Textile Industry

– in Westminster Hall at 4:00 pm on 21 October 2009.

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Photo of Michael Moore Michael Moore Shadow Secretary of State for International Development 4:00, 21 October 2009

As ever, it is a pleasure to serve under your chairmanship, Mr. Gale. I hope that we will give you an easy time over the next half hour. I am not sure that I would express the same sentiments to the Minister, because I have a few hard questions for him. However, I am grateful for the opportunity to bring before the House the hugely important issue of the difficulties faced by the textile sector at the moment, particularly in my constituency, and I shall raise issues to which I hope the Government will respond.

Sitting suspended for a Division in the House.

On resuming-

Photo of Michael Moore Michael Moore Shadow Secretary of State for International Development 4:12, 21 October 2009

The textile sector is a huge and important part of Britain's manufacturing economy, but there is sometimes a tendency for people to talk it down. I am absolutely not in that camp. I think that British textiles remain at the forefront of the industry and are among the finest anywhere in the world, particularly the sector that I represent-the Scottish cashmere industry in my constituency in the borders. We have some of the finest and best-designed textiles to be seen anywhere. The cachet of Scottish cashmere is such that the knitwear from my constituency features in major designer collections year after year. That is not a recent phenomenon; it has happened for generations.

In Hawick, Selkirk and Galashiels in my constituency, thousands of people's livelihoods depend directly or indirectly on the success of the cashmere industry, and they are rightly proud of the heritage that it represents. They are also still confident about its future, and I share that confidence. Research carried out by Scottish Enterprise a couple of years ago highlighted that there are more than 40 companies in Scotland involved in cashmere, most of which operate internationally. They have about 4,000 direct employees, about 50 per cent. of whom are based in the borders.

The textile sector generally, and the knitwear part of it on which I focus this afternoon, has had decades of the fiercest competition. We in the south of Scotland are not newcomers to the pressures of globalisation such as the supply of yarn from China, the increased manufacturing competition-albeit at a different end of the fashion scale-from China, and the fact that customers are based in all parts of the world.

The industry has not hidden behind protection or looked for easy assistance in the past, but this sector and the group of companies within it are now under serious pressure, like so many other manufacturers across the United Kingdom. The companies that I am talking about have survived because they have continually exceeded their customers' expectations, have reinvented their manufacturing processes and have achieved world-class service standards. If someone needs two jerseys to be knitted and in Manhattan by Friday, it is just about possible to have that done in the borders today and to have it there on time. Very few parts of the world can offer that level of service, but my constituents and the companies that I represent do that week in, week out. A company does not get to be a fixture in Bond street in London, or on Fifth avenue if it is behind the curve, and none of those companies is in that position. But-a but was inevitable-I have identified three major and specific areas of challenge in which I believe the Government should get involved and offer support.

The first area is finance. Through no fault of their own, many of those companies face the most serious credit crunch that they have ever experienced. Often, they are family companies that go back for generations, that are used to managing their finances carefully and used to the pressures that their product design cycle and customer payment habits have forced on them. Orders are placed in spring, and companies begin to make up orders later in the year, making huge investments in stock and wages over summer and into autumn. Then, the customer gets the goods, and it can be 90 or 120 days before the cash comes back. Cash is always at a premium for those businesses, but right now, as in so many areas of business, suppliers are shortening their terms of credit, and customers are extending theirs.

Meanwhile, the banks have taken the opportunity provided by the recent chaos to introduce charges for things that nobody ever previously imagined they could charge for. The reduction in competition has meant that the costs of banking finance have increased enormously, assuming that it can be obtained at all. That is a big issue with many banks. I hope that when the Minister responds, he will give specific examples of companies that are getting support through the various Government schemes. I have to tell him that my discussions with senior figures in all the local companies that I represent have revealed a terrible mismatch between Government policy and expectation about what the banks are doing, and the reality on the ground. The Government must look into that gap, find out what is going on and make the lending happen.

