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This is an important debate and I am grateful for the opportunity it gives to north Staffordshire Members, who are present in force, to debate the effect of the closure of Royal Doulton's last remaining manufacturing plant in Nile street, Burslem, in my constituency, which is not far from your constituency, Mr. Deputy Speaker. The closure was announced on
I am very pleased that the Minister is in his place in good time for the debate, fresh from his travels yesterday to Stoke-on-Trent. I know from his stance and from his work in the Treasury and in the Department of Trade and Industry that he is au fait with the problems that Stoke-on-Trent faces. He has a detailed grasp of the ceramics industry, and I want him to take on board the experience of people in Stoke-on-Trent and to work with us to improve the industry.
We want the Minister to reaffirm the Government's long-term support for business and enterprise in the region, especially in the ceramics sector, which must involve all Departments. The Government must continue to take a special interest in the outcome of the Lyons review, which was set up to oversee the transfer of Departments away from the south-east to areas such as mine, where the benefits will be so much greater. We hope to be able to take a clear message on the matter to the Deputy Prime Minister and to the Chancellor.
I shall explain the background to the debate. Royal Doulton came to Burslem from Black Prince road, just over the river from Westminster, following the successful collaboration with Pinders. By 1884, Royal Doulton became the sole owners of the Nile street site and built a china section. From then on, Royal Doulton built its profits and its business on generations of skilled pottery workers in our area.
Fifteen years ago, when I was part of a parliament and industry fellowship trust with the company, it employed about 7,000 workers, and the Royal Doulton brand was to die for. It was a symbol of the best of British industry, by appointment to Her Majesty the Queen, and renowned worldwide. However, since then, successive managers of the company, especially the latest duo, Hamish Grossart and Wayne Nutbeen, who were supposedly brought in to rescue the company, have succeeded in closing the last remaining factory in Stoke-on-Trent. Workers have been let down by successive managements, but nothing can compete with the callousness of Grossart and Nutbeen in handling the announcements, as my hon. Friend Paul Farrelly made clear at an annual general meeting earlier this month.
This is a double-edged debate: it is about the sheer incompetence, betrayal and failure of Royal Doulton, and it distinguishes between the deplorable way in which one company has conducted itself compared with the approach of responsible companies in Stoke-on-Trent and north Staffordshire, which, however challenging the market conditions in the global economy, strive to improve competitiveness and contribute to the local economy by working jointly with all the stakeholders.
Although today's debate was prompted by the Nile street announcement, even if that had not happened, we were due a debate on the ceramics industry, and we would have secured one. Away from the glare of publicity of the Royal Doulton announcement, there have been many meetings and discussions, followed up by Ministers, to address in detail the issues relating to the ceramics industry that north Staffordshire Members have identified. However, before we can consider in detail what more we can do to support and help to restructure the industry, we must deal with the anger in Stoke-on-Trent about what Doulton has done and how it did it. In my 17 years in Parliament, I have never known anger like it, and it needs to be expressed here, in Westminster.
The anger is everywhere in my constituency and across north Staffordshire and is all-pervasive. One prominent local company director thinks that the situation at Royal Doulton is scandalous and points out that when the chairman and chief executive were appointed to sort out the company, Doulton shares stood at £1.74, whereas when he wrote to me, they were at 8p. He feels that they have shown no concern whatever for the skilled work force. The general secretary of the Ceramic and Allied Trades Union, Mr. Geoffrey Bagnall, accurately summed up the situation as lions led by donkeys.
The anger is felt by the workers employed on the shop floor, who sat on their benches listening to rumours of the factory closure on their local radio stations—BBC Radio Stoke and Signal—on the Friday, while all the time Mr. Nutbeen denied that a decision to close the factory had been taken. The concern is shared by prominent business leaders, who understandably distance themselves from the company for fear of being tarred with the same brush. Shop-floor workers are united in anger. They resent the way in which their loyalty to successive so-called final restructurings has been rewarded with a total factory closure, the transfer of 525 jobs to Indonesia and all the attendant uncertainty in the immediate aftermath.
There are, then, questions that require answers from Royal Doulton. However, its attitude until now has been that it takes its decisions behind closed doors and only once it has taken them does it tell the rest of us what they are. If Royal Doulton will not give those answers, it is up to the Government and the shareholders to investigate and call the people responsible to account to find out exactly when and how they made the decisions and the effects that their announcement will have on the livelihood of the workers, their pension rights, retraining and employment needs in the area, and the Nile Street visitor centre in my constituency, which is financed by European funding and the Government office for the west midlands. I am sure that my colleagues will pick up that point later. It may be worth asking whether, even at this late stage, there is still some way in which the visitor centre can be salvaged as part of the tourism and heritage legacy of Burslem. Also there we have the Royal Doulton heirlooms, which morally belong to their city of origin—Stoke-on-Trent—but which the company says it intends to sell on the open market.
We must also address the wider impact on the local economy just at the time when the Burslem masterplan and urban design plan have been agreed and are being taken forward, hand in hand with the initiatives of the North Staffordshire regeneration zone and housing pathfinder market renewal, which comes under the auspices of the Office of the Deputy Prime Minister.
Will the Minister give us assurances that, where appropriate, Departments will investigate all the ramifications of the Doulton decision? Will he take account of the bad taste of the company's decision to agree a land sale for the factory site at Nile street with St. Modwen before any announcement or detailed consultation with the trade union? That raises all manner of questions about the timing of the company's business announcement.
There is the same incredulity locally that the company could approach the Stoke-on-Trent regeneration company—19 per cent. of which is owned by Stoke-on-Trent city council and the rest by the St. Modwen property development company—and present drawings of a proposed new factory and visitor centre to be leased by Royal Doulton at Festival park in relation to the announcement of the factory closure, and still not meet its statutory obligations to consult about job losses.
How can a large-scale manufacturing outsourced outlet, which is what it will be, dressed up as selling ware made in Stoke-on-Trent and presented as a showcase on an industrial estate selling goods made overseas, benefit Royal Doulton or north Staffordshire? In fact, many people want to take the "Royal" out of Royal Doulton. All its actions fly in the face of the partnerships that so many of us have taken so much time to establish through the work of the regional development agency—Advantage West Midlands—the CATU, the North Staffordshire partnership, the local authorities, the chamber of commerce, the Ceramic Industry Forum, the renowned CERAM Research and the trade association, the British Ceramic Confederation.
