HC Deb 01 November 2000 vol 355 cc251-8WH


Mr. Harry Barnes (North-East Derbyshire)

On 4 September, a bombshell exploded at Clay Cross in my constituency. Within minutes of the takeover of Biwater, a pipe-manufacturing plant, it was announced that the works would be closed down at the beginning of December—only a month from now. That would lead to the loss of 700 jobs, and, since 75 per cent. of those workers live within a 5-mile radius of the plant, that would cause devastation to the local community.

The response was immediate. Everyone combined to fight the threatened closure: the workers, the General, Municipal and Boilermakers' union, local councils, elected representatives and the whole of the local community, including a highly active women's support group. The reaction was so strong because everyone knew that this plant was not on its last legs. It was to be closed not because it was doing badly, but because it was doing rather well.

According to Biwater's annual report this year, the company's share of the home market grew by 9 per cent. Its major strength, however, is in the export trade, and the report stressed that there had been a 30 per cent. increase in sales in Italy, and significant contracts with the United Arab Emirates, Syria, Vietnam, Korea, China and South Africa. The company's market position was being maintained in France, Spain and Germany. A breakthrough had been made into the Egyptian market, and the dominant market position was being maintained in Lebanon.

The only problem had been initial low oil prices in the middle east. When the price of oil rose, so did Biwater's orders. Indeed, with the recent hike in oil prices, orders have been flooding in. I have supplied details of these to the Department of Trade and Industry. Between 1 September and 25 September, £3.4 million-worth of orders came in, mainly after the announcement of the closure. On 16 October, I faxed to the Secretary of State 25 pages of further evidence of continuing export orders. In fact, the workers at Clay Cross have been working overtime and extra shifts in order to meet growing demand. Orders stood at £7.5 million at the end of August and rose to £9.13 million by the end of September.

Another sign that demand has been high for the pipes is that the value of stocks of goods for resale fell from £5.5 million in 1999 to £4.7 million in 2000. Biwater was not, therefore, producing goods that could not be shifted. Operating profits also rose from £2 million to £2.3 million in the same period.

Why on earth, therefore, would anyone wish to close down a plant that is the jewel in the crown of the United Kingdom's pipe-manufacturing industry? Let us look at who is up to what. Saint-Gobain is the company that took over Biwater. It operates through a British subsidiary, Stanton plc. Saint-Gobain is a highly profitable, powerful multinational company. From its headquarters in Paris, it controls 600 subsidiaries in 42 nations, and 8 per cent. of its massive empire is in pipe production.

Saint-Gobain's interests in Biwater have been, first, to destroy the pipe-manufacturing capacity of a rival company that has strength in overseas markets; secondly, to take over Biwater's substantial order books, resulting in much of the work ending up with Saint-Gobain's other operations in Brazil, China, Spain, France and Germany; and, thirdly, to transfer some of the plant to Stanton's works at Ilkeston, but mainly to asset-strip the provisions.

That Saint-Gobain has such selfish interests is illustrated by the nature of its deal in taking over Biwater. It has purchased the machinery, the order books, the know-how and the work force. It will take what it needs and place the rest on the scrap heap. It has leased the land and buildings from Biwater on a short-term basis only. In commercial terms, it considers that it needs to get off the site as quickly as possible.

I have had no time to mention the role of Adrian White, BBC governor and the effective owner of Biwater, so it will need to be spotlighted in future. It should also be noted that, even though it has recently received state aid in France, Saint-Gobain is not short of a bob or two. With 600 subsidiaries in 42 nations, its stock market value has increased threefold since 1988. In 1999, its gross profits amounted to 34.1 per cent. of sales, and its dividends amounted to 8 per cent. of sales, so it has ample cash for wheeler-dealing. It will benefit from the Clay Cross closure, but no one in this country will benefit.

Before I ask the Department of Trade and Industry and the Secretary of State to take specific action, I shall mention what has happened so far. On 22 September, the Secretary of State met a deputation from Clay Cross, including my hon. Friend the Member for Bolsover (Mr. Skinner). The Secretary of State faxed Jean-Louis Beffa, the chairman and chief executive of Saint-Gobain, asking him to reconsider the decision to close on the basis of arguments from the deputation, which he conveyed to Mr. Beffa. In his letter, the Secretary of State added: On behalf of the UK Government, I can assure you that we stand ready to provide assistance to keep the factory open. When Mr. Beffa rejected those arguments, the Secretary of State rang him to try to persuade him to change his mind, but the arguments were again rejected. On 28 September, the Secretary of State made the following point at the Labour party conference: When there is real pressure and difficulties in areas like textiles, coal and steel and in specific plants like Biwater in Clay Cross...we must not stand to one side. We won't walk away. It should be added that the pressures in textiles, coal and steel are relevant to the area in which Clay Cross is situated.

