Bombardier - Statement

– in the House of Lords at 2:15 pm on 22nd November 2018.

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Photo of Baroness Vere of Norbiton Baroness Vere of Norbiton Baroness in Waiting (HM Household) (Whip) 2:15 pm, 22nd November 2018

My Lords, with the leave of the House I shall now repeat a Statement made today in another place by my honourable friend the Minister for Business and Industry. The Statement is as follows:

“Following Bombardier’s announcement that it plans to reduce its workforce by 490 employees at its Belfast aerostructures site, I have this morning spoken to Michael Ryan, its chief operating officer of aerostructures and engineering services. I have arranged a follow-up meeting with him later this afternoon. This follows the announcement from the company earlier this month that a further 5,000 staff from its global workforce will need to leave the company over the next 12 to 18 months.

I understand that the employee consultation period of 90 days has now been triggered. During this time, Bombardier will be doing what it can to mitigate the number of compulsory redundancies required, including considering the possibility of voluntary redundancy packages. I recognise that this is unwelcome news for the Belfast workforce and their families. It is regrettable that they face further uncertainty at this time of year, but Bombardier is a private company and the Government have no role in its commercial decisions. My top priority has been to emphasise our support for Bombardier’s high-quality UK workforce now and in the future.

The Shorts factory in Belfast employs around 4,000 skilled workers, with almost a quarter of those working on the A220, the new joint venture with Airbus. It also supports a supply chain of hundreds of companies and many more jobs in the UK. It is in all our interests that Bombardier’s Belfast facility is successful. Last year, when the joint venture was announced, both Bombardier and Airbus made a number of important commitments to me, including that wing manufacturing will continue in Belfast, that the treatment of UK sites and suppliers will be equal to that of other Bombardier and Airbus suppliers, and that the strategy will be one of building on existing strengths and commitments, not plant closures, taking opportunities to increase sales of the C Series across the globe. These commitments still hold true.

The announcement yesterday is part of a five-year transformation plan that covers the global business. This is a long-term strategy, designed to increase the competitiveness of the company. It is, of course, deeply unsettling, for the workers at the Belfast facility, and the Government will work closely with Bombardier to minimise the uncertainty and help them to prepare for the future. The Government are also working closely with the Belfast facility on its longer-term competitiveness. In the global aerospace market, this is driven by embracing new technology. This year, the Government invested over £20 million in R&D at the Belfast plant to develop new products and improve efficiency.

The Government will continue to work closely with the company, the unions and the devolved Administration to support the company and to support manufacturing sectors that we can be proud of. In Northern Ireland, the Department for Communities’ redundancy service offers its support to employers, workers and those impacted during a redundancy situation”.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords) 2:18 pm, 22nd November 2018

My Lords, I thank the noble Baroness, Lady Vere, for repeating the Statement.

Bombardier’s presence in Northern Ireland is vital to the economy there, representing as it does 8% of Northern Ireland’s GDP and about 40% of the Province’s manufacturing output. The company employs 4,000 people across Northern Ireland as a whole, so this announcement will be a devastating blow, and not only to the families who will be directly affected in the run-up to Christmas—an estimated 20,000 jobs throughout the UK are part of the company’s supply chains. Many such employees and their families may also be affected by the company’s decision.

I am sure noble Lords will recall that last year the company was under attack from President Trump, who attempted to impose tariffs of nearly 300% on Bombardier when the company was accused by Boeing of dumping its C Series jets in the US market. Will the Government join me in paying tribute to the way in which Bombardier’s unions, primarily Unite and GMB, worked closely with Michael Ryan and Bombardier’s management team at that time to fight those absurd dumping allegations?

I am sure your Lordships’ House will be disappointed that the same spirit of co-operation appears not to have been the case today; we understand from Unite that the unions were not made aware of the extent and scale of the job losses that management are now contemplating. Will the Secretary of State meet the unions to discuss how to work together on these issues?

The 490 proposed job losses are just the latest in a long line of redundancies by Bombardier: there have been over 1,700 since May 2015. The company has said that these job cuts are part of a global drive to cut costs, but it is true that a disproportionate number of the 5,000 Bombardier jobs to be cut globally will be cut in Northern Ireland. It is over 10% of the workforce there.

