BAE Systems (Lancashire)

Mark Hendrick Excerpts

Thursday 27th October 2011 Commons Chamber

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

BAE Systems recently announced 1,423 job losses in Lancashire, including 822 at the Warton site in the constituency of the hon. Member for Fylde (Mark Menzies), 565 at the Samlesbury site in your Chorley constituency, Mr Deputy Speaker, and a further 136 elsewhere in Lancashire. Many of the highly skilled workers who will find themselves out of work live in Preston and the surrounding area of central Lancashire.

The chief executive of Preston city council, Lorraine Norris, has written to the Secretary of State for Business, Innovation and Skills, the right hon. Friend of the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), who is here to reply to this debate, and in a fairly detailed letter that makes its points quite strongly, Ms Norris, with the support the Labour administration in Preston, says:

“Lancashire provides the greatest number of direct and indirect aerospace jobs in the country and while individuals affected by BAE redundancies may be able to find work elsewhere by moving to other parts of the country, their skills will be lost to the local economy and the Lancashire economy weakened. Because of their long lead in time, skilled jobs lost in this way cannot easily be replaced when the country’s economic fortunes improve.”

She goes on to say:

“Preston has been successful in moving away from an economy dominated by low-value manufacturing linked to the textile industry”—

like Yorkshire—

“and broadening its economic base. We have been able to retain and expand high value manufacturing jobs linked to advanced engineering, with strengths in both the aerospace and nuclear sectors. With our partners we have been working hard to improve links between industry and the Higher Education sector—particularly with the Universities of Manchester and Central Lancashire… As a result in the decade up to 2008 we have been able to demonstrate the third highest increase in private sector jobs in the country.”

The Government talk about rebalancing the economy. Nobody and no area has done more to rebalance it than Preston and central Lancashire, given that many civil service and public service jobs were located there, and that of course it has a large private sector.

Unemployment is at a 17-year high. In Preston it stands at 5.2%, compared with 3.9% nationally, and almost 5,000 people are seeking employment, which is the highest level since jobseeker’s allowance was introduced. BAE Systems employs about 40,000 people in the UK, down from 42,000 in 2009. Many of those jobs are based in the north-west, and given the work’s technical nature the majority of workers are highly skilled.

Let me give the Minister some facts and figures. In Preston and Fylde, one in four residents working in manufacturing works at BAE Systems, principally at the Warton and Samlesbury sites. Between 2008 and 2010, Preston lost 4,800, or 5.1%, employee jobs, against a fall of 2.4% in the 12 districts of Lancashire and a drop of 3.4% nationally. That is a tragedy. The success of the company is therefore vital to the regional and national economies. BAE makes a direct contribution to them, and many other jobs in Lancashire are dependent on BAE. It has been independently estimated that each aerospace job creates four or five related jobs in the supply chain. There is therefore a multiplier effect on unemployment and the economic picture is far worse than the headline figure suggests.

The announcement of more than 1,400 job losses is a devastating blow, first and foremost for the workers and their families, but also for the local economy and Britain’s wider manufacturing and defence industries. As cuts are made and contracts go overseas, a highly skilled work force are being lost. I wrote to the Secretary of State for Business, Innovation and Skills some weeks ago to ask what steps the Government are taking to limit the impact of the job losses, but I am sorry to say that, despite the urgency, I have yet to receive a reply.

[Graham Jones (Hyndburn) (Lab)]

I asked the Department for Business, Innovation and Skills about an employment impact assessment, but have yet to receive a credible reply. It seems that no such an assessment has been made. Does my hon. Friend agree that it appears that employment is considered to be a price worth paying? EADS and the Italian workshare contractors are making no one unemployed—that was reported in the Financial Times on 3 October—but the Government seem to think that it does not matter if 3,000 people are made unemployed.

[Mark Hendrick]

I agree. Although the enterprise zones are a welcome addition to Lancashire, they are a sticking plaster to try to cover the running sore that the job losses have become in Lancashire. The announcement of 1,400 job losses is a devastating blow.

A key area of development at the Warton and Samlesbury sites is the manufacture of the Eurofighter Typhoon jet. It recently flew its first major combat mission, serving in the skies over Libya to help the national transitional council in its war against Gaddafi, which is testament to the need for the aircraft. The production work is taking place in three tranches. Tranches 1 and 2, involving the production of 384 Typhoons, are now complete, and include 144 jets ordered by the previous Labour Government, with the remainder going to our European partners. The Labour Government also signed up to tranche 3A, which is the subject of the current defence cuts. The coalition Government are now planning to halve the UK’s tranche 3 order. BAE will cut its production from 61 to 36 jets annually, resulting in thousands of job losses. How can the Government justify massive cuts to our defence industry when the economy is edging towards recession? These cuts go too far, too fast and are resulting in the slowdown in production of the Typhoon aircraft.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

I congratulate my hon. Friend on securing this debate. Is he aware that the disappointment and support for those workers is shared throughout the north-west, not least because of the synergies in the defence industry in that region? Is he also aware that Barrow shipyard is an example of how the submarine supply chain could be damaged as companies that supply the Typhoons lose orders and their workers are put under threat?