The first and last word on the effects of Doulton's announcement must go to the workers. The CATU is working hard to obtain legal redress. I want a strong message to go out to its members that we support them. That prompts the question whether the time is now right for the Minister's Department to carry out further fine-tuning of employment relations legislation and regulations. For example, will he review the redress available to a trade union when a company blatantly ignores its statutory obligation to consult?
I absolutely agree. That is why I hope the Minister will carry out a thorough review of further progress that can be made. I want to see the speedy implementation of the European directive on consultation and information.
However, there is another side to the argument. The House should know—the Minister showed that he understood this when he visited my constituency yesterday—that the main concentration of the United Kingdom ceramics industry is based in north Staffordshire, predominantly in Stoke-on-Trent, so its survival and success are crucial to the area. That is why the Government have supported funding for the Ceramics Industry Forum and why the industry must continue to go from strength to strength. Support for innovation, design, skills and training must be high on our shopping list of future Government support.
The Minister saw for himself yesterday the real difference that the facilities at work funded by the Government is making to workers. The CATU has also shown what a difference a work force development project can make. Supported by Jobcentre Plus and the Learning and Skills Council, I seek an assurance that he will ensure that the next stage of this funding is speedily—we cannot wait until October—appraised and agreed by Advantage West Midlands. Funding from the European social fund has already been approved, and it simply remains for AWM to agree its contribution.
Will the Minister update us on the progress on tariffs on hotelware, especially in relation to the United States and China, which my hon. Friend Mr. Stevenson and many other hon. Members have raised on numerous occasions, and say what scope there is for further bilateral trade talks? Will he update us on counterfeiting, backstamping, liaison between Customs and Excise and trading standards legislation—and enforcement of that legislation—all issues that we have raised repeatedly, and constructively, with Government?
Will the Minister take account of anxieties over the underfunding of pension funds and the need to compensate employees who worked for local ceramic industry companies that have gone under and who have lost their pension? There is still time for the Government to address that point in the Pensions Bill.
In view of the Minister's combined DTI and Treasury expertise, will he initiate talks with the directors of the main banks to review the way in which the loan guarantee scheme works and see whether it can be used to support investment in the ceramics industry? There is not time to list all the issues, such as transport, packaging or the operation of the European emissions trading scheme, on which I understand talks were taking place with the trade association earlier this morning, but we shall continue to flag them up across Departments to ensure that north Staffordshire remains the centre of ceramics.
If the Minister cannot answer all those points during our short debate this afternoon, will he find the most appropriate way of ensuring that we continue to tackle each and every one of these issues?
I congratulate my neighbour, my hon. Friend Ms Walley, on securing this debate. As she said, it is badly needed to explore what has gone wrong, to express the horror and anger felt throughout north Staffordshire and by anyone who cares about British manufacturing—feelings run further than just the ceramics industry—and to explore what Government can do and what lessons we can learn.
When great names, including industrial names, fall, a shudder is felt through the world. When the announcement was made, there was a sense of disbelief in north Staffordshire. It seemed incredible that anything could touch the pillars of the industry—Royal Doulton, Wedgwood and Spode—which had been great names throughout the world and symbolic of British industrial brilliance and success for, in the case of Royal Doulton, about 125 years, and in the case of Wedgwood and Spode, about 250 years. We must ask what that means and what can be done.
I want to impress it on the Minister that the industry has been great for the past 250 years and still is, as I hope he saw when he visited north Staffordshire yesterday. Those brand names sell throughout the world because the wares are beautifully made and superbly crafted, and are great designs that are prized and valued. We have a worldwide reputation for quality, innovation and design.
Profits have always been made in the industry and continue to be made. As the Minister will have seen yesterday, several companies, such as Dudson, Steelite and Spode, which trade in the same general market conditions as Royal Doulton, not only survive but thrive. It is difficult, for reasons that we might explore in this debate, for companies to be successful in this complicated industry, because of international market conditions and in the light of new technology, but it is possible. If Royal Doulton has not succeeded, questions must be asked about the management.
Employment in the industry in this country is declining because of technology and lower labour costs elsewhere. However, at the same time, more ceramic ware is produced in north Staffordshire than has been during the 250-year history of the industry. Sadly, few people are now employed. When I first became a Member of Parliament 21 years ago, more than 50,000 people in north Staffordshire worked in the industry; now there are probably fewer than 10,000. Nevertheless, profits are being made, the ware is being produced and there is a future, albeit for a smaller work force. However, according to Royal Doulton's management, they have no future in north Staffordshire.
Nobody disputes that there are difficult market conditions. Labour costs abroad and Government subsidies for the manufacturing industry in other countries, such as China, are factors, as is new technology. Many aspects of the industry, but by no means all, can be carried out effectively by robotics. We have invested well in this country, but those factors put international pressure on the industry. There have also been unfair practices, such as backstamping and dumping, which the Minister will have heard about yesterday. Over the past 10 or 15 years, we have recognised that we cannot compete on cost, only on quality, design and promoting the great brand names. To do that we need skilful management, both industrially and financially. In recent years, Royal Doulton has failed the stringent but realistic tests that others have passed.
When I was first a Member of Parliament, Royal Doulton was owned by the Pearson group as part of a package of high-quality companies. With its great industrial, marketing and financial skills in the City of London, it kept the company going and made it prosper. Since the strategic demands of the group led to its being reshaped into a media company, which has different management and ownership now, it has done less well. In recent years, it has appeared to be panicking, selling off good elements like Royal Crown Derby, and last year there was an undignified and rather shameful scrabble to sell off the core symbols of its heritage—its great museum collection. That was done in the stupidest, most ill-considered and thoughtless way, and was symptomatic of the sort of poor thinking that has bedevilled the company in recent years.
As my hon. Friend has said, some difficult questions should be asked by the Government and the financial regulators about the management of the company. This problem is occurring throughout industry when companies fail. The public, employees and—I hope and believe—the Government do not like to see companies that are failing sacking huge numbers of loyal, skilled and important workers, while the directors and management walk away with huge pension schemes and bonuses, having had large increases in salary, packages of relocation and other things during the failing years of a company. To see directors go away lining their pockets substantially while people who have worked for a company for 20, 30 or 40 years are left with nothing, offends the British sense of justice and fair play.
