BAE Systems

Mark Hendrick Excerpts

Thursday 24th November 2011 Commons Chamber

[Alan Johnson]

That is absolutely right. That is why we wanted a debate in the House with a motion setting that out, because that is precisely the message we need to put out. As I will say later, that is precisely what other serious manufacturing companies are doing.

Four countries are affected by the decision to slow delivery of the Typhoon, but only BAE in the UK has reacted by throwing highly skilled engineers out of work and abolishing a manufacturing plant. Although the company says that its announcement was forced by the slow-down in orders for the Typhoon, almost a third of the job losses are for the Hawk, an aircraft that remains popular around the world. Orders are imminent from Saudi Arabia, Oman, Iraq and the United States, and potential orders are imminent from Poland, Kuwait and the RAF in a few years’ time. When we and others, including the unions, have asked the company what will happen if they get an order for 10, 50,100 or 150 Hawks next week—this relates closely to the point that the right hon. Member for Haltemprice and Howden made about the 90-day process—its reaction has been that nothing would change. Our suspicion is that is because there is a view that it will not be the other side of the Pennines that benefits from extra Hawk orders, but Texas, India and manufacturing plants abroad.

When the unions have berated BAE on the effects on British manufacturing and pointed out that it is an important British manufacturing company, it has replied that it is not a manufacturing company, but an engineering company that chooses to manufacture, the implication being that that is the choice it has made at the moment but might not make in future. In no other major industrialised country in Europe would a company that has spent much of the past decade moaning about skills shortages be getting rid of some of the most highly skilled people in the country. In no other major industrialised country would a company whose biggest customer is the Government and whose biggest investor historically has been the taxpayer be causing such damage to a precious sector of the economy.

There is an alternative approach. Andrew Witty, the chief executive of GlaxoSmithKline, another British manufacturer that sells its products abroad, lambasts British businesses that turn themselves into “mid-Atlantic floating entities” with no connection to society. He says that his company has given a lot to Britain, but that Britain has given a lot to his company and that it would not exist without the work of British people and the support of the British Government. He is busy returning manufacturing jobs from abroad to this country. He says that his objective is to give more jobs, provide more skills and pay more taxes in Britain. It is a shame that other iconic international British companies do not follow the same philosophy.

[Mark Hendrick (Preston) (Lab/Co-op)]

I am well acquainted with Andrew Witty, having met him at GlaxoSmithKline’s research and development centre in China. It is now a global business that employs thousands of Chinese people, and although the company returns a lot to the UK, it also has major investments abroad in the same way as BAE Systems will have when it is employing people in India.

[Alan Johnson]

My hon. Friend is absolutely right. That is precisely the point. We can compare those two British companies. Around 96% of GlaxoSmithKline’s sales are abroad, but it is making a decision as a British company to invest in Britain and open manufacturing plants at a difficult time, and it is of course helped by the patent box that was agreed by the Labour and Conservative parties. It is an example that BAE should follow.

As thousands of highly skilled BAE employees contemplate a miserable Christmas, it is time for the company to engage properly with its work force in order to ensure that their important skills are retained in aerospace manufacturing and that aerospace manufacturing is retained on the Humber. We are 58 days into the statutory 90-day process, but there is no sign whatsoever that BAE is doing anything other than going through the motions. Indeed, the site director at Brough told my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) only last week that nothing would change during this consultation process. He told her that they were going though the motions. When the 90 days end on Boxing day, it will still be 27 September as far as BAE’s plans are concerned.

The unions are working hard to hold the company to its statutory obligations. The union representatives involved are very good and need no advice from me, but if I was a union rep involved in the case, I would seriously consider seeking a protective order against BAE for its lack of engagement.

We believe that BAE’s three manufacturing sites should be retained. The company should stand by its loyal work force in difficult times, so that when the good times return it has sufficient manufacturing capacity in this country to deal with the extra work.

All the signs are that military aerospace will expand dramatically from about 2016. At the very least, BAE should adopt the intelligent proposals put forward by its own executive group at Brough in order to mitigate the significant risk inherent in the company’s plans by retaining crucial assembly and sub-assembly at Brough for the duration of the next Hawk acquisition contract, thereby saving about one third of the jobs until 2016.