I agree with the Government that it is in all our interests that Bombardier’s Belfast facility is successful. However, I was struck by the comment in the Statement that when the joint venture between Bombardier and Airbus was announced,

“a number of important commitments”, were made to the Government,

“including that wing manufacturing will continue in Belfast, that the treatment of UK sites and suppliers will be equal to that of other Bombardier and Airbus suppliers, and that the strategy will be one of building on existing strengths and commitments, not on plant closures, taking opportunities to increase sales of the C Series across the globe”.

What has gone wrong here, precisely? Were the Government led up the garden path? Were these binding commitments, and can the company be held to them? According to the Statement, the Government clearly believe that these commitments still “hold true”—whatever that means. It is certainly not a very legal term. What precisely will the Government do about it?

I have a number of further questions for the noble Baroness. What recent discussions have the Government had with Bombardier regarding its global restructuring plan? For instance, it has been reported that as a result of Bombardier’s redundancies in Northern Ireland, production jobs could be created in Mexico and Morocco. What assessment have the Government made of these reports, and will they make strong representations to Bombardier on that issue?

It is estimated that there are a further 60 aerospace-related firms in Northern Ireland. What assessment have the Government made of the resulting impact on these businesses of the decision to make redundancies? What discussions has the Secretary of State had in Northern Ireland about securing alternative inward investment into Northern Ireland? Are there any government contracts in the offing, for instance?

When steel sites were being closed a few years ago, steel task forces were set up with government aid. What provision will be put in place for advice and support to Bombardier employees and families affected by this round of redundancies? Will any additional government funds be provided outside the current block grant and the special DUP-designated funding—if that is being retained—to help reskill any workers who will lose out?

Bombardier represents 8% of Northern Ireland’s overall GDP and the aerospace industry contributes £1.3 billion to the Northern Ireland economy. It is a significant slice of activity there. What steps are the Government taking to ensure these vital industries are protected in the long term?

Presumably, the Government will review its investment of over £20 million in research and development activity at the Belfast plant, which, according to the noble Baroness, was there to develop new products and improve efficiency. Can she say how much of that is in doubt now, and what steps will be taken to make sure that value of money is secured?

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport)

My Lords, I start by thanking the Minister for repeating the Statement. This is a very significant development, because Bombardier is one the biggest employers in Northern Ireland. This is very sad news for the whole of Northern Ireland.

Earlier this month, Bombardier announced that it would have to cut 5,000 jobs across its global operations. Of that, 3,000 would be in Canada. It seems to me that, for a very small country, the number of jobs being cut in Northern Ireland will have a disproportionate effect. It also seems that the loss of 500 jobs, which is a considerable number, does not reflect the assurances the Government said they received from Bombardier when they made their investment in research earlier in the year.

It is a particularly bitter blow for east Belfast, where the company is based, and especially for the workers and families who will be directly affected. It is of great importance, because these are well-paid, highly skilled workers in a relatively low-paid economy. At the moment, Northern Ireland is in a particularly uncertain situation; our whole economy is uncertain, but Northern Ireland’s is more uncertain than the rest.

Bombardier’s struggle to bring in orders for its C series jets was almost certainly exacerbated by the threat of punitive US tariffs which hung over the company for several months. What are the Government doing to defend the rules-based international trade system in the Trump era? Can the Minister tell us if they are still hopeful for a trade deal with the US that benefits UK businesses?

The Government could have a vital role to play in helping these workers reskill and retrain in the face of a rapidly changing labour market. What steps are officials in Northern Ireland taking in this regard, and have the Government considered supporting people with, for example, an endowment, or an individual learning account which they can use at any stage in life to access further education or training?

The Statement says that the Government have no role in Bombardier’s decisions, as it is a private company. But that overlooks entirely the leverage given to them by the £20 million that they invested in the company this year for research, and to help it improve efficiency. Can the Minister explain what efficiencies they anticipated as a result of this investment? From time to time, the word “efficiency” actually means cutting jobs. Was there a clear agreement about job security when that money was invested?