The situation is desperate. We are within a month of closure, and the loss of 150 jobs is earmarked for 17 November. In the light of his past commitments, what can the Secretary of State do? Under the Fair Trading Act 1973, the Secretary of State may immediately refer the takeover to the Competition Commission. Pending completion of the commission's investigation, the Secretary of State can prevent closure and establish that the plant is running fully, as prior to the takeover. Before deciding whether to do so, the Secretary of State will take into account the points made in this debate and representations from the EU Competition Commissioner. Commissioner Monti is considering whether, under EU directives and regulations, Saint-Gobain has abused its dominant market position and whether abuse or misuse has occurred in respect of state aids agreed by the EU Commission and paid by the French Government.

Phillip Whitehead MEP and shop stewards met representatives from Commissioner Monti's office in order to pursue those points. He is trying to obtain relevant material from the European Union, and I believe that the DTI itself has made representations to try to clarify that point.

We should be on a winner with this argument: we should be able to save the plant. However, there is a big fly in the ointment—the Office of Fair Trading. In April, the OFT looked into the intended takeover. Its recommendation to the Secretary of State was that the deal could be accepted and did not need to go before the Competition Commission. On the basis of the OFT's report, which made no reference to the closure proposal and concentrated on competition policy matters only, the Secretary of State accepted the recommendation. The Secretary of State was, however, misled—the Director General of Fair Trading recently revealed that the OFT knew prior to the report that Saint-Gobain intended to close Biwater.

I assume that if information of that nature had been passed to the Secretary of State, he would have had second thoughts about accepting the OFT recommendation. When, on 3 October, I asked the Secretary of State to refer the matter to the Competition Commission, he decided first to return it to the OFT, on the basis of new information that he had to hand, much of which had been supplied by myself and Councillor David Nuttall, leader of North East Derbyshire district council. Unfortunately, John Vickers, the new Director General of Fair Trading, merely endorsed his predecessor's recommendations. However, the Secretary of State can still refer the matter to the Competition Commission over the head of the OFT. That has been done before by the Secretary of State and his predecessors.

The OFT's report, of which we now have an edited version, with various statistics removed, shows no signs of its having assessed certain matters that are of relevance to the Secretary of State's judgments. Under the Fair Trading Act 1973, he is entitled to consider the impact of the development on UK exports—I have stressed today and in the past the export work in which Biwater is involved—and the distribution of industry and employment in the UK. Neither of those matters is included in the advice that was sent to the Secretary of State by the OFT, and they do not appear to have been given serious consideration. Even given the OFT's concern for competition policy, the arguments that I have summarised today, which were presented in detail to the Secretary of State, override the position that it has taken.

As an alternative to turning to the Competition Commission, the Secretary of State could negotiate an immediate deal with Saint-Gobain to save the day, perhaps involving a new purchaser who will properly operate the plant as a competitor with Saint-Gobain. I see no reason why Biwater (Clay Cross) cannot concentrate on producing much needed pipes for the overseas market—including desperately needed pipes for the third world—while Stanton plc, which operates with a foundry involved in pipe production, from Ilkeston in Derbyshire and from Staveley, which is also in my constituency, could concentrate on the home market, which it mainly supplies.

I hope that the Minister can either tell us exactly what the Secretary of State will do or explain his thinking and confirm when a final decision is to be made. The matter cannot drag on for much longer. We need a response that will save 700 jobs. As early-day motion 1084—which was signed by 103 Labour Members—argued, the matter should go before the Competition Commission, the closure should be put on hold, and the report that would then be published by the commission should be geared towards saving the plant.

Mr. Dennis Skinner (Bolsover)


Mr. Deputy Speaker (Mr. John McWilliam)

Does the hon. Member for Bolsover (Mr. Skinner) have the permission of the hon. Member for North-East Derbyshire (Mr. Barnes) to speak?

Mr. Barnes

indicated assent.

1.14 pm
Mr. Skinner

I have nothing but praise for the work done by my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) ever since the closure programme began. He has been involved during every single waking hour, for a simple reason. The case does not involve 700 jobs in the south-east, where unemployment has gone way below the national average. We are talking about an old coalfield and steel area. In some villages in my constituency, where some of the Biwater employees work, the level of hidden unemployment is not dissimilar to that in many other high-unemployment areas in old coalfield regions. You, Mr. McWilliam, know only too well about how much unemployment is hidden. The net result is a rate of some 15 to 20 per cent.

