Honda in Swindon

Lord Fox Excerpts

Tuesday 19th February 2019 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, I thank the Minister for repeating in your Lordships’ House the Statement concerning Honda. It is a serious situation and I am deeply sorry for the loss of jobs this will bring to the economy, industry and people in and around Swindon.

The Statement talks about individual company circumstances, the industry’s business cycle and technological change. In the Government’s myopia over the EU and Brexit, interpretations of its relative effect in this case will once again be played out across the analysis. But the Government cannot keep finding and hiding behind individual business circumstances to deflect their accountability. After all, there now appears mounting evidence. Today, Honda in Swindon. Yesterday, Nissan in Sunderland. The day before, Hitachi in Anglesey. The day before that, Toshiba in Cumbria.

This is against the backcloth of continuing fallout on the high street, with December’s Christmas trading the worst in a decade. Twenty-three thousand shops have closed, losing 175,000 jobs, with HMV, House of Fraser and Poundworld recent casualties. Even in the Government’s own public services around the country, the Carillion and east-coast rail franchises have also fallen apart.

This portrays more than individual misfortunes. The Government are responsible for setting the right economic environment—a conducive economic climate for business risk-takers to thrive in. The Government’s false hopes in creating industrial sector deals do not appear to have deep foundations. Many appear to fall over as soon as they are initiated. We are seeing empty shops, empty industrial sites and empty promises.

Brexit and its effects cannot be disentangled as the Government seek to agree new international trade deals as the litmus test of Britain’s new status. In contrast, the EU has just concluded a wide continental trade deal with Japan after seven years of negotiation. It will not have escaped the House’s notice that the four names already mentioned as examples of company withdrawals from all around the country, from the north and north-west to the south-east, are all Japanese companies with long-term investments and horizons.

The long-term commitment given by a previous Prime Minister, Margaret Thatcher, to the people of Japan that the UK would be a borderless conduit into the European market will be understood to have been broken. Just when delicacy was required, the Japanese felt insulted by the approach of the Secretary of State for International Trade, with accusations of foot-dragging. As evidenced by the Trade Bill currently passing through your Lordships’ House, trading partners do not simply accept a cut-and-paste transfer of the terms of EU agreements. As 29 March draws ever nearer, the certainty of failure is increasing. Business is raising its voice in dismay. Last week, Airbus spoke out on the catastrophe that a no-deal outcome would pose for it, even as the collapse of Flybmi was being felt in regional economies.

Returning to the Statement and the threat to mass-market car manufacturing in the UK, where 200,000 jobs are at risk, there does not appear to have been any close dialogue between the Government and Honda concerning plans and how any necessary change could be facilitated. The Statement says very little. Indeed, there appear to be lots of dots in the text. When will the Government join up the dots, change their policy direction and take no deal off the table? Was it wise for the Government to withdraw grants to support the purchase of electric cars? Will the Government undertake a thorough impact assessment of the effects of cutbacks in the automotive sector in the West Midlands, Sunderland and Swindon on their local economies? Will the Government act on that report with supporting measures? Today’s news is devastating for the people of Swindon, who found out about the situation only through social media. Unfortunately, the Government are today failing their citizens.

[Lord Fox (LD)]

My Lords, as set out by the noble Lord, Lord Grantchester, last time it was Nissan, this time it is Honda. I wonder how many more such cases we will have to discuss before much longer. The Minister gave a spirited rendition of her department’s attempts to whistle in the dark. This is a blow. Before I go on, I refer your Lordships to my interests in the register.

It is clear that Honda’s Swindon plant has had challenging economics for some years. Last year’s output of 160,000 vehicles was sub-scale, yet Honda avoided closure and kept Swindon open—so why close it now? I am afraid that I do not believe in coincidences. It is no good the Minister saying that the company ruled out Brexit as a cause. Brexit promises to raise costs for parts and reduce access to the EU, which is fatal for an already marginal plant. Honda knows what it is doing, but it is a polite Japanese company that likes to keep out of politics. It also hates to close factories and sack people. The current chaos in this country gave it licence to act.

Beyond the absolute disaster this poses to Honda workers, and many more in the supply chain, this brings into question the Government’s industrial strategy. As Ian Howells, senior vice-president for Honda in Europe, said:

“We have to move very swiftly to electrification of our vehicles”.


Mr Howells also said that the company had to “look very closely” at where to put its investment. He explained that it has to be in a marketplace of the size that Honda requires to make the investment worth while; he emphasised scale. The conclusion that comes out of today’s announcement is that this does not include the United Kingdom.