The Department of Trade and Industry must look into the management of the pension scheme and the management of directors' and boards' salaries in recent years, in order to ensure that everything is in order in the company. That needs to be examined, and I hope that the Minister will hear that. It is not an easy thing for him or the financial authorities to do, but it is necessary because there are plenty of signs that in many companies—and Doulton may be one of them—things are not right. That cannot be left unquestioned.
We need a DTI investigation into the financial circumstances of the company in recent months and the whole way in which it has been managed. We also need, as my hon. Friend has rightly said, some assistance from the Government, because the industry is still a good, thriving industry. We are not going to the Government on our knees with a begging bowl saying, "Please save us." The industry is still strong, albeit one that employs fewer people.
The Government have done some good things in setting up the Ceramics Industry Forum and supporting CERAM Research, which is one of the real leaders in high-technology manufacturing research in this country. However, as my hon. Friend says absolutely rightly, there is a possibility—we need to make it a certainty—of getting European Union money. The European side of the £2.7 million has been secured. We now need the regional development agency in the west midlands, Advantage West Midlands, to fulfil its side of the deal, and anything that the Minister can do to speed up the process would also be helpful.
On paper, the European money is lost at the end of June, and Advantage West Midlands is saying that it needs six months to reassess the bid. We do not have six months to spare in this case. We need a little bit of pressure from the Minister to encourage the good people at Advantage West Midlands to consider the matter with slightly more dispatch and make a decision. That is the sort of practical help that the Government can provide.
I very much welcome the fact that the Minister visited Stoke yesterday, and took the trouble to listen to some of the best people in the industry, such as Mr. Ian Dudson. He will have learned a great deal, and I hope that he will be encouraged that what has happened to Doulton is the exception rather than the rule. We have to ensure in what we do during the next few months that it continues to be the exception, and that the rest of the industry thrives, even if weaker brethren like Doulton fail.
I ought first to explain my interest in this subject. I am still the director of a family retail business. Items that we have sold over all those years, going back to 1891, include ceramics, china and glassware.
At one stage in my career, I was the buyer for the china and glassware department, so I understand exactly how much the names that have been discussed by the hon. Members for Stoke-on-Trent, North (Ms Walley) and for Stoke-on-Trent, Central (Mr. Fisher) mean. Those names are part of British heritage; Royal Doulton is part of the British way of life. It was with great sadness that I heard about the demise of production in the UK.
I do not know many of the details of the Royal Doulton case, and I will not comment on what has happened, except to say that when I took over the china department many years ago, I was surprised to find that we had 50 tea plates of one design. Asking the previous buyer why that was, I was told with a certain degree of irritation that it was because that was what the company had sent us. Going back a long time, there was a great arrogance about some of these companies. They were so keen on exports that they ignored the home division and they decided that one was very lucky to be sent anything. If one was sent tea plates with the wrong pattern, it was just bad luck.
Sadly, I could almost foresee problems occurring, yet because of the Royal Doulton name, I could never have envisaged what has happened. It has not always been the best company to deal with, but it would be a great shame for the whole ceramics industry to be tainted by what has happened to it.
Away from tableware and giftware, the industry is thriving. The industrial and construction markets are doing very well. However, it has been extremely difficult for all British manufacturing industry. I was in a debate on the British furniture industry recently where the Minister was present. It has gone through very similar problems, as has the cutlery industry in Sheffield.
About 15 to 20 years ago, I prided myself on the fact that we were selling and could stock our departments with British goods. Sadly, the price became a little high for the good burghers of Uxbridge, and although they wanted British goods, they were pulled towards imported goods. I understand that that is what the market is all about. As the hon. Member for Stoke-on-Trent, Central said, successful companies have relied on quality and a niche market, and I am surprised at some of the companies that have gone under, because of the power of their trade name.
Customers often visit my gift department wanting to buy something British to take abroad or give to a foreign visitor. Recently, they have been appalled to find how many products with British trade names are manufactured abroad. If we promote British industry in the correct way, there will still be a great deal to say for it.
As the hon. Lady said, counterfeiting, copying and illegal imports are real problems, and it is very difficult for companies to live with them. One has only to tweak a pattern on tableware to make it not exactly the same thing, and hence get away with it. One can also change the name: I must be careful because the companies in question may still exist, but I have seen Royal Doulton spelled differently in several ways, such as Royal Dalton.
I, from the other end, not the manufacturing end and not with a constituency interest, say for heaven's sake we must support the ceramics industry. It is part of Britain's heritage and is something that we should be proud of.
I had not heard about the selling off of the heirlooms. I think that it is appalling. Perhaps the Minister can talk to his chums in the Department for Culture, Media and Sport and see whether they can do something about it. To lose some of those pieces would be absolutely irresponsible. I am pleased that I have been able to speak a little from the customer point of view and to say my little piece. It is incredibly important that we support British ceramics. Each Member of Parliament should do their bit and go out and buy some. They do not have to buy it from my store—although there is a generous discount on production of the House of Commons pass.
I add my congratulations to my hon. Friend Ms Walley, of our great city, on securing this debate. It is sad that the background to it is one of so much anger and frustration in north Staffordshire—and in Stoke-on-Trent in particular. Those feelings are based on our facing an unacceptable situation.
We recognise that, like many other areas of Britain, north Staffordshire is going through the most profound economic and social changes. We do not deny that, and although we still have a long way to go, we are managing those changes with a certain degree of success. Those changes are no less profound and serious for that success. We no longer have a coal mining industry at all; after 70 years, Michelin no longer produces tyres in Stoke-on-Trent; and the ceramics industry, one of the mainstays of our economy through the years, faces enormous problems and significant challenges.
As has already been said, particularly by my hon. Friend Mr. Fisher, there are success stories in the approach to managing those changes that we have adopted with the industry, the Government, the Ceramic and Allied Trades Union and the local community in north Staffordshire. We cannot succeed on our own. In that context, the recent events at Royal Doulton have dealt a body blow, not only to the company and, more important, to the people who lost their jobs, but to the heart of that important partnership between the industry, the trade unions, the employers, the employees, the local authorities, Members of Parliament and every stakeholder in the great industry. Despite all the problems and challenges that it faces, the industry remains great. That is why the unacceptable activities of the Doulton company and its management have dealt such a body blow. There is a feeling of real anger about the way in which people have been treated.
