GKN: Proposed Takeover by Melrose

Mhairi Black Excerpts

Thursday 15th March 2018 Westminster Hall

[Mhairi Black (Paisley and Renfrewshire South) (SNP)]

I congratulate the hon. Member for West Bromwich West (Mr Bailey) on securing this debate. I echo many of the comments that have been made. It is clear that there is a consensus that GKN is at the cutting edge of the UK Government’s industrial strategy and plays a key part in that. We have heard that it is involved in sensitive programmes, and that it provides technology for a US defence company. I say that because the Royal Air Force has ordered 138 of the F-35B fighter jets made by that company. That is worth noting. The lifespan of some of those products could be up to 50 years from initial development, and that requires continuous maintenance. We already know that the London-based company Melrose has a record of buying companies, holding on to them for a few years and then stripping them. Given the nature of the technologies we are talking about, it makes no national sense to allow a hostile takeover to happen.

GKN operates in more than 30 countries and has 58,000 employees, including 6,000 in the UK. Even the workers are expressing concerns that a takeover by Melrose could leave the Government’s industrial strategy in tatters and see GKN sold off piecemeal, bit by bit, with jobs cut or shipped abroad. The warnings could not be clearer. Even the Secretary of State for Defence recently said before the Select Committee that he felt it would have been remiss of him to fail to express concerns. The merger could see parts of the business that provide components for military equipment falling below standards. The Committee on Foreign Investment in the United States, a US regulator relevant to military implications, must give approval, but GKN has warned that it does not believe that Melrose will be able to obtain that approval within the required time. As the hon. Member for Birmingham, Northfield (Richard Burden) said, we are talking about a potential and unnecessary risk to national security.

Under the Enterprise Act 2002, a number of authorities have the statutory power to intervene in takeovers. The power can, rightly, be exercised only on certain specified grounds. There are three main grounds on which certain authorities can stop takeovers. The Secretary of State for Business, Energy and Industrial Strategy may intervene on the grounds of national security and of financial stability. We have already established that national security is an issue, or at least an argument, but there is also a clear argument for financial stability.

As if the scale of what is at stake were not argument enough to act, flinging in the political chaos and uncertainty surrounding our political future due to Brexit ensures that the stable continuation of a major employer is more important than ever. We only need to look at the pensions aspect. The chief executive of the Pensions Regulator wrote to the Work and Pensions Committee to express grave concerns about the GKN pension scheme. We are trying to promote pensions and to convince people to ensure that they are secure in later life, because we recognise there is ticking time bomb, which could be disastrous, but at the end of December the GKN pensions deficit officially stood at £700 million. GKN warned that Melrose’s intention to ramp up the debt would lower its ability to support the pension scheme. That seems to be totally counterproductive, given the language continually used about pensions in particular.

Surely, before any progress can be allowed, Melrose must submit its takeover plans to the Pensions Regulator to show that the security of the retirement scheme will remain intact, and that is even without all the other arguments I have given. The reality is that the Government have the power, the reasons and the support to act. The question is, do they have the will?