There is, of course, a big supply chain in Northern Ireland which is also affected. Can the Minister give us an estimate of the value of that supply chain, and the number of jobs involved? Will the Government undertake to have meetings with any of those in the supply chain whose companies and jobs will be affected? Finally, the Statement refers to the joint venture with Airbus. Can the Minister assure us that Airbus is still in a good position, despite these job cuts, with its partner?

Photo of Baroness Vere of Norbiton Baroness Vere of Norbiton Baroness in Waiting (HM Household) (Whip)

I thank the noble Lord, Lord Stevenson, and the noble Lady, Baroness Randerson, for their contributions. A number of issues were raised, and I will cover as many as I can. I agree with the noble Lord, Lord Stevenson, that it was very good that we managed to fend off the tariffs coming from the US. I pay tribute to the work done by the unions, and to the Prime Minster, who was instrumental in making sure that Bombardier was not hit by these very significant tariffs, which would have had a very difficult impact on its business.

Over the coming days, we will meet with Bombardier —I think the first meeting is this afternoon. We will encourage the company to work with the unions; I am disappointed to hear that it did not. We are at the very start of a 90-day consultation period, which will obviously include numerous meetings with the unions, employees and, indeed, the company.

On the comments in the Statement about the commitments that have been given, these are not at all inconsistent with what is happening. My understanding is that different parts of the business are responding in different ways to the global markets for their respective products. Certainly, the Airbus-Bombardier joint venture is proceeding successfully—that is about a quarter of the workforce in Belfast—and there is no reason to suspect that there will be any job losses at all there. Our ongoing discussions with Bombardier are very good, because it is a key part of the aerospace growth partnership, which meets to discuss the aerospace sector as a whole. The department has a budget of £1.98 billion to invest in R&D over a 13-year period to support the growth of the sector and its transition to new technologies.

On parts of manufacturing going to Morocco and Mexico, that is indeed the case. Some of that involves less-skilled workers and less highly manufactured parts, but what we need to do is to make sure that the R&D is there and that the skilled employment exists to allow those jobs to come back as technology moves on. That is where we are putting our money.

We are confident that the Northern Irish Government have the resources to support the workers to retrain or to find work, but it is important that we understand that we do not currently know who will lose their jobs. We do not know whether that will be compulsory or voluntary, so it is very difficult to talk about retraining or new jobs for these people until we know who they are.

The Government will not be reviewing the £20 million that we contributed to Bombardier in conjunction with Invest Northern Ireland, because it was R&D spending. We have to be clear that research and development is the Government priming the pump. I am afraid that the engine has to run itself, but it is our job to make sure that we put seed funding into projects that we know will be a step change to coming new technologies.

Turning to some of the detail from the noble Baroness, Lady Randerson, obviously I cannot commit right here, right now about a trade deal with the US, but she will doubtless be reassured that we will be looking to create as many new trading relationships as we possibly can. That will certainly have benefits when it comes to future tariffs. Regarding the supply chain, again, it is too early to tell because we do not know where the jobs will come from, what elements of the business will be downsizing and what the consequences will be for the supply chain. It might be that the manufacturing elements are slightly overstaffed as technology has improved, and that the impact on the supply chain will be very small because there will still be products going through it. Until we understand that a bit more, I do not think that we can comment on it.

Photo of Baroness Seccombe Baroness Seccombe Conservative 2:31 pm, 22nd November 2018

My Lords, messages of this type are always unsettling, but at this particular time of year I feel for all the employees of Bombardier in Northern Ireland. However, people tell me that aerospace is a huge global industry. If there is work to be done in this industry, Bombardier should benefit from this development. Am I right in thinking that is true?