That is why 700 jobs in Clay Cross are as important as a Rover problem spread over 20 constituencies. My right hon. Friend the Secretary of State for Trade and Industry got stuck into the Rover problem. We are still concerned about the eventual outcome, but we managed to get the show back on the road. The case under discussion affects about three constituencies in the main, but it is just as bad—if not worse—in terms of consequences for the people there. All deep mine pits in north Derbyshire have closed and the textile industry has been ripped apart. In my constituency, 700 jobs have gone in the past few months. I think that a similar number of jobs have disappeared in my hon. Friend's constituency and in other parts of the area. We are saying to the Secretary of State for Trade and Industry, "You've got to do something special here."

We must bear in mind that there has been intrigue from the beginning in this matter. Those concerned went to the Office of Fair Trading and said, "Look here, there's a takeover. This monster conglomerate, Saint-Gobain, is eating things up all over the place and asset stripping. It is like the 1960s and 1970s all over again, like Slater Walker and all the rest, except that it is French." Everyone is hoodwinked, the business is taken over and they close it within half an hour. What happens then? Two directors of Biwater manage to obtain a directorship in the new firm, Saint-Gobain. It was a dirty intrigue from beginning to end.

Of course, the workers were not told. If it had happened on the mainland of the so-called Europe, common market or whatever it is, they would have been told. We made strong representations to the Department of Trade and Industry and we expected the Office of Fair Trading to do its job. It has not done so, so we have now come to a political crunch. If I were the Secretary of State for Trade and Industry, I would not want the OFT to pull the wool over my eyes. I would say, "Look here. I'm the gaffer. I'm the boss in this Department and I'll refer this to the Competition Commission. Never mind about those tinpot civil servants who took the decision." There is too much hiding behind civil servants. When somebody is given the job of Secretary of State for Trade and Industry, he has a duty to ensure that civil servants are considering the political implications of what has happened in this case, which have been outlined so precisely by my hon. Friend.

It is a race against time. There is only a month. The shop stewards and workers are fed up to the back teeth. If anybody is to be blamed, it should be Saint-Gobain and Biwater. The trouble is that we can say that it is their fault only if the Secretary of State does the decent thing and implements my hon. Friend's proposal. He should refer the matter to the Competition Commission, irrespective of what the OFT does. The OFT is employed by the state and paid by the taxpayer—by all of us here. Why should it decide what the issues should be? The Secretary of State should stand above its decision and re-negotiate it to ensure the survival of this viable plant—we are not talking about an uneconomic unit, here—so that those workers can keep their jobs and the dole queues will not rise in Clay Cross and Bolsover resulting in the taxpayer picking up a massive bill for dole and unemployment benefits.

1.20 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson)

I congratulate my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) on securing this important debate. The Government recognise the devastating effect that the announcement of the closure of Clay Cross has had on workers at the plant and on the local community. That has been articulated by my hon. Friend and by my hon. Friend the Member for Bolsover (Mr. Skinner), who spoke with great passion. The closure of the plant, which plays a key role in the employment and wider economy of the area, has clearly come as a heavy blow. We fully understand the efforts that my hon. Friend the Member for North-East Derbyshire has made to bring this case to the attention of the House.

Part of the Government's competition policy relates to the regulation of mergers, and it might be helpful if I outline that process. The Secretary of State considers merger cases on the basis of advice provided by the Director General of Fair Trading. The officials of the DGFT in the Office of Fair Trading undertake an analysis of a merger that meets the qualifying criteria under the Fair Trading Act 1973. In particular, they will consider the effects of the merger on competition in the relevant markets.

It is the policy of the Government to refer merger cases to the Competition Commission for further investigation primarily on competition grounds. It is open to the DGFT and to Ministers to consider other issues, which can be broadly categorised as public interest issues and could include, for example, the effect on employment, regional development, or national security. However, as the Office of Fair Trading's own published guidance states, only in very exceptional circumstances would such considerations be a decisive factor.

Mr. Skinner

Is that acceptable?

Mr. Johnson

It is the process that is always applied. I shall come on to talk about the specific case in a moment.

The primary purpose of merger control is to consider and, if necessary, block or amend those mergers that are identified as having adverse effects on competition in markets. Merger control is, therefore, part of a competition policy whose aim is to improve the dynamism, innovation and efficiency of the economy as a whole, which we believe is the best means of securing jobs.

Once the Director General of Fair Trading has advised, the Secretary of State may refer the case to the Competition Commission for further investigation. The commission may recommend clearing the merger, in which case that would be the end of the matter, or find that the merger is against the public interest because of adverse effects. If the latter happens, the Competition Commission may recommend seeking undertakings from the parties to remedy the adverse effects, or simply blocking the merger. The Secretary of State can accept or reject those recommendations, including clearing the merger.