To give the impression that the incident has had its gestation in recent months would be wrong. It has been going on for years. When such events happen in different parts of the country—including north Staffordshire and Stoke-on-Trent— we sometimes hear the siren voices saying, "The work force is to blame. They've been too intransigent. They haven't recognised the changes that the industry is facing. The trade unions have not been prepared to be flexible to meet the issues head on." We sometimes hear that the management or shareholders are to blame, because they are concerned about only their own interests. Some siren voices might say that the workers at Royal Doulton and their union representatives have played a part in the situation that we now face, but they would be wrong. Let there be no mistake that this tragic situation is the direct result of 10 years of rank bad management—the sort of management of which this country should be ashamed. For years, the company made products while watching its market disappear. It continued to make the product, stuffed it in store and said, "It's Royal Doulton—sooner or later, it will sell." However, the company found itself with millions of pounds worth of stock that it had to give away. Was the work force responsible for that? No, it was the unacceptable face of British management, and I will argue that the Government have a direct responsibility for and interest in what has taken place.
As my hon. Friend the Member for Stoke-on-Trent, Central rightly pointed out, the tragedy affecting Royal Doulton has wider implications for the British economy. Royal Doulton ignored the dramatic changes that were taking place in the global market. It failed entirely to recognise the fact that people were going out to eat in restaurants rather than staying at home and were therefore not using the same ware as they were in the past. Other important companies in north Staffordshire, which are now doing rather better, recognised those changes and found the work force ready and willing to adapt to them, even though it meant the loss of some employment. The work force realised that the changes were inevitable, and they enthusiastically supported them. We are now seeing the difference. The problems affecting the ceramics industry are not the unfortunate result of an accident or global market conditions. They are the direct result of unacceptable actions by an important section of British management. North Staffordshire has a concentrated dependence on the ceramics industry, but the problems also affect other sectors. That point is important—Royal Doulton is not the only company affected.
That leads me to a point that has already been touched on but which I believe needs to be emphasised. How, in this day and age, when we are supposed to have a constructive framework of employment laws, can a company can get away with such actions? That is what my constituents, those of my hon. Friends the Members for Stoke-on-Trent, North and for Stoke-on-Trent, Central and the trade unions are asking, and we need an answer. Why can a major company do a secret deal that has the direct result of hundreds of people losing their jobs without consulting anybody until the deal is done and the announcement is made? How can that happen? What is wrong with our employment law that means that companies can get away with that? What has happened should not be allowed. It is unacceptable, and the Government need to examine it carefully. Although a relatively small company in terms of national and global employment, Royal Doulton is a world-renowned company with a reputation that has been built up over years that has a lot of respect throughout the world. Make no mistake: if Royal Doulton can get away with such action in the name of management, other companies will be allowed to get away with it. Such practices are completely unacceptable.
We in north Staffordshire are determined to meet the challenges and to build on our successes, but we cannot do it alone. We need the Government to act determinedly and in partnership with us to address the problems that still affect the ceramic industry. Unless action is taken, even those companies that we claim are relatively successful will increasingly find themselves pushed out of the marketplace.
Mr. Randall said, in his capacity as a buyer of ceramic products, that his customers, the good burghers of Uxbridge, wanted to buy British goods but were priced out—they felt that the goods were too expensive. That may be so, given the changes that are taking place throughout the world, but we must give the people of Britain—whether in north Staffordshire, Uxbridge or elsewhere—the choice.
The hon. Gentleman is absolutely right, but in terms of good management there comes a point when a retail outlet cannot afford to keep offering goods that people do not want. It can try to promote them, but it is up to the manufacturer to make the goods more attractive.
I take that point. If the hon. Gentleman will bear with me for a few more seconds, I might be able to clarify what I mean by giving consumers the choice. One of the problems faced by the ceramics industry that is products that are manufactured elsewhere come into the UK with no mark of origin and are then decorated in the UK and sold as British products. That is unacceptable. We can discuss price, but we should give British consumers the information that they need to be certain where a product has been produced.
We must impress on the Government how important it is for them to stress, in their dialogue with the United States through the World Trade Organisation, that even if it has been slightly reduced recently, the peak-time tariff of 30 per cent. on our pottery imported into the USA is unacceptable. It is a tax on British goods entering the USA—the most important market for the British ceramic industry. Action must be taken on that issue. In addition, we need to see more evidence that the Government, the European Union and the WTO are serious when they talk about monitoring the import of ceramics from China as part of the WTO accession agreement. We must impress on the Government the importance of that.
I reiterate the point made by my hon. Friends that we are proud of the partnership that we have in north Staffordshire, even with the difficulties that we face. We intend to meet the challenges and are managing the changes positively, but we cannot do it alone. Further investment is necessary. European Union money has been mentioned and Advantage West Midlands must put in its share—the Government must impress on it how important that is. We must also ensure that the framework of investment that will create new jobs in north Staffordshire continues to be available.
I, too, congratulate my hon. Friend Ms Walley on securing this debate, which is timely, given the dire situation of Royal Doulton. I should also like to thank the Minister for taking the time to listen and to respond to this debate about an important sector of UK manufacturing, and for his visit to Stoke-on-Trent yesterday.
I declare an interest, as I am a recent shareholder of Royal Doulton. Last week, I cast shares as proxy for another Doulton shareholder at the company's annual general meeting in the City. That shareholder was the former managing director of the Nile street factory, which was about to close. His votes went against Royal Doulton's management last week. I have also advised the Ceramic and Allied Trades Union, whose general secretary Geoff Bagnall, and his deputy, Garry Oakes, I warmly welcome here today.
Many of my constituents worked for Royal Doulton, have been made redundant by Royal Doulton, or are Royal Doulton pensioners. To give a flavour of the local impact of the company's implosion, last Friday, as part of "MPs back to school" day, I was at Chesterton primary school in Newcastle-under-Lyme explaining to children what I did locally. When the subject of Royal Doulton inevitably came up, one of the teachers asked the kids if any of their mums and dads were affected. No fewer than 10 hands shot up. There were stories of parents now facing redundancy, of mums and dads who had lost their jobs at Doulton in recent years, and of worries about Doulton pensions. It was a worrying and depressing litany from the mouths of 10 and 11-year-olds at just one school in my constituency.