Photo of Baroness Vere of Norbiton Baroness Vere of Norbiton Baroness in Waiting (HM Household) (Whip)

My noble friend is completely right. The Government firmly believe that the aerospace sector is one that we really need to be involved in. Wings are manufactured by Airbus and Bombardier, as we have heard. We have engines from Rolls-Royce, aerostructures from Spirit, Bombardier, GKN and Melrose, and advanced systems from Safran, UTC, Thales and GE Aviation. The total turnover of the aerospace sector is £33.5 billion. It supports direct employment of 124,000 people and indirect employment of 167,000 people. The average salary is £41,000 a year. We know that growth is coming in the sector. It is estimated that we will need 35,000 new large passenger aircraft over the next 20 years. They will be greener, quieter and more efficient. It is very important that the Government involve themselves in the sector and put their money into the right projects that need research, so that we can be a major part of creating those new aircraft.

Photo of Lord Rogan Lord Rogan Deputy Chairman of Committees, Deputy Speaker (Lords)

My Lords, I welcome the news that the Minister has been so proactive in this matter. As has been stated, it cannot be stressed too strongly how important the highly skilled jobs from Bombardier are to the Northern Ireland economy. As mentioned in the Statement, this year the Government invested more than £20 million in research into new projects and efficiency. This is a positive development. Would the Minister consider whether, by offering extra aid and finance, more jobs could be maintained?

Photo of Baroness Vere of Norbiton Baroness Vere of Norbiton Baroness in Waiting (HM Household) (Whip)

My Lords, as I mentioned, there is a very significant pot that amounts to about £150 million a year. The Government are always open to hearing any applications from companies such as Bombardier for some of this money, on the understanding that it is for research and development. That of course includes jobs in those sectors. It is to make sure that those companies are fit for the future and able to take part in the global aerospace industry.

Photo of Lord Empey Lord Empey UUP

My Lords, in her Statement the Minister mentioned that her department would be working with the devolved Administrations. For the second time today, I say to her that her right honourable friend in the other place the Secretary of State for Northern Ireland must understand that, in this situation, two parts of government have a responsibility. The devolved part of government has responsibilities for training and other areas of economic activity, such as new developments and new plants. I had the privilege of handling the Bombardier issues for many years. We invested a lot of money in the C Series wing plant and various other things.

My anxiety about this is that things will start falling between the cracks. There has been a very good relationship over the years between the Governments in Belfast and here with the company and the unions. They have been trying to work together. We know that it is a tough market. We have already said that aerospace is one of the United Kingdom’s great success stories, but it is particularly important in our circumstances. Yet again, the absence of the devolved Administration is a risk that has to be taken into account. The Government’s policy is one of saying, “We are doing our best to bring the devolved institution back and this is our objective”, but nothing is happening and nothing will happen in the immediate to short term because there is no initiative, drive or effort being made, as far as I can see. I appeal to the Minister to reflect to her right honourable friend in the other place that my anxiety is that there is nobody directing their local departments. Therefore, a large slice of what could be done could very well be missed out. That is something we have to watch very closely.

Photo of Baroness Vere of Norbiton Baroness Vere of Norbiton Baroness in Waiting (HM Household) (Whip)

The anxiety so clearly outlined by the noble Lord, Lord Empey, is common to many Members of your Lordships’ House. I will certainly make sure that my right honourable friend the Secretary of State for Northern Ireland looks at Hansard and takes his comments on board.

Photo of Lord West of Spithead Lord West of Spithead Labour

My Lords, the United Kingdom in effect leads the world in wing design and wing construction. It is one of our areas of excellence. Bombardier has just posted remarkably high profits. Is there any indication that it is trying to move some of this knowledge and skill to places such as Mexico?

Photo of Baroness Vere of Norbiton Baroness Vere of Norbiton Baroness in Waiting (HM Household) (Whip)

My Lords, there is no indication that it is trying to do something like that. The UK is a very important hub for the more high-spec and high-tech ends of wing design and wing manufacture. On profitability, Bombardier is not just about aeroplanes; it is also about trains. We know that you cannot look at overall profitability and say, “Okay, it’s all profitable. Surely these sorts of things don’t have to happen”. That is not the case. This is a massive company with many billions of pounds-worth of revenue. While it is true that its profitability has improved, it is nothing like where it should be, given the amount of capital invested in it. If the five-year transformation plan works it will put the company on a firmer footing.