A second problem that I did not expect, which has become a huge issue for my local companies, concerns the behaviour of energy suppliers. I have been staggered to find, on more than three occasions in the past six months, that energy suppliers-each time a different one-have been demanding huge security deposits from companies before agreeing to continue their supply of electricity or gas. I am talking about figures of tens of thousands of pounds being imposed on companies that are not in a position to pay them. Those companies do not have poor track records on payment: they have honoured their bills and received their electricity and gas reliably, without any issues. Again, there has been a change in behaviour among the major players in the market, with tens of thousands of pounds being demanded and premium rates being charged. As if demanding a security deposit were not enough, advance payments have also been demanded on many occasions.

I raised that, privately, with one of the energy Ministers, who has now moved to a different Department. He was sympathetic privately, and I would be interested to know to what extent the Minister here today finds that behaviour to be common across the country. If it is news to him, I hope that he will urgently go back and insist that both his Department and Ofgem look at how those companies are behaving.

A third area of concern relates to skills, which are at the core of all those businesses. To witness the hand stitchers, see the skills in the weaving sheds, as I have done countless times over the years, and see the years of experience that go into finishing goods, is to realise the almost magical quality that is required, for example, in understanding how much to wash a cashmere sweater before it is ready to take to the client. That might not depend simply on training-perhaps there is something magical about it. Those skills are precious and need to be retained. Right now, when many companies are struggling, the cost of training is a major issue for them.

It is deeply unfortunate that, into that mix, the doubts about the future of Skillfast-UK have come to the fore. The sector skills council responsible for the textile industry, as is well documented, is now appealing against the decision to disband it, although I am yet to find out formally the outcome. The Minister wrote to one of my constituents recently about that issue-I shall refer to that letter in a moment-stating that he could not announce anything. I wonder whether he will be in a better position to do so today. I am not picking up the baton on behalf of Skillfast-UK, but I do want to know what will happen if it no longer exists, because if it goes, what will replace it? Leaving the textile sector without that support will be a damaging decision in the industry's hour of need.

The issue of skills has been raised by many Members for many years with different Ministers. Alongside that, I will mention two other issues: country of origin labelling and passing off. It is of great concern to my constituents and the textile companies that the country of origin labelling is not adequate enough to allow us to show that the goods produced in my part of the country are produced in Scotland, or even in the UK. It is too easy for others to pass off their goods as having been made in Scotland, and that has been batted backwards and forwards between us and Europe.

I am looking this afternoon, as a minimum, for an assurance from the Minister that the Government will vigorously continue to pursue that issue and take action to ensure that the right powers are in place for trading standards authorities and others to tackle passing off. To suggest that something is made in Scotland when it has been made several thousand miles away is clearly unacceptable. It is a fraud on my constituents who make the garments and on the customers, many of whom are from overseas and come to Scotland to buy them.

In the summer I had a meeting with the Minister and my constituent, Ken Pasternak, to whom the Minister has recently written. I would like to put on the record some of the issues Mr. Pasternak raised in his letter, in particular the issue of export credit insurance, which, if made available, would substantially help textile companies by reducing some of the risk that the banks fear there is in manufacturing, particularly in textiles.

I am afraid that the Minister's response did not go down terribly well with Mr. Pasternak, who, as the Minster will recall, is a gentleman of direct language-I will not repeat what he said when we spoke about the issue a few days ago. The suggestion that the Government are monitoring the situation cuts no ice with businesses that are struggling here and now, and I fear that some of them are in a fragile state and may suffer accordingly. Mr. Pasternak also highlighted the need to put ourselves on a level playing field, particularly with regard to the support packages that have been made available to Italian competitors. Again, that was brushed aside in the Minister's response, but I am afraid that I did not see a strong argument for the decision to sidestep the issue. If our main competitors within Europe are getting that support, it is hard to argue that we should somehow do without it. Mr. Pasternak also raised the issue of tax credits for samples production and for innovation. I apologise if I missed it, but I did not see much of a response to that in the Minister's letter.