In common with many traditional manufacturing industries, ceramics has long found the going very tough. As in other sectors, chief among the challenges is our response to globalisation and competition from emerging low-wage economies, often assisted by UK companies investing over there rather than here. We realise that there is no easy Government panacea for globalisation. However, there are issues, to which my hon. Friend Ms Walley referred, to do with fair trading, which we can seek to remedy. The Minister will be aware of the efforts made by the north Staffordshire Members, along with those of the trade union and the industry, to tackle concerns such as blatant copying of designs by China, punitive and protectionist US import tariffs, and ensuring that marks of origin fairly reflect where an item is made. The last issue is very important to an industry such as ceramics, because it is important to consumers that they are not misled into buying fragile fizzy plonk, as it were, rather than the full-blooded champagne that they really want.
Chief among the challenges are: investment in modern technology; having the right management and skills; and getting the right designs for the right markets at the right time and at a price that gives companies an acceptable return. As we have heard already, many ceramics companies are doing just that in a difficult environment. The industry is not an unremitting tale of woe; it has a future and there are many success stories. However, Royal Doulton, one of the industry's flagship names, is simply not one of them.
It is hard, after many years of commentating on and dealing with industry, for me to recall a worse example of blundering management. Royal Doulton is a textbook case of poor leadership, poor judgment, and questionable corporate governance: the worst of UK manufacturing in microcosm. The recent history should be told, so that it is not glossed over and the wider lessons not learned or forgotten. The present Royal Doulton chairman, Mr. Hamish Grossart, has been in that position for almost six years, since mid-1998. He is typical of many chairmen of public companies in this country: a privileged scion of a City family and Edinburgh's financial elite. He has a bagful of directorships—six others, at the last count. He is rarely seen or noticed at Royal Doulton's headquarters in Stoke-on-Trent, yet he picks up £120,000 a year from this cash-strapped company, plus perks. The local joke is, of course, "No wonder we can't afford him full-time." I have written to Mr. Grossart, raising detailed questions about the management and corporate governance of Royal Doulton. He has promised me a reply, but I have not yet received it. However, in the meantime I have obtained a few hard facts about his tenure.
Mr. Grossart's is a story of consistent and unremitting failure. Since he became its chairman, Royal Doulton has racked up pre-tax losses of £127 million, it has not made a profit or paid a dividend, and its turnover has halved. It swallowed more than £18 million of rescue rights issue money raised a mere two years ago, but its debt has grown again and its balance sheet has higher gearing than before the fundraising. During that period, the share price has slumped from more than £2.50 to about 9p today. The sad fact is that the planned closure of the UK factory at Nile street in Burslem means that, since 1998, Mr. Grossart will have shut all 11 UK factories and made more than 4,000 loyal, hard-working employees redundant. That is hardly a record of which to be proud. The wider point is that, as with so many companies in this country, the board has been rewarded handsomely for failure. Given some of the payments and perks, workers and shareholders could rightly ask, "Is Royal Doulton being run not so much as a pot bank but as a piggy bank?"
The history of this proud company is not all written in red ink. In 1997, before Mr. Grossart arrived, it turned in a pre-tax profit, and in 1998 it at least made an operating profit. It has not done so since. Last week, at the annual general meeting, Mr. Grossart said that the company
"was heading for the knacker's yard" before he arrived. All I can say is that when he did arrive, he jumped into the driver's seat, gunned the engine, severed the brakes and smashed Royal Doulton into every pile-up along the way. Let me give an early example: in 1999, uniquely among publicly quoted companies, Royal Doulton was bitten by a millennium bug of its own making months before the millennium. The fiasco of installing new warehouse software cost the company dearly and turned it into a laughing stock in the industry. It is worth noting that the current chief executive, Mr. Wayne Nutbeen, was the chief operating officer at the time.
Royal Doulton has been looking to Indonesia for its salvation. That undertaking has hardly been error-free either. According to accounts from Indonesia that I have managed to obtain, in the five years since that operation started to the end of 2001, it accumulated total losses of $6.2 million. It has also suffered serious accounting problems, and a run-in with the Indonesian tax authorities over its tax accounting cost an already cash-strapped company another $5.8 million.
I mention that not to embarrass Royal Doulton but to make a wider point about the running of our public companies. As far as I can tell, none of that was made public to UK shareholders, not even when Royal Doulton had its rights issue back in February 2002. Too often, mistakes in such companies are simply swept under the carpet or glossed over and presented as part of a coherent and inevitable strategy. Such glossing and flossing happened again last week at Royal Doulton's AGM in the City. I was last in the City with the shareholders and with Geoff Bagnall of the trades union two years ago at the rights issue, which the union pragmatically supported for the good of Royal Doulton's future and the last remaining employees. At that time, only two years ago, Mr. Grossart assured the work force and investors that, after another painful factory closure, one third of production would take place in the UK, one third would take place in Indonesia and one third would be sourced from elsewhere. After yet more pain in the meantime, he assured staff and investors as recently as last September in the interim results statement that
"major structural changes have now been largely completed".
Did he mean the major changes apart from shutting down the last factory, in which the company had been investing the previous year, and ending UK production—or leaving it at 2 per cent., not one third? In reality, have not subsequent events shown that the chairman again had no clue where Royal Doulton was going and that workers and shareholders were misled? All that he has done is push firmly down on the accelerator on the way to the knacker's yard.
I am sure that the Minister will agree that we must encourage leadership by example in UK companies, even when times are tough, yet last month, when the news of Nile street's closure was finally broken, what did the chairman of the company do? Did he insist that his chief executive stay and talk to the workers? No. There was no meaningful consultation with the work force either before the announcement or immediately afterwards. Instead, Mr. Grossart let his chief executive fly off for a holiday in Zanzibar, heaping more ridicule and bad will on Royal Doulton. My only hope is that the company did not pay for his ticket, because in the last year it had already splashed out £64,000 on air fares and relocation expenses for Mr. Nutbeen and his family, on top of his salary of £200,000 a year. He also gets an extra £25,000 a year in lieu of company contributions to the UK pension scheme, of which he is not a member, which is £18.7 million in deficit. That is another worry for Doulton pensioners.