That throws up at least three questions. First, given Mr Howells’ assessment that the UK market is sub-scale, how does Brexit create a more attractive market for investors? Making the addressable market smaller does not make good sense for future inward investment. Secondly, Dyson is going to Singapore, Nissan is stepping back and now there is this news from Honda. Where does this leave the industrial strategy? The Minister is right to emphasise the very fast pace of technological change, so where does this leave the electrification strategy in particular? Unless what the Government are attempting to do has volume car makers located in this country to deliver future vehicles, it will all come to naught, but volume car makers are departing this country. Clearly, Honda does not buy the Government’s plans, so what does the Minister know that makes her think that she knows better than Honda? Thirdly, Ford has warned the Government, and JLR clearly has issues. To date, Toyota is silent about Burnaston, but that plant is eerily similar to the Honda situation. Perhaps the Minister can tell us what conversations are going on with Toyota.

These are multidimensional problems and I concede that our Minister is not in control of all of the issues out there, but the Government can do some things right now to calm industry nerves. In the Statement the Government have said that they will do whatever it takes. Well, they could rule out a no-deal exit now and they could look again at remaining inside the customs union and the single market because that is what the car industry wants to hear. Today’s announcement is devastating for Swindon, but how many more advanced manufacturing businesses will have to close their doors before the Government finally get this message?

[Baroness Vere of Norbiton]

I thank the noble Lords, Lord Grantchester and Lord Fox, for their comments. Some were very measured indeed—for which many thanks—but others I felt were a little harsh. I hope to explain why.

Let us start with the B-word. Although the leadership of Honda in Japan, Europe and the UK have specifically ruled out Brexit as the cause of this announcement, it is worth considering the impact of Brexit on the wider automotive sector. Of course, it remains our top priority to leave the EU with a deal that is good for business and provides the certainty that it needs. Within the Government and the Conservative Party, we feel that we are coalescing around a pragmatic compromise to achieve this deal. Unfortunately, the Labour Party seems to be more split now than it was 12 months ago, but I implore the remaining pragmatists in the Labour Party to back a deal because it is important for the industrial success of our country in the future.

We are determined to ensure that the UK continues to be one of the most competitive locations in the world for automotive and other advanced manufacturing. We have put forward a precise and credible plan for the future relationship with the EU and we are looking forward to working with the EU to put it into place. I have already made it very clear that Honda has made a series of global decisions. This is not unprecedented; it is a revision of the global manufacturing operations of a very significant automotive organisation. The current model, the Civic, is at the end of its production life cycle so it makes sense for Honda to cease operations in Swindon.

Much has been made of investment and whether that is a good thing by the Government at the moment and whether it is continuing. The Government have announced significant investment in this area. The automotive sector deal was announced in January last year. As a part of that, the Government and industry have committed £1 billion over 10 years to support the Advanced Propulsion Centre. The centre does research and development and it commercialises the next generation of low-carbon technologies, as well as keeping the UK at the cutting edge of low-carbon automotive innovation. We are talking about electrification, which is incredibly important. I beg to differ with the noble Lord: just because we do not manufacture hundreds of thousands of electric vehicles here, although I would very much like us to do so, we can achieve innovations by using this money. Already 44 projects have received £770 million to help them to leverage and get the intellectual property which we can then put into new types of engines and drivetrains that will make sure that these electric vehicles work. That is incredibly important. Also part of the automotive sector deal is £80 million for driving the electric revolution, focusing on power electronics and navigation. There is also the £400 million that the Chancellor announced in the Budget last year for charging infrastructure. That project is coming along well.

It is not just the Government choosing to invest in our country; businesses are choosing to come here. The noble Lord mentioned Toyota. Just last year, in February, Toyota announced that it would build the next generation of its hybrid Corolla model at the Burnaston factory in Derbyshire. The Secretary of State went to visit it, and it is now coming online. The new engines for this model will come from the company’s Deeside factory in north Wales, which will also help secure 3,000 jobs at this site. Toyota is not alone. Aston Martin has announced that the St Athan facility will become the home of its electric vehicle range. In February 2018, Greg Clark opened YASA’s new 100,000-unit electric motor production facility in Oxford. This goes back to what I said earlier to the noble Lord: it is not just about building the entire car nowadays but about building the components. If we have the ability to create these new engines, we must make sure that we use it.

Of course, we are in close dialogue with the car manufacturers; we were in close dialogue with Honda. I am sure noble Lords will understand that Honda’s announcement was hugely market-sensitive but it leaked anyway. That was hugely disappointing, mostly for those families who found out what was going to happen at Honda from the media, which I feel is wrong. The Secretary of State is now in close contact with Honda—as indeed he always is, but now more specifically—on building this task force to make sure that we get the skills and experience that are there into other manufacturing facilities in future.

I felt that some of the comments made by the noble Lords, Lord Grantchester and Lord Fox, were a little harsh. I recognise that there are mixed fortunes in the economy at the moment but all noble Lords who have ever run a business know that it goes up and down. Some businesses are not viable any more; others come to fruition. We must note that employment is at a record high and wages are growing; those are both very good things. Over half of SMEs expect to grow next year, and GDP is growing at 1.4%. I do not believe that this picture is of the dismal nature painted by the noble Lords.