I hope that I have made clear how serious the problem is. Yesterday, Lochcarron of Scotland announced the closure of its knitwear operation in Hawick, putting 38 jobs at stake in my constituency. The management hope, as do I, that they will be able to get jobs for them in Hawick, or certainly elsewhere in the sector, and that the business in Selkirk will continue profitably. That is a reminder that businesses are having to make tough decisions right now and that things are very difficult indeed. I hope that the Minister has noticed that I have not stood here and asked for lots of money this afternoon, or for the Government to write big cheques. However, I have asked them to exercise the powers that they already have and which they need to use more vigorously, and I hope that the Minister will do that.

Photo of Ian Lucas Ian Lucas Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Business and Regulatory Reform) 4:26, 21 October 2009

It is a pleasure to appear before you for the first time as a Minister, Mr. Gale. I congratulate Mr. Moore on securing the debate. I would like to start by apologising formally to him for the delay in writing to Mr. Pasternak following the meeting we had in the summer; that was quite unacceptable. I was unaware that he had not been written to before, so I am sorry that the letter arrived with him only last week.

The hon. Gentleman is a strong and powerful advocate for the textile industry, and I know the area he represents very well. He has eloquently set out the importance of the industry to his constituency. Of course, the textile industry is an important part of Britain's manufacturing base. I fully take on board its importance and fully recognise that times are very tough for it indeed, as they are for most industries at present. As with all industries, textile manufacturing in the UK is reinventing itself, and the hon. Gentleman referred to the innovation of the textile industry in his constituency and the way it has been able to change, developing from a cottage industry at its inception hundreds of years ago and through the industrial revolution of the 19th and 20th centuries, which saw a massive textile industry develop in the UK as a whole.

Although the industry has of course reduced in size in recent years as intense competition from Asia has hit it hard, it has, as he described, moved up the value chain and specialised in high-quality, niche products or high-tech "technical textiles". That is a journey that most UK sectors in the globalised economy have made, moving up the chain and focusing on quality. That change is vital to the textile industry's continued competitiveness. While the sector is not as big as it once was, I fully accept that it is an important part of the UK's manufacturing base.

For the Government and for me personally, manufacturing is extremely important. We are still the sixth largest manufacturing country in the world. Manufacturing employs 3 million people directly in this country, contributes £150 billion to the economy and accounts for half of Britain's exports. It is responsible for 75 per cent. of our business research and development. The textile industry is part of that industry and deserves Government support. Of course, economic development in Scotland is a devolved issue, and I understand that the hon. Gentleman and representatives of the industry in Scotland have ongoing contact with Scottish Ministers as well. I believe that John Swinney, the Cabinet Secretary for Finance and Sustainable Growth, will be attending the Scottish textiles annual conference tomorrow.

The Scottish Government offer a wide range of support to the textiles industry through Scottish Enterprise, Highlands and Islands Enterprise, Scottish Development International and Skills Development Scotland. It includes innovation and investment grants such as regional selective assistance grants and the Scottish Manufacturing Advisory Service, a resource that has recently been enhanced significantly to ensure timely and specific company support for all manufacturing businesses, including those in the textiles sector.

Those companies availing themselves of the Manufacturing Advisory Service, which has a track record of providing practical advice to improve capabilities, efficiency and productivity, report real benefits from the process. Indeed, Peter Scott & Co. Ltd, which is run by Mr. Ken Pasternak, to whom we have referred, is one of the companies that has benefited from Scottish MAS advice. I understand that after receiving advice, on-time delivery improved from 52 per cent. to 91 per cent. in just three months.

The Scottish Enterprise textiles team is working closely with the industry through the National Textiles Forum and the industry steering group on a programme of activity to support the textiles industry through these challenging times. More widely, manufacturing will play a key part in helping us to rebuild growth across the UK. That is why we have specific help in place for the manufacturing sector. Our manufacturing strategy brings together £150 million of support in the medium term, and will help business to access increased skills and technology support, and to be successful in entering new and emerging markets.

I am conscious that many textiles companies are relatively small businesses. It is vital that small and medium-sized enterprises are helped during a period of economic downturn, as their survival in the current economic climate will be crucial to maintaining employment and economic activity in the short term, and to providing growth as we look towards recovery.

