(5 years, 7 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
I congratulate my hon. Friend on securing this timely debate. International students can act as ambassadors for us in a funny sort of way, because they understand the culture of the country. More importantly, the two universities in my constituency, the University of Warwick and the University of Coventry, are involved in research and development in the motor car trade, medical facilities or medicines and other such things. Does my hon. Friend agree that when students go back to their own countries, their knowledge of what we can do and can produce may, in a roundabout way, help our trading relationship with those countries?
As a fellow west midlands MP, my hon. Friend will have shared the experience of the enormous investment that is coming to the region from Indian entrepreneurs who were educated in this country. That is a hard economic benefit that has accrued.
To get back to the point I was making, we have only achieved £23 billion of the benefit that was targeted way back in 2013.
(6 years, 9 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The hon. Gentleman has put his finger on an issue that I will develop at some length during my speech. He is absolutely correct.
Perhaps I should state that, from a philosophical or ideological point of view, I am not anti-private sector. I am not anti-City. I recognise that globalisation is a potential force for good, even though it does throw up some considerable challenges and needs to be managed. I feel, however, that the role of Government must be to ensure that where vital national interests are at stake, the private sector is regulated in such a way that those interests prevail over what are often the short-term or illusory interests of the shareholders involved or the myriad City professionals and advisers that tend to make a lot of money from takeover bids. Some of the issues that arise from this proposed takeover bid are specific to GKN and Melrose, but others throw up broader, national issues.
GKN is a company of enormous strategic importance to the British economy. In 2015, it made sales of more than £16 billion worldwide and contributed £1.36 billion to our economy. It is one of the major—perhaps the major—tier 1 providers within the automotive and aerospace industries.
My hon. Friend has brought a timely debate. I have worked in defence industries. The Secretary of State has got to look at this in the context of the national interest, because the real danger is that the Americans will hive it off piece by piece. The hon. Member for Isle of Wight (Mr Seely) is right when he says that Melrose only keeps businesses for about five years, makes a profit for shareholders and is gone. This is probably one of the last bastions of Britain’s independent defence industries. More importantly, there are 6,000 jobs at stake. No doubt Melrose has its eye on the pension scheme as well—most of them do.
My hon. Friend anticipates some of the points in my speech. I agree with him completely.
GKN holds the position as one of the world’s greatest tier 1 providers in part because of the number of portfolios it holds worldwide with other joint venture companies, as well as with British companies, but also because of its research, development and technological advances, particularly in the automotive and aerospace industries. The UK aerospace sector is the largest in Europe, second globally to the USA. It supports more than 210,000 well-paid jobs in this country and delivers £29 billion in exports, generating £32 billion in turnover each year. GKN, as the only large tier 1 supplier, has a strategic role in the growth of the sector and, as I said earlier, it makes a total contribution to the UK economy of more than £1.3 billion.
GKN’s identity as a sector leader is largely based on the large amount it invests into research, development and technological advances. The distinctive focus on research has for decades been the cornerstone of the company. By its very nature, research and development involves long-term investment projects. The benefits of such programmes are often enjoyed only decades or even longer after the investment has started.
Typically, the motor industry has a product cycle of seven to 10 years, but at the moment major car manufacturers are looking for long-term partners to invest in future generations of electric vehicles. Because of its long-standing association with those companies, GKN is currently well placed to be a partner in such ventures. The aerospace sector has a product cycle of 20 to 40 years, again highlighting the importance of a company investing long term with the companies it serves. Since 2000 GKN has invested more than £561 million. That has created long-term, well-paid, highly skilled jobs that are of particular benefit to our regional as well as our national economies.
Absolutely. The hon. Lady puts her finger on a very important point. Productivity in the motor and aerospace industries is way ahead in manufacturing overall, and in other types of business as well. Anything that damages such industries will damage the level of productivity in our economy, which we all know is a matter of considerable concern.
GKN not only invests in research and development in its own companies, but partners universities up and down the country—Leeds, Manchester, Warwick, Nottingham and Sheffield, for instance—again helping to underpin regional economies, driving research excellence and giving students the level of skills that they need and an involvement in manufacturing that is absolutely crucial for developing our future skills base. As the hon. Member for Isle of Wight (Mr Seely) mentioned, the Melrose business model appears to be fundamentally incompatible with that approach.
I was chided by the Melrose chief executive for calling Melrose a hedge fund company. It says it is not; it says it is a turnaround company. In the Business, Innovation and Skills Committee it was called an asset-stripping company. Whatever we call it, it has a short-term strategy reminiscent of the way in which hedge funds work. It aims to buy and sell companies within a window of between three and five years. Despite protestations that it does keep companies for the longer term, one example that must be considered is that of Brush of Loughborough, a UK company that makes gas turbines. It was taken over by Melrose 10 years ago and is failing. Melrose has been unable to sell it on in its desired turnaround window because of the huge structural change in the sector owing to the move away from fossil fuels. Melrose has failed to invest in development to mitigate the changes and save employment within the company. It has already halved its workforce and has recently announced another 270 job cuts.
