GKN Automotive Plant: Birmingham — [Dame Angela Eagle in the Chair]

Part of the debate – in Westminster Hall at 10:19 am on 28th April 2021.

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Photo of Amanda Solloway Amanda Solloway Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 10:19 am, 28th April 2021

It is a great pleasure to serve under your chairmanship, Dame Angela. I congratulate Jack Dromey on securing this really important debate today. I have an awful lot of respect for him, as he knows. I agree with Lucy Powell about the passion with which everybody has spoken in the debate. It has been absolutely crucial.

The hon. Member for Birmingham, Erdington is a long-standing advocate for the UK automotive sector and champion of the world-class automotive businesses in his constituency, including GKN and Jaguar Land Rover. The proposed closure of the GKN Automotive plant in Birmingham is deeply disappointing. I myself have a background in manufacturing of over 20 years, as the hon. Gentleman probably knows, and I feel a great connection to British industry—in fact, my great-uncle flew Spitfires, so I absolutely appreciate that aspect. I am really sympathetic to the difficulties associated with a situation such as this.

The Government are supporting manufacturing. “Build Back Better: our plan for growth” sets out the Government’s plans to drive growth and build on our competitive advantage through significant investment in infrastructure, skills and innovation. We will pursue growth levels in every part of the UK, enabling the transition to net zero and supporting our vision of a truly global Britain.

The proposed closure of the GKN plant was a great shock to the employees and will be hugely concerning for them and their families. The plant is part of the fabric of the local community, producing components, as we know, for vehicle makers including JLR, Nissan and Toyota. It is a really important part of the UK automotive sector, which provides 149,000 manufacturing jobs. There are examples of employees spending most of their lives at GKN, with some of them being there from the time they leave education until retirement. As we have heard, there are also people in their 20s with young families to support.

The Government are committed to doing what we can to save those high-skilled jobs. The Minister for Investment, Lord Grimstone, met with Liam Butterworth, chief executive of GKN Automotive, last month. That helped the Government to understand the rationale behind the proposed closure and explore options for securing a long-term, sustainable future for the Birmingham plant. At the meeting, welcome assurances were given that all viable alternatives to closure will be considered. Also, my right hon. Friend the Business Secretary and the Minister for Investment met with the hon. Member for Birmingham, Erdington and representatives of Unite the union regarding this issue last month. The mandatory employee consultation provides a platform for alternative proposals to closure to be presented. Unite has developed its sustain-and-transition proposal, and we encourage it to table the proposal formally with GKN if it has not already done so.

The hon. Members for Birmingham, Erdington and for Easington (Grahame Morris) referred to transfer pricing. We have been told by GKN that sales between its plants are carried out on commercial terms, and that is independently audited.

Ultimately, the future of the plant is a commercial decision for GKN management, but we stand ready to discuss viable alternative proposals with GKN management. That could involve investment in capital equipment or skills to stoke the plant’s competitiveness. In the event of closure, with production carefully wound down over the next 18 months, the priority will be to find new jobs for those people who lose their jobs. GKN has committed to supporting its employees through this difficult time. The Minister for Investment will follow that closely.

As we know, the Melrose takeover of GKN in 2018 faced considerable opposition, with cross-party calls for it to be blocked on national security grounds. The takeover was considered by the then Secretary of State fairly and impartially, in accordance with the legal powers provided through the Enterprise Act 2002. Under the 2002 Act, the Government have the power to intervene in mergers on public interest grounds. There are, however, strict and limited grounds for intervention. Ultimately, the review determined that there were no grounds for objecting to the deal. Melrose was required to make commitments to the Ministry of Defence to address matters relating to national security.

In March 2018, the then Business Secretary wrote to Simon Peckham, chief executive of Melrose Industries, setting out additional binding commitments that would be needed in the event that the takeover bid was successful. A copy of the letter and the response from Melrose are available in the House of Commons Library. As we have heard today, there are differing views on whether those commitments have been met. The legally binding post-offer undertakings made to the Takeover Panel are independently verified every six months by third party advisers. The advisers provide a report to the Takeover Panel confirming Melrose’s compliance.

As my hon. Friend Mark Pawsey said, these are challenging times for the automotive sector. In 2020, 920,000 cars were produced in the UK, which was 29% down on 2019 levels. Businesses across the automotive sector, including GKN, have had to restructure to maintain competitiveness.

The Government have stood shoulder to shoulder with businesses and workers to support them through these challenging times and have provided an unprecedented level of support, including the furlough scheme. That helped protect the income of around 60% of the automotive sector’s full-time employees when production was temporarily suspended last year. In addition, £4.6 billion of liquidity has been provided to the sector through the coronavirus loan scheme. The Government are committed to supporting the sector through these challenging times, so that it can exploit future opportunity.

The global automotive sector is undergoing significant change, as production shifts to zero-emission vehicles and supply chains are restructured to produce new technology. Modern developments in production plants are being accelerated and creating a once-in-a-lifetime investment opportunity for the United Kingdom. To be clear, this is not just about protecting the status quo and retaining the manufacturers that we have in the UK, including JLR, Nissan and Vauxhall, but about stimulating a high-tech market that cements our global position at the forefront of mobility.

The Government have announced £500 million of funding as part of a commitment of up to £1 billion over the next four years through the automotive transformation fund. That will help build, at pace and scale, an internationally competitive zero-emission vehicle supply chain in the United Kingdom, including in key regions where levelling up is crucial, such as the north-east, Wales and the west midlands, as highlighted so well by the hon. Member for Manchester Central.

The UK-EU trade and co-operation agreement provides a phased introduction of the rules of origin requirements for zero-emission vehicles. That was welcomed by the UK automotive sector as it allows manufacturers time to increase local content—an issue raised by Mick Whitley. GKN will be an important part of that future supply chain. It is developing cutting-edge vehicle technologies at its innovation centre in Abingdon. Securing investment in gigafactories is a priority to meet demands from UK-based vehicle makers. The Government are in advanced negotiations with several potential investors.

The Government are committed to ensuring that the UK continues to be one of the best locations in the world to research and develop the next generation of vehicle technologies and to manufacture zero-emission vehicles. GKN is at the forefront of these technological developments through its innovation centre in Abingdon. Our aim is that the Birmingham plant also continues to be at the heart of GKN’s manufacturing operations.

As I explained, the Government are ready to discuss alternative proposals that could include investments in capital equipment or in the skills needed to secure future vehicle technology. That would help provide long-term, secure jobs for the dedicated and skilled employees.