Co-ordinated action is being taken by all relevant Government Departments and agencies in providing real help for business now. Some of the different measures that the Government have introduced include securing legal commitments that will ensure that over the 12 months from March 2009, the Royal Bank of Scotland and Lloyds will lend, on a commercial basis and subject to demand, an extra £27 billion to businesses. Barclays and HSBC have made an additional £6.5 billion of business lending commitments, and an enterprise finance guarantee scheme that will secure up to £1.3 billion of additional bank loans to small firms with a turnover of up to £25 million has also been introduced. So far, £880 million-worth of eligible applications from more than 7,700 firms have either been granted or are being processed or assessed.

The Government have also introduced a £75 million capital for enterprise fund-£50 million directly from the Government, which is augmented by £25 million from the banks-to invest in small businesses that need equity. So far, fund managers have made offers totalling more than £56.4 million to 37 businesses.

Yesterday, the UK Export Credit Guarantee Department launched a letter-of-credit guarantee scheme to assist UK exporters by boosting the availability of short-term export finance. The new scheme should provide further help to UK exporters, particularly smaller companies that export to emerging markets, which is where letters of credit are most used and where new opportunities can be found.

Over the past year, we have also been working to give help to business to ensure that the UK's productive base comes through the recession. We are focused on how we can rebuild growth and are looking at our strengths and capabilities to determine how we can position ourselves to grow in the long term. The central remit of the Department for Business, Innovation and Skills is to invest in growth and to help build for the future. Earlier in the year, we published our strategy in "New Industry, New Jobs", which builds on new ideas to ensure that SMEs are able to grow when the upturn comes, and makes the case for continued investment in innovation and new technologies.

Turning to the specific points raised by the hon. Member for Berwickshire, Roxburgh and Selkirk, I represent a manufacturing constituency myself, and many SMEs in my constituency have been encountering the kind of difficulty that he described. I am well aware of the disappointment, to put it mildly, that is felt in many parts of business and by many individual company and business owners at the attitude of the banks and the line they have been taking.

The Department has a "help for business" team, which has been dealing with many cases that MPs have brought forward. The team has worked with banks to try to resolve particular difficulties relating to specific companies. I availed myself of the service before I became a Minister and have done so since. I have found that its efforts have been greatly valued by many of the companies that approached the Department. If the hon. Gentleman is aware of any companies that wish to avail themselves of the service, he should by all means bring them forward, and the Department will do its best in those individual cases to make contact with the banks and try to take matters forward.

I am grateful to the hon. Gentleman for the point that he made about energy companies, the deposit scheme and up-front payments. The issue had not been brought to my attention before, but I am concerned by what he said. I shall go straight back to the Department and look into it, liaise with other Ministers who may be aware of it and see what the regulator has to say about it. The matter does cause me concern, and I am grateful to him for raising it.

On Skillfast, I am afraid that I cannot give the hon. Gentleman further information. Unfortunately, he received the letter from me only recently, as I said earlier. The Government have not at this stage reached a decision on whether Skillfast should be offered a new licence to continue as a sector skills council, but I expect that Ministers will reach a decision soon.

I have again taken on board the country-of-origin point that the hon. Gentleman raised, which has often been raised in this House in many different contexts. Of course, because of the particular value and style of the products we are discussing-textiles, particularly Scottish textiles-this is an important issue, and I assure him that I will do all I can to take the matter forward. It is extremely important that a distinctive and great British product such as Scottish textiles should be protected fully and should not be undermined by the country-of-origin problems or passing off that he described.

I am grateful to the hon. Gentleman for putting his case to me and for securing this debate. He raised several issues, some of which I shall investigate further because they affect businesses not just in his constituency but right across the country. I am determined to do all I can in my role to assist particular businesses and sectors. I assure him that I regard the Scottish textile industry, which is so firmly based in the borders, as an innovative industry with a great product. It is an industry that exports around the world and an industry for the future, and the Government are determined to do what they can to continue to support it.