Although Melrose has invested £230 million in research and development in various companies over the past five years, the significant thing is that that is less than it paid its top 20 executives in the past year alone. That does not seem to be indicative of a company that is committed and wedded to long-term investment in research and development.
Many Members will have seen the announcement from Tom Williams of Airbus. The Financial Times has today published an interview with Tom Williams, the chief executive of Airbus, which is one of GKN’s biggest customers. He said it would be “practically impossible” to give new work to the engineering group if Melrose succeeded in its hostile bid. He cited the lack of “strategic vision” and the lack of long-term investment owing to the short-term ownership model. We could not detect a more telling intervention and substantiation of the point being made. We must remember that Airbus is only one customer of GKN, but Airbus’s public statement sends a signal to many other strategic customers of GKN.
Another cause for concern is the relative size of the companies. Last year alone GKN had revenue in excess of £10 billion, compared with just over £1 billion at Melrose, which proposes to finance its bid by borrowing £3.5 billion.
In addition, GKN employs 60,000 people across 30 countries, a level of personnel management that Melrose has no comparable experience of. As part of its takeover bid, Melrose has revealed plans to sack the entire board of GKN. Melrose as a company would double in size, but with no commitments to further capacity and an absence of the management expertise that has historically been part of GKN. Furthermore, Melrose has never taken over a company that specialises in aerospace manufacturing, which is perhaps one of the most concerning issues of all.
GKN’s prominence in the aerospace sector means it has a unique stake in the maintenance of our national security. As a leading world tier 1 supplier, it operates on a lot of UK defence platforms. As its order book with the Ministry of Defence is relatively small, Melrose has claimed that that issue is not significant. It ignores the fact that many of GKN’s customers are foreign companies that provide defence equipment that is subsequently procured by this country, so there is a much greater strategic involvement than the figures quoted by Melrose suggest.
GKN’s military aerospace involvement includes Lockheed Martin, Lightning, Raptor, Boeing, Eagle, Hornet, Harrier II, Eurofighter, Typhoon, Panavia, Tornado, Saab, Gripen and the new B-21 engine—a huge range of engines and vital components in a vast range of our defence components and needs for the future. Significantly, our own Defence Secretary felt the need to raise this issue with the Department as he no doubt responds to concerns that lie within the industry. I hope the Minister will refer to that when he sums up.
The US Government are highly likely to review any takeover via their Committee on Foreign Investment. The UK has a clear interest and should do the same. The public interest test applies under the national security element of section 58 of the Enterprise Act 2002, and the UK Government have the power to consider whether the takeover is in the public interest.
Earlier, I mentioned the fact that GKN is one of the few companies that now gives Britain its independence in defence terms. It has been known for years—and if we think about it, it is a matter of the national interest—that, for example, Pratt & Whitney has always been after Rolls-Royce. That gives an indication of what is likely to happen at GKN if Melrose takes it over and asset-strips it. American companies will come in, and we will no longer have an independent role to play in manufacturing our own defence equipment.
My hon. Friend anticipates, with great foresight, some of the potential developments if the takeover were allowed to happen.
I believe that there are broader issues, however. The GKN takeover is a case that goes well beyond defence. It is relevant to our productivity, as the hon. Member for Redditch (Rachel Maclean) said, to our economy and research capabilities, and to the jobs and pensions of about 6,000 people in the UK. I am not here to argue that GKN is a perfect company and perfectly managed—that issue is widely acknowledged; but in view of the contribution that it makes to our industry as a whole, the highly paid and highly skilled jobs that it provides, its innovative research-led developments in key sectors of the economy and its commitment to maintaining a strong manufacturing industry in the UK, its future development needs to be carefully thought through, balancing the interests of shareholders with the vast number of other stakeholders involved.
Neither the takeover, nor a hastily contrived reorganisation in response to it, is the best way to deal with the problems. A solution centred on preserving shareholder value at the expense of all else would be disastrous for regions, such as the west midlands, that depend on manufacturing, and for productivity and the economy. The far-reaching implications of the proposed bid should prompt the Secretary of State to look at widening his powers of intervention on takeovers to include broader considerations of public interest. I appreciate that it was a Labour Government who withdrew that consideration, in the Enterprise Act 2002, but since then the global nature of the world economy has changed rapidly. Welcome adjustments were made to the takeover code relating to post-offer undertakings following the Kraft-Cadbury takeover. However, it is time to re-examine the situation, and to seek a more robust set of criteria that acknowledge the integrated investment and research-led nature of the 21st-century global economy, to ensure that the globalisation that benefits many areas does not decimate others. That could be done by broadening the criteria for defining the public interest, from the existing four, by increasing the percentage of shareholders who have to vote in favour of a takeover, or in other ways. It is time that the question was re-examined, to get a more robust set of criteria, which would preserve vital national interests.