There is one final issue in the run-up to the factory closure that is firmly related to leadership by example. From the chief executive's comments to the local press before his holiday, it seems that the review and sale of the Nile street factory had started six months before—in September, shortly after the interim results were announced. In November, however, while the review was going on, three directors, including Mr. Grossart and Mr. Nutbeen, bought Royal Doulton shares at the nearly rock-bottom price of 3p a share. As a result, they are all sitting pretty on a paper profit of nearly half a million pounds. If only other long-suffering investors, who include the workers, had had such foresight. Instead, in a proud, 200-year history, what they have, through mismanagement, is a scenario in which UK manufacturing is set to all but disappear.
After that tale of woe, and woeful leadership, who did Royal Doulton's chief executive have the cheek to blame? Funnily enough, he blamed the Government. I do not expect the Minister to respond to individual actions and events at companies such as Doulton. However, I should be grateful to learn what assistance Doulton has requested in the past to support a future in UK manufacturing, or to help its work force, because I understand that it is precisely none. I should also be grateful to hear how much importance my hon. Friend attaches to leadership by example and to good corporate governance in all UK industry. Lastly, I should be interested to hear his views on the appropriateness of Royal Doulton having "Royal" in its name and bearing the royal warrant when it is shifting production overseas in such a tragic and underhand way. If that does not fall within the Minister's remit, I should be grateful to know where people concerned about the issue should be directed.
I am grateful to Ms Walley for initiating the debate, and to the many hon. Members who know more intimately about Royal Doulton than I do. I would have spent more time talking about the matter from an outside perspective, but my colleagues have already referred to management issues and to the fact that, over time, the management has not handled the company, or the consultation, very well.
I want to examine the key issue of consultation. Hon. Members asked how decisions made in businesses can seemingly come out of the blue. Surely, if there was proper, relevant and real consultation, that would not happen. If the work force were engaged properly, as they should have been in this case, better-informed decisions would be taken and the work force themselves would be better.
It is understandable that the work force feel disgruntled and unhappy. There are the similar examples of Corus steel, which was strongly criticised for how it made people redundant, and the Accident group, which made people redundant by text message. Those examples highlight how this country is behind in that respect.
In the Standing Committee on the Employment Relations Bill, my hon. Friend Malcolm Bruce and I highlighted the issue to press the Government to confirm that they are fully committed to helping UK companies to implement the relevant European measures. I hope that the Minister will reaffirm his commitment today.
The Liberal Democrats believe in giving business maximum freedom in which to pursue competitive advantage and believe that it would be wrong to try to restrict the right of companies to relocate parts of their business overseas. However, we must remember that, in a free market, if companies rejig their production overseas the home market will take that on board. Home sales can be affected if people feel that the company is not trying hard enough to keep jobs in the UK.
Particular attention has been drawn to the fact that US ceramics tariffs are hitting the industry, a point made by Mr. Stevenson earlier this year and again today. We saw how similar problems arose in the steel industry, until President Bush finally capitulated and scrapped steel tariffs, following a long and bitter battle with the EU. As the world's largest economy, the United States has a responsibility to take those issues on board. I ask the Minister what progress has been made on negotiations relating to US tariffs on pottery imports, and what the position is today.
Hon. Members have referred to Chinese counterfeits, an issue on which I wanted to say a few more words. I very much support what was said. Furthermore, the British Ceramic Confederation says that when counterfeit goods are exported to countries such as South Korea, where the enforcement of copyright law is lax, things become even more difficult. Although British businesses now have greater protection for their designs and productions in the EU, design protection outside it is more difficult. The Business Link website acknowledges that, saying,
"Design law across the world is a complex area".
That is an issue that we need to put to the World Trade Organisation and other bodies. I hope that the Minister will take on board the British Ceramic Confederation's request and liaise with the Chinese authorities to help to clamp down on the production of counterfeit goods in Asia.
A serious issue also arises about manufacturing in general. That goes wider than Royal Doulton, but this debate has highlighted the need to consider manufacturing generally in this country. New figures show increasing unemployment in the manufacturing industry. While house prices boom and consumer sales increase, manufacturing is an area of great concern. The Government have an obligation to create a regulatory climate that helps businesses rather than hindering them. The Minister will know that I have often engaged in such issues. I do not do so in a general way. One can keep talking about red tape, but there are specific examples, many of which I could give today, such as the burden of student loan payments.
Recently the British Chambers of Commerce held a conference across the road. It has taken a lead in highlighting the burden of regulation on businesses. I ask the Minister again what action the Government are taking to speed the removal of regulation and to boost vocational education. There is much talk about university education, with which I agree, but we must place emphasis on vocational training too, to give our workers the opportunity to compete, through their company, with efficient practices and so on. I agree with a point made earlier: it is disgraceful that, over so many years, management have not listened to the work force, have not responded to the marketplace and have allowed this situation to occur. Colleagues know that far better than I do, but I have come across it myself during my business career. Having been in a small business where I—fortunately—had control over my companies, I was appalled to learn that businesses are still operating in that way.
I express concern about the impact on the work force at Royal Doulton, which I am sure local Members will share, and I am encouraged to see that a rapid response team has been put in place to help those made redundant. I hope that the responses will include offers of retraining and the like. There was a similar situation in my constituency, and the rapid response unit was very good at taking on those issues. I hope that that is happening in this case.
In the long term, we must focus on our industries and help them with the issues that I raised, such as tariffs. We must also help communities that are devastated. Despite the fact that the ceramics industry is a great one, the number of people employed in the work force is in decline, and I hope that the Government will deal with that issue through the regional development agencies, which are sometimes hamstrung by regulation, to do what needs to be done. I believe that these issues should be addressed locally, through RDAs or by other means, because it is those in the local area who know what needs to be done. I hope that the Minister will take that point on board when he responds.
