GKN: Proposed Takeover by Melrose

Drew Hendry Excerpts

Tuesday 27th March 2018 Commons Chamber

[Greg Clark]

It is important that we recognise the benefits and valued presence of GKN in many parts of the country. It is a pivotal UK engineering firm, with a long heritage. The commitment that I obtained from Melrose was for that to continue, and that is what it has set out, but it is for shareholders to judge the decisions that the future management may make.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I thank the Secretary of State for advance sight of his statement. He is right to seek undertakings at this stage, because the concerns are many and varied, including: taxpayers’ money being used in GKN’s programmes; defence contract concerns; and the location of GKN’s headquarters. Another concern is security of employment, as Melrose is not known for its hesitation in stripping out what it sees as unimportant to its aims. There are concerns about training, research and development, and the long-term security of sensitive intellectual property, and there are written concerns from the Pensions Regulator that the pensions of employees could be seriously weakened by the proposed takeover.

I understand from the Secretary of State’s statement that he will place Melrose’s response in the Library, but will he give the answers to my questions in the House today? Is he confident that the Melrose line of, “Buy, improve, sell” is not in actual fact likely to be, “Buy, strip and sell what is left”? What detail will he require to be satisfied of this, or is it, in Melrose’s words, to be done “in good faith”? If the Secretary of State for Defence is to receive assurance for his “serious concerns”, will he come to the House to confirm that he is happy with the answers given? Will the Secretary of State outline the mechanism by which Melrose will guarantee that jobs will not be shipped abroad, and that the pensions of GKN workers will be fully funded? Finally, will he assure the House that he will intervene if any of the questions asked about the many concerns that are left remain unanswered?

[Greg Clark]

I have set out in terms in my letter to Melrose and in my statement that, in many respects, the model of short-term ownership—especially for assets connected with defence purposes, in which long-term relationships are important—is in tension with the model of these industries. That is why I set that out, outside the statutory determination that I have to make. I suggested that the commitments that Melrose makes are legally binding. The takeover panel provides one mechanism for that, which I commend, but there are other ways in which the undertakings could be made legally binding.

The hon. Gentleman asked about the assessment of the Ministry of Defence. At the close of the bid—when all of the facts are known, including what has been said this morning—the Ministry of Defence and other agencies will make an assessment and advise me on whether there are grounds for an intervention in the interests of national security. I have made a commitment to this House that I will take that expert advice seriously and meticulously, and will make a decision when I have it before me.

On pensions, Melrose and GKN have been in discussion with the pension trustees and with the Pensions Regulator. It is for the Pensions Regulator to determine whether the arrangements are satisfactory for the interests of not just current, but future pensions.