In answer to a question on 7 February, the Prime Minister said at column 1494 that she would act in the “national interest”; and in August 2016 she launched her Cabinet Committee focusing on delivering one of her Government’s top three priorities—an economy that works for everyone, with a strong industrial strategy at its heart. The case of the GKN takeover provides the Prime Minister with a chance to prove the strength of her commitment to her self-defined mission to make Britain a country that works for all.
(6 years, 10 months ago)
Commons ChamberWell, in common with other Members on both sides of the House, I have taken part in the police service parliamentary scheme, and, having done that, I would have thought that we would all be united in our admiration for the sheer professionalism, dedication, commitment, skill and expertise of our police forces.
Having started on that consensual note, I will move on. I make no apologies whatsoever for standing up, in line with other west midlands Members of Parliament, to criticise this settlement in the context of what West Midlands police are going to get and what their needs are going to be. My hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) outlined some of the key statistics, and I will not repeat them. What it amounts to is that, following this cash-plus precept settlement, there will be a £12.5 million gap in what is needed to sustain the current level of service. It could lead to the closure of 18 police stations. West Midlands police force has lost over 2,000 officers, and it is difficult to see how it could go on without losing more.
The key issue is the funding model that the Government are developing for the police in areas such as the west midlands. If there is an annual flat grant, which effectively means that we lose the real value of that grant by a certain percentage every year, allied with a maximum on the precept, then the areas with the lowest-value property profiles—nearly always urban areas with lower-income people and often higher crime rates—will become disproportionately disadvantaged year on year. That is the situation that is developing in the west midlands. A rise in council tax in the west midlands will raise £3.35 per person. In Surrey, it raises £6.42 per person. That is why we see other anomalies such as Hampshire, which, with almost 1 million fewer residents, has a larger increase in its settlement arising from the precept than areas such as the west midlands.
I am sure that my hon. Friend would agree that a reserve can be spent only once. More importantly, all the West Midlands police divisions have gone now, including in Coventry, so nobody really knows who to point the finger at. I have had meetings with the police on this. The public in Coventry, and in the rest of the west midlands, are becoming very concerned about the fact that there is a lack of policemen, but, more importantly, that the funding formula is grossly unfair to the west midlands.
I agree with everything that my hon. Friend says. Indeed, he leads me on to my next point.
We can bandy statistics around, but what matters in the end is the perception of the people who work in the police force and the perception of the public who experience the service it provides. Find me an area in the west midlands policing zone where local people will not complain of a reduction in the frontline neighbourhood policing in their area. Find me an area in the west midlands that has not seen an increase in crime rates and a lowering in satisfaction with the service.
For me, that was reinforced when, six months ago, a middle-ranking policeman asked to come and see me. He explained that he had joined the force over 10 years ago, risen in the ranks, and found it incredibly satisfying, but was going to have to leave. The strains on him, the public expectations of what he could deliver, and how demoralised he was feeling because he knew that he could not deliver were such that he could face it no more. That may be a one-off, but I am worried by the fact that the chief constable and the police commissioner reiterate to me everything that officer cited as his reasons for leaving when they describe the overall funding statistics for their service.
(8 years, 6 months ago)
Commons ChamberMy hon. Friend mentioned the motorcar industry. Twenty to 25 years ago, Coventry companies such as Massey Ferguson, British Leyland and Standard were household names. That is why it is vital that we remain in Europe, in order to further develop the recovery of manufacturing in the west midlands.
Absolutely. My hon. Friend’s experience echoes my own on the other side of the midlands economy.
The fact is that investment, particularly by Tata in Jaguar Land Rover, has transformed the manufacturing economy in my constituency and the surrounding constituencies. We now have the new i54 development, which is a supreme example of what new investment in modern motor manufacturing can do. As a result of that, the local supply chain has been rejuvenated.
We have problems, however. My constituency has more foundries than any other in the country, and they form a vital part of the supply chain that underpins our ability to produce high quality cars and superb manufacturing exports, but they have skills shortages and an ageing workforce. However, they have been helped by the recruitment of skilled workers from eastern Europe through the EU. The companies involved tell me that without those workers, their ability to meet the demands placed on them by the cutting-edge technology that we are producing to expand our manufacturing exports would be hampered and jeopardised.