I am delighted that the debate has taken place today, and I particularly want to congratulate my hon. Friend—I use that term advisedly—Ms Walley on securing it, and Paul Farrelly on the valuable work he has done. I rise to speak not only as a shadow trade and industry spokesman but as a Staffordshire Member of Parliament. Hon. Members have already pointed out that there are structural problems in the ceramics industry as a whole. I would like to pay brief tribute to the work of the Ceramic Industry Forum operating in the European Parliament, which is chaired jointly by Malcolm Harbour and Michael Cashman.
There are problems in the ceramics industry generally, but the problems at Royal Doulton have been exacerbated by the crass incompetence of the recent management. The hon. Lady has already pointed out the history of Royal Doulton, so it is clear that the demise of the company is not just the demise of a single factory or firm. A short time ago, it was the leading English group of fine china companies. The English fine china business has always been cyclical, but it has been a proud and successful exporter of fine English products.
In the early 1980s, as we heard, Pearson found that the business was not performing to its expectations. Its response was not to close down the company but to bring in a new chief executive to give the business inspired and creative leadership. It engaged Stuart Lyons, who had a background in menswear manufacturing, and had previously been managing director of the UDS retail group.
In those days, Stuart Lyons, with the support of the Pearson chairman, Viscount Blakenham, introduced new manufacturing technology to the tableware, figurine and glass-making operations, and combined that with innovative design and marketing programmes. In addition to the existing markets of Canada, the USA and Australia, he opened distribution subsidiaries in Hong Kong and Tokyo, and the company's products were sold in 80 countries around the globe. Royal Doulton became the world's leading specialist fine china retailer, with more than 400 branches, including the Lawleys shops in England and a successful chain in America.
However, 10 years ago, when the Pearson group decided to concentrate on its media activities, Lord Blakenham invited Stuart Lyons, who had by then been awarded a CBE for services to the china industry, to make the business public and gain a separate listing on the London stock exchange. Royal Doulton plc was listed in December 1993, and in the three years that followed the company doubled its earnings per share and delivered dividend increases of 13 per cent. annually. It was a success. Annual turnover was more than £250 million, with profits rising to £17.6 million. On the strength of that achievement, further expansion was planned. It was apparent that the brand names of Royal Doulton, Royal Albert, Royal Crown Derby and Minton, all part of the Royal Doulton group, were more powerful in the USA than the distribution that they commanded. America was then, as now, the world's richest market, and the company had already opened a chain of 50 stores there that were well managed and commercially profitable. Guaranteeing Royal Doulton's success, and safeguarding the work force in north Staffordshire, depended on further penetration of the US market, as well as on building up the United Kingdom market.
With the full support of his board, his independent chairman, the banks and the company's financial advisers, Lyons spent many months negotiating the agreed acquisition of a large and profitable retail group in the USA. That should have been a further step in Royal Doulton's expansion and a significant boost to the Stoke-on-Trent economy.
I will not, because there is little time and the Minister wants to respond.
Life is not always so simple. Two institutional holders of Royal Doulton shares—they held 25 per cent. of the equity between them—failed to understand the strategic logic of the proposal and adopted a policy of short-termism, refusing to support the proposal. That is one of the costs of the free market: those who own shares in companies are free to make mistakes. At that time, the Royal Doulton share price stood at about £2.50. Today, after a series of rights issues at ever lower prices, it stands at less than one twentieth of that figure, having fallen as low as 3p.
Stuart Lyons left the business rather than preside over a new strategy in which he had no confidence. A new management team took over. Their first step was publicly to belittle the company that they now led. They then proceeded to dismantle Royal Doulton's design, marketing and retailing teams worldwide. They rationalised—if rationalisation is the word—stocks, warehouses and advertising budgets, and wondered why the company's sales went into freefall. Unwilling to blame themselves, they blamed the previous management, the present management, the work force, the economy, the marketplace, the Government and the trade unions.
For the past seven years, Royal Doulton has made trading losses, having made substantial profits every year for the previous 12. Every loss has led to further cuts, to factory closures and to job losses. Only the top management team is protected, with high salaries, share options, housing allowances, bonus entitlements and free trips abroad. Hamish Grossart, the chairman, has much to answer for, as do M&G and Mercury Asset Management. They have demonstrated clearly that those are the destructive forces, forces of short-termism and lack of vision that have seen the destruction of the well-respected Royal Doulton company.
This is not a saga about party politics or political philosophy. It is a tragedy for the people of Stoke-on-Trent and of Staffordshire generally. It is also a tragedy for the English exporting effort, for investors in Royal Doulton and for Customs. I endorse the series of questions asked by the hon. Member for Stoke-on-Trent, North and those asked by other Members including the hon. Member for Newcastle-under-Lyme. I look forward to a full response from the Minister.
I am told that some former Ministers have found the experience of responding to Westminster Hall debates rather painful. In the light of the fantastic contributions that we have had from hon. Members of all parties, it is both a privilege and a pleasure. Indeed, it is always a pleasure to serve under a Deputy Speaker whose commitment to manufacturing is acknowledged throughout the House.
I am grateful to my hon. Friend Ms Walley for securing the debate and for taking the trouble to meet me in Stoke-on-Trent yesterday to brief me in great detail.
No single sector is as well represented, with the Members from north Staffordshire, or more effective in speaking up for itself as the ceramics sector. Today we are considering one of the gravest subjects we ever consider—the loss of hundreds of jobs and livelihoods, affecting family members across the generations in a community that, although still a world leader in ceramic innovation and production, has suffered from deeply hurtful company closures.
I always enjoy meeting ceramics manufacturers, and yesterday was my third visit to manufacturers in Stoke since becoming a Department of Trade and Industry Minister. They tell me that the Government's direct support for the UK ceramics industry, our establishment of the Ceramic Industry Forum, our involvement of work force representatives through their trade union, and the direct funds of £3.3 million have all ensured that UK ceramics firms maintain a world lead. That progress is welcome, and it means that it is to the United Kingdom and north Staffordshire in particular that many companies, countries and competitors look for innovations.
Let no one claim that any Government are doing more to listen to and respond to the needs of the industry or that anyone is doing more to liaise with it. The DTI, the Treasury, the regional development agency, the local Government office for the west midlands and the British Ceramic Confederation meet every quarter to address the issues that give UK manufacturers a competitive lead.
We are working closely with individual major ceramics manufacturers precisely to achieve that competitive lead. I regret to say that Royal Doulton is noticeable by its absence.