--- Later in debate ---

[Mark Hendrick]

I am well aware of the synergies, the skills that are employed in the submarine and shipbuilding industries and the implications for aircraft carriers. They are connected, and everyone who works in the defence industry throughout the country is worried.

If the Government made more finance available, BAE could ramp down production of Typhoons more gradually, instead of the step-down transition. That would enable the company to mitigate the impact of job losses by steadily reducing its work force as workers now in their early 50s approach retirement. That would coincide with the conclusion of tranche 3A production in 2015. The unions at BAE are in favour of that approach—a gradual ramping down while meeting the country’s defence needs, instead of a drop from 61 aircraft to 36 a year from January next year—but that is not happening. As in so many other areas, the Government’s strategic defence review was rushed and ill thought through. Labour Members recognise that some savings must be made, but they should be part of a carefully constructed industrial strategy, not a rushed and ideologically driven SDSR.

The decision to cut production has wreaked havoc with BAE’s medium-term and long-term plans and produced a great deal of uncertainty. A highly skilled work force will be lost forever. Thousands of years of accumulated experience and skills will be thrown aside, and although orders may arrive in future from India or, possibly, Japan, the loss of these workers will be tragic. Many will go to work in other parts of the country and take up new positions; many will take early retirement and be lost to the industry for ever.

Simply put, this Conservative-led Government do not understand the consequences that their policies have on workers, on businesses or on the manufacturing economy as a whole. Typhoon could be made more competitive and attractive for export by improvements to its radar capabilities. Will the Government fund the development of the E-Scan radar system? If so, will the Minister update the House on whether funding has been allocated for that development and whether the finance has been sent to SELEX or to BAE Systems? I invite the Minister to intervene to deal with that point.

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

As the hon. Gentleman knows, the assessment is under way between the Government and industry, and it would be a mistake to pre-judge its outcome. We are funding and engaged in that assessment programme and we are hopeful that it will be advantageous. It is important to bear in mind that this will be at the forefront of European technology; it is an important long-term investment.

[Mark Hendrick]

I am not sure whether that was a yes or a no on whether the funding was made available. When trade unions met the Under-Secretary of State for Defence, the hon. Member for Aldershot (Mr Howarth), at the Conservative party conference—the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford, was also present at the meeting, but arrived late—they were assured that the money had been allocated for E-Scan radar, but Ian King from BAE Systems has said that no money has been allocated or transferred to the company, and SELEX says the same, despite the fact that the Defence Minister gave assurances that that money was going to the E-Scan programme.

It is imperative that the Government provide a coherent plan of action to help Britain’s defence industry and the wider manufacturing sector as a whole. The longer BAE is able to keep workers, the better prepared it will be to meet demand should other countries order Typhoon jets. Will the Minister tell the House what steps his Government are taking, not only at ministerial level but through UK Trade & Investment, to secure defence contracts from India and Japan, both of which have been linked to the Typhoon project?

In his first major speech after the general election, the Prime Minister pledged to make the next decade

“the most entrepreneurial and dynamic in our history”

and said that he wanted to

“give manufacturing another chance in this country.”

Speaking of his desire to rebalance the economy, he said that Britain had become

“heavily reliant on just a few industries and in just a few regions—particularly London and the South East.”

The actions of his Government in the past year have demonstrated that those were empty words.

BAE is a world-leading manufacturer that contributed £4.9 billion to UK exports in 2009—about 2.1% of Britain’s total goods. Half its UK employees are based in the north, and it is being forced to cut jobs. The manufacturing industry base of this country is in crisis and the Government have no clear plan of action—indeed, by squeezing the life out of the economy, they are significantly contributing to the problem.

The Prime Minister and the Chancellor claimed at the Budget to have a plan for growth. Is it not the case that the cuts will not help growth in this country, but will achieve the opposite by reducing production and GDP to make the economy worse off, not better? Time and again, this Conservative Government have shown a complete lack of support for the manufacturing sector in this country. We saw it with Bombardier, we saw it with Sheffield Forgemasters, and now we are seeing it with BAE Systems. I promise you, Mr Deputy Speaker, that Britain will not recover from the global economic crisis without a strong manufacturing base.

We know that the cuts are going too far and too fast. We know that there are problems in the eurozone that Governments are grappling with. Those problems will make us much more likely to go into recession. The measures that the Government are taking in cutting the defence budget are also causing problems in keeping the economy moving. When are the Government going to realise that and start providing the support that the manufacturing industry in this country is crying out for?