GKN

Rebecca Long Bailey Excerpts

Tuesday 24th April 2018 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I thank the Secretary of State for giving me advance sight of his statement.

There are two issues that I must raise today: the fact that the reported assurances obtained by the Government, both in the letter of 27 March and subsequently, are not sufficient to guarantee the security of the long-term prospects of the company and, indeed, the workforce; and the inadequate capacity of the takeover regime to protect companies outside the very limited grounds of national defence, media plurality and financial stability.

First, as I made clear last month, the assurances obtained by the Government in Melrose’s letter of 27 March were sadly inadequate. Apart from the first five assurances which were post-offer undertakings, what was in the letter was completely unenforceable. For example, there were no post-offer undertakings on maintaining employment or tax residency, which could easily constitute such undertakings. Indeed, the maintenance of employment is vital to our national security, and the loss of these jobs will cause the diminishment of vital skills that are integral to our defence industry.

Putting aside issues of enforceability, what of the assurances that have been reported since 27 March? The reported veto power that the Secretary of State for Defence has to stop the sale of certain businesses will not, I am afraid, solve the national security problem. Melrose reportedly has a short-term outlook which undermines the long term that is required for defence projects. That is important, and a veto on the sale of certain parts of the business by the Defence Secretary will not help significantly. Sadly, the Government’s failure to address the short-term horizons of Melrose may damage the capability of a business to deliver projects that could last for 10, 15 or 20 years.

Secondly, our takeover regime is inadequate, and the Secretary of State is acutely aware of that. If a takeover falls outside the grounds of national defence, media plurality and national stability, the Secretary of State cannot act, even though the takeover may be harmful for the business, harmful for employees, harmful to research and development, and harmful to supply chains.

Let us take the case of Unilever. Last year it was threatened with a takeover, and there was nothing that the Government could do because the takeover fell outside the three public interest exemptions. Unilever has since commented on the inadequacy of the UK takeover regime, and its recent decision to place its headquarters in the Netherlands was, as reported by the Financial Times, arguably driven by a desire to escape the poor safeguards for takeovers in the UK. Labour Members have called on the Government to broaden the public interest test. The measures that the Government have proposed so far are not good enough. We know that, in GKN’s case, they already had the power to act and did not do so. However, our takeover rules would not have prevented Unilever from being taken over had Kraft been prepared to follow through, because that had nothing to do with any of the three exemptions.

I agree with the Secretary of State that our takeover regime must be open enough to encourage foreign investment, but it must also protect against short-termism and long-term damage to our economy and national security. Arguably, too often it is short-termism that prevails. Only this week we heard reports that the hedge funds that bought GKN shares to make Melrose’s takeover possible are now targeting Melrose, shorting the company on the stock exchange.

What we needed from the Secretary of State today was not just a waving through of the deal, but action, both in obtaining concrete assurances from Melrose on the future of GKN and its workforce, and in the form of clear plans to reform and widen our takeover regime to protect British businesses. I fear that the short-term predators already smell their next victim—and it is not just Melrose; it is Britain’s industrial future.

[Greg Clark]

Right from the outset, the hon. Lady has been unable to advise us of what specific undertakings she thought it was appropriate to obtain. She needs to understand that as this is a quasi-judicial decision, the statement that she made that she would block the bid would disqualify her from making that decision, as the right hon. Member for Twickenham (Sir Vince Cable) knows to his cost.

The evidence presented to me was that this was a British company taking over another British company, that no such takeover has ever been blocked on national security grounds, and that the Ministry of Defence and the other agencies said there was no reason for intervention on those grounds. I have to tell the hon. Lady that the previous directors of GKN themselves said that there was no reason for an intervention on national security grounds. She should reflect on the commitments that the Defence Secretary and I have secured to retain the aerospace division for at least five years, to ensure that the Government have the right to approve any future sale of any defence business or asset, and to invest in research and development to at least the current level. Not once in the past four months has she engaged in a similarly forensic way to set out what she thinks would be appropriate commitments.

The hon. Lady says that the commitments are inadequate, but they have been given as legal deeds and in some cases set out to the Takeover Panel as post-offer undertakings. The truth is that she has had the opportunity to engage with this matter, but having prejudiced her position by saying from the outset that the takeover should be blocked, she has given away the ability to have influence on what the regime should be.

The hon. Lady knows perfectly well what the Government’s powers on takeovers are, because the 2002 Act was passed under a Labour Government and sets out those limited powers, which are the same as in the rest of Europe. The difference between the Government and the Opposition is that when we came into government, we reformed those powers to allow post-offer undertakings to be given, so the situation when Kraft bid for Cadbury and undertakings were reneged upon cannot happen in the current circumstances. We have taken an active approach to ensuring that all stakeholders’ interests are secured, whereas the hon. Lady preferred to float above it all and simply say no before considering the evidence. We have proceeded responsibly, and she would do the employees of and stakeholders in GKN a service if she engaged more forensically in future.