--- Later in debate ---

[Mark Hendrick (Preston) (Lab/Co-op)]

BAE Systems is a world-leading manufacturer of defence and security products. It has bases scattered across the globe in places as distant as the United States, Australia and India. However, it is important that the UK remains at the core of its business and its base.

Before the recent announcements, BAE Systems employed 40,000 people directly. When the indirect employment throughout the company’s supply chain is factored in, about 120,000 British jobs are dependent on BAE Systems. To further demonstrate the company’s standing, it generated £9.2 billion in revenues in 2009. It made a direct value-added contribution to UK GDP of £3.3 billion and contributed more than £650 million to the Treasury’s coffers. The Prime Minister has spoken at length about wanting to support British manufacturers. No company has done more than BAE Systems.

BAE has a centre of excellence in the north-west. In 2009, a comprehensive report into the company by Oxford Economics stated:

“The North West is by far the most important region within BAE Systems UK, accounting for about half of all its UK employment.”

That is about 20,000 jobs. The report went on to make a point that has just been made by the hon. Member for South Ribble (Lorraine Fullbrook):

“BAE Systems now accounts for exactly one in eight jobs in knowledge-intensive production within the North West.”

BAE’s concentration in the north-west means that the recent announcement that the company will axe 3,000 highly skilled workers, half of them in Lancashire, is a body blow to the region, as I am sure it is in Yorkshire as well.

The Warton site, which employs more than 8,000 people and contributes more than £300 million to the local economy, will see 822 redundancies. A further 565 jobs will go in Samlesbury, and more than 100 elsewhere in the region. Many of them are in my constituency and the surrounding constituencies in central Lancashire. That is a tragedy for those employees, their families and the region. We have heard a great deal about Brough today, but to put the matter in context, more jobs are being lost in Lancashire than exist at Brough as a whole.

Contrary to some fairly derogatory remarks about the standard of the work force in Lancashire, Warton and Samlesbury are highly confident that they are capable of doing whatever work is required on any aircraft if the company asks them to undertake it. The north-west is where BAE Systems has placed the bulk of its operations, and it is where the company’s future lies. The north-west centre of excellence exists at Warton and Samlesbury, and it will be a major contributor to this country’s gross domestic product. Coming when they do, however, the changes are a particular problem for families on either side of the Pennines.

The Typhoon jet is a huge success story, which we want to be continued. As the hon. Member for South Ribble mentioned, the jet undertook its first major combat missions earlier this year, providing an invaluable service in the skies of Libya. Production of the Typhoon has taken place in three tranches, and although the previous Government signed up to tranche 3A, it has sadly been subjected to the coalition’s ill-thought-through and rushed strategic defence and security review. Rather than producing a carefully constructed industrial strategy, the Ministry of Defence is now planning to halve the UK’s tranche 3 order, and BAE will cut its annual production from 61 to 36 jets.

Last week, the Minister made the point that much of what was happening was due to the slowness of ramping up work on the F-35. Nigel Whitehead, the group managing director, has made it plain in a letter to me and other hon. Members that the main reasons for the decision were the cut in the Typhoon, not the F-35, along with the withdrawal from service of the Harrier and the decision to scrap the Nimrod. That is what the company is saying about the facts.

[Peter Luff]

rose—

[Mark Hendrick]

I am happy to take the Minister’s intervention, because I have only 16 seconds left and I shall get some extra time.

[Peter Luff]

I am very grateful to the hon. Gentleman. Whatever the rights and wrongs of his argument, the letter makes it clear that that decision was taken in 2008.

[Mark Hendrick]

Which decision?

[Peter Luff]

The decision by the four core Typhoon nations not to acquire the full quantity of Typhoon tranche 3 aircraft was taken in 2008. I do not think I can take responsibility for the last Government’s decisions.

[Mark Hendrick]

I think the Minister is talking about tranche 3, not tranche 3A.

It is important that people get the matter into perspective. For each of the 1,500 BAE Systems jobs lost in Lancashire, four other jobs will be lost in Lancashire as a result. It is a huge blow to the region, to Lancashire and to many hard-working families from Preston.