I was delighted to be photographed yesterday holding the House of Commons chinaware that we use here, so we do put our money where our mouth is. There is no better place to showcase it.
It is no wonder that Dudson is a company that in the past five years alone—I will allow hon. Members to draw their own conclusions about the time scale—has taken international contracts previously given to China for a major theme park corporation and one of the world's largest coffee houses. That is a tribute to the innovation and investment of the manufacturers of Stoke-on-Trent, and especially to the highly skilled and well-led work force who deliver 21st-century needs at peak production.
In spite of our complaints about Chinese imports, we know that the manufacturers in north Staffordshire can provide a lesson about innovation, design and quality to the rest of UK manufacturing and the world, because they are second to none.
As I have said before, redundancies are a sad but inevitable part of commercial life. Although some companies handle them well and treat their work force with respect, dignity and compassion, and work with employees and their trade unions to save jobs, sadly, Royal Doulton is not one of them. It has not taken any of the steps that other responsible manufacturers have taken, and it did not fully explore all the funding opportunities that have been mentioned by hon. Members.
Government representatives and the regional development agency met the company in 2002 to outline the possible help available locally, including up to 15 per cent. for operating in an assisted area, assessing available European regional development funds and preparing a bid for objective 2 funding. Hon. Members will share my disappointment that none of those options was pursued. Last August, a further meeting was held with the company, and again possible funding options were put to Royal Doulton. I have met the dedicated and experienced officials at the Department of Trade and Industry who promote the ceramics industry, and they are as frustrated and disappointed as local and other Members. I share that frustration at the company's failure to explore the available options.
I am also concerned to read reports that an employer of the reputation of Royal Doulton has not kept its work force or experienced and distinguished Members of Parliament informed of pending decisions. My hon. Friends the Members for Stoke-on-Trent, North and for Newcastle-under-Lyme (Paul Farrelly) came to the DTI, and working with Advantage West Midlands, we ensured that a taskforce was set up for Royal Doulton.
The taskforce was established and met within 13 days of the announced closure, and I am grateful to all the people who came together so quickly—Advantage West Midland, Jobcentre Plus, Stoke-on-Trent city council, the Ceramic Industry Forum, the Leaning and Skills Council and the North Staffordshire regeneration zone project. As can be seen, the taskforce includes all the key agencies and industry professionals and involves the key worker representatives from the union who know more about the situation than anyone else. The taskforce is meeting again next week, and I have asked for a report from it after that meeting, which I will share with hon. Members whose constituents are affected.
No consideration of any aspect that could help to ensure the prosperous future of the company and its work force should be ruled out by the taskforce. We are fortunate, because in a similar debate to which I have responded in this Chamber, the time scale was much shorter and there was not such a determined group of hon. Members as we have seen today, reflecting a lifetime of commitment to the industry.
Hon. Members have rightly highlighted other issues of concern. Counterfeiting and backstamping, especially by China, have been blamed for undermining our successful manufacturers, and I am aware of the burning resentment felt by UK manufacturers, who have to pay a fee to Customs and Excise to lodge an application to prohibit competitors in China and elsewhere from bringing goods into the EU and UK that they have illegally copied from British designs. That will not happen any more—we have abolished the fee.
Last month, my hon. Friends the Members for Stoke-on-Trent, North, for Stoke-on-Trent, South (Mr. Stevenson), for Stoke-on-Trent, Central (Mr. Fisher), for Newcastle-under-Lyme, for Stafford (Mr. Kidney) and for Staffordshire, Moorlands (Charlotte Atkins) met my hon. Friend the Minister for Trade and Investment to discuss, among other matters, illegal counterfeiting by Chinese companies. We are strongly supporting amendments to directive 84/500 to ensure that all ceramic tableware is permanently marked with the name, trade name or registered trademark of the manufacturer or seller.
A further issue raised by my hon. Friends concerns the 30 per cent. import tariffs imposed by the United States on hotelware. My hon. Friend the Minister for Trade and Investment shares that concern and intends to make strong representations in international forums. It was raised on his instruction at bilateral talks with the Chinese earlier this month. The British Ceramic Confederation has been given the full details of the Chinese officials with responsibility for considering the matter. The Chinese authorities tell my hon. Friend that they are keen to co-operate, and we look to the British Ceramic Confederation to report to us regularly on what we hope will be positive progress.
My hon. Friend the Member for Stoke-on-Trent, North also stresses the need for partnership between Government and local companies, and I could not agree more. That is why we have established the Ceramic Industry Forum and why we value our contacts with the British Ceramic Confederation, which represents 95 per cent. of the industry. Indeed, my hon. Friend was with me yesterday when Ian and Max Dudson thanked me for the research funding given to a local consortium in which Dudson plays a major part. That consortium is helping to drive British manufacturing and innovation forward in ceramics in three areas: cup making, plexiform and flexible flatware.
The idea of the consortium, like many of the best ideas, originated in north Staffordshire. CERAM Research at Stoke-on-Trent worked with us to put together a consortium of 10 manufacturers. They have been working with direct funding from the Department of Trade and Industry on the manufacturing improvement club model to set up a trial plant, which we saw yesterday. That plant has so much potential that it is expected to be a major exporter of expertise, and manufacturers around the world will look at how we have achieved a tremendous competitive lead.
Another firm that we visited yesterday, H and R Johnson, showed how successful, forward-looking management that is willing to reinvest in the work force, the plant and machinery, rather than in sending their wives back to Australia or on holiday, can gain a world lead. We saw yesterday the tile-making plant based in Stoke-on-Trent, which is the most advanced in the world.
We know that we have the best; it is sad that we have to come together as often as we do for Adjournment debates not to showcase the best but to criticise and try to learn lessons from the poorer performers. I am glad that my colleagues, the local Members of Parliament, stress the vibrant nature of the ceramics industry, and that they join me in analysing those success stories and celebrating the success that Government and industry can achieve together, although I confess that the vast majority of that is due to the work force and local industry.
I urge Royal Doulton to co-operate fully with Jobcentre Plus, Advantage West Midlands, the rapid response team and, most importantly, with its work force, unions and Members of Parliament, to ensure that everything that can be done in the next year is done. The ceramics industry in this country has a great and long history, but I, like my colleagues, believe that its greatest years lie ahead.