain where other businesses cannot prosper.

[Mr Frank Field]

Will the Minister give way?

[Mr Prisk]

Yes, then I shall move on to the specific issues that the hon. Lady raised

[Mr Field]

One key point that my hon. Friend made was that, in the situation under discussion, we have a very specific group of employers who are very clever at managing public sector support for their industry; and one question that she asked was whether the Minister knows whether the Welsh Assembly Government or the Scottish Government are issuing support to entice the firm away from Moreton, because it enjoys taxpayer support. If they are, can the Government—the English Government—match what the Welsh and Scottish Governments are offering?

[Mr Prisk]

I am going to address the specifics of the hon. Lady’s questions, but I wanted to ensure, as the right hon. Gentleman rightly points out, that we looked at the context, because there are good manufacturing stories to be told in the north-west, and it is important to stress that.

The hon. Lady referred, first, to the alternative proposals, in which I know she is actively engaged, and she asked what might happen if they were successful. We have a problem, because Burton’s has decided to wind down its business and to reinvest elsewhere. I shall turn to the Scottish numbers in a moment, because we have made specific inquiries. It is therefore very difficult, at this moment, for the Government to try in any way to override a decision if the company wishes to move from that location to elsewhere—however frustrating I am sure that will be for the hon. Lady. If the company does not wish to remain on that site, it is very difficult for the Government to change the fundamentals of that particular business.

On the Scottish Government grants that have been allegedly applied for, we have made specific inquiries to try to help the hon. Lady, and at the moment we understand that no detailed discussions have taken place between the company and the authorities. There has been an initial discussion, but no business plan, details or finance plan have been discussed. The location in question in Scotland would not qualify for regional selective assistance, however, so we wait to find out what the discussions may or may not be about between Burton’s and the Scottish authorities. I have asked my officials to monitor the situation closely, and if we receive that information we will of course share it with the hon. Lady, so that she is able, in her local discussions, to deal with it. She will appreciate, however, that at this moment and at this Dispatch Box it is very difficult and, indeed, probably inappropriate for me to second guess what may or may not be offered.

On the question of the company’s accounts for last year, which show a credit of £418,000 for, as the hon. Lady put it,

“the release of Government grants”,

we have spoken to the Northwest Regional Development Agency, and I am disappointed to tell her that, as of an hour ago, it has not been able to provide us with that information. I have pressed upon the RDA the need for it, and the moment I receive a reply I shall of course share it with the hon. Lady, so that she can understand the background to the situation and what

“the release of Government grants”

actually means.

The hon. Lady referred to two other businesses, Typhoo Tea and Manor Bakeries. She asked whether there is a danger of a domino effect because the security and amenities on the site are shared. I am concerned that the closure of the plant should not have unreasonable adverse effects on the neighbouring businesses. I am not familiar with the exact site and with what those effects might be, and I am not sure whether it would be £1.5 million, £2 million or £3 million. However, we are in direct contact with the RDA to establish the specific facts and itemised numbers on that. She said that the data centre that the company offered is not yet operational. If we get that information from the other companies through the RDA, we will bring it to her. It is difficult for me, in the circumstances, to make a commitment at this moment, but I am happy to come back to her in due course when we have more information on that issue.

The hon. Lady said that the Moreton site was effectively the only land in the area that is suitable for industrial development and zoned for that use. She asked what the situation would be if there was a closure, because it could be serious. A number of avenues are open, and I urge her to work with business and civic leaders in this area, as I know she already is. She mentioned the regional growth fund, the first round of which closed today.