I would now like to turn to the specific case that we are debating today. The merger between Stanton and Biwater was notified to the OFT in April 2000. It received information from the parties and asked, publicly, for third-party comments on the merger. Although Stanton did tell the OFT of its plans to close Clay Cross, the OFT was unable to seek the views of third parties on the plans as the information was commercially confidential and its release without the provider's permission could have breached the Fair Trading Act 1973.

The OFT carefully considered the merger between Stanton and Biwater. The DGFT advised the Secretary of State on 21 June that the merger should be cleared. This advice was put on the OFT website, at the request of the Secretary of State, on 13 October. I do not intend to repeat it here. The essential points are that the DGFT found that the merger raised no competition concerns, on the basis of which advice the Secretary of State cleared the merger on 29 June. However, it is important that hon. Members are aware that the advice given to the Secretary of State did not refer to Stanton's plans to close Clay Cross.

I shall now explain the steps that the Government have taken since we became aware that the Clay Cross plant was to shut. My hon. Friend the Member for North-East Derbyshire mentioned that my right hon. Friend the Secretary of State for Trade and Industry has taken a personal interest in the case. The meeting that he described took place on 22 September. Immediately following that meeting, he asked the Director General of Fair Trading to publish the advice that he had given to Ministers on the case. We have also responded to requests from my hon. Friend and other interested parties to look again at the decision.

Under the Fair Trading Act 1973, a merger decision may be revisited if material facts in relation to a merger not in the public domain were not disclosed. However, the plans to close the plant, which were disclosed to the OFT, do not constitute such material facts. My hon. Friend wrote to my right hon. Friend the Secretary of State on 3 October asking him to refer the merger to the Competition Commission on the basis of other, new material facts that he said were contained in documents that he had sent to the Secretary of State.

On 9 October, my right hon. Friend asked the Director General of Fair Trading to look at the information provided by my hon. Friend and others. Some of the information related to the period since June and therefore cannot have been made available to the OFT when it undertook its analysis of the case. I understand that the director general and his staff have carefully examined all the information that was provided to them. Following that examination, the director general wrote on 23 October to my hon. Friend the Member for North-East Derbyshire

Mr. Barnes

How would the material that had to be made available to the Office of Fair Trading by June relate to the Biwater annual report from which I quoted? That report showed the viability of the plant, but it was not publicly available until October, and it would not have been submitted until the year ending 31 April. The report might have been examined by the OFT, but it was not examined very carefully.

Mr. Johnson

My hon. Friend makes an important point about information that may have become available after the merger but was based on facts that were known before then. I shall deal with that point when I come to the crux of the matter—where we go from here.

The Director General of Fair Trading concluded that the information was not material and that it would not have affected the then director general's analysis of the case in June. He said also that the new information did not rebut the evidence for a lack of significant competition concerns considered by the then director general, nor his conclusion that the case should be cleared. On those grounds the director general sees no grounds for re-opening the case. However, we are aware of the separate approaches being made to the European Commission, and we shall obviously consider the Commission's views to see whether they are relevant.

I shall now describe the steps that the Government have taken to deal with the impact of the closure. First, immediately after seeing my hon. Friend the Member for North-East Derbyshire and hon. Members for the neighbouring constituencies on 22 September, my right hon. Friend the Secretary of State wrote to the chief executive of Saint-Gobain. Mr. Beffa, asking him to consider the options for preventing the closure. Mr. Beffa made clear in his reply that the decision had been taken for strong commercial reasons which the company were not prepared to revisit. Saint-Gobain has stated publicly that its main motivation for the acquisition of Biwater was to protect the position of UK-manufactured ductile iron pipes and fittings in the UK market. I understand that the company's reasons for closing the Biwater plant at Clay Cross arise from a number of factors, including over-capacity in the UK market.

In the time left to me, I shall turn to the practical steps that we are taking to try to ameliorate the impact of the closure. A job shop has been set up on the site to provide advice on job vacancies, retraining and benefits. We have provided rapid response funds to provide enhanced retraining opportunities for the work force over and above existing provisions. A cross-authority working group has been set up by the county council to co-ordinate the response of all its departments and to offer a range of support. Derbyshire county council and North East Derbyshire district council are working on an impact study. That study will assess the overall impact of the closure on the Clay Cross area, including the knock-on effect on Biwater's local suppliers and other local businesses. That will be a valuable tool to inform the group's longer-term work. A wide range of long-term action is also in hand or planned, and some money from the single regeneration budget has been made available. I understand that those are not the concern of my hon. Friends; they are looking to save jobs.

This has been an important debate on an important topic. The Secretary of State has made it absolutely clear that he wants to take into account all the points made by my hon. Friends before he considers the matter further. He will do exactly that, with a view to our assisting in any way that we can to ensure that the matter described so eloquently by my hon. Friends is dealt with, and so that any jobs that can be saved will be saved.