Business Update
Greg Clark Excerpts(5 years, 7 months ago)
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The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
Last week I published a Call for Evidence seeking views on the extent and impact of late payment and measures to go further in tackling the issue. This follows the commitment made by the Chancellor of the Exchequer in his 2018 spring statement that the Department for Business, Energy and Industrial Strategy would lead on a call for evidence to ‘eliminate the continuing scourge of late payments’.
Since 2012, the overall level of late payment debt owed to SMEs has fallen substantially, to £14.2 billion last year, down from £30.3 billion five years ago according to BACS, the payment service provider. While the halving of late payment debt is welcome, I am determined to see this reduce still further.
Alongside this publication, I announced that the Government would take immediate action to tackle late payment, by introducing the following measures:
A new, tough and transparent compliance regime to underpin the prompt payment Code. The Small Business Commissioner will join the code’s compliance board to provide independence from industry and the board will report on all cases of signatories being removed from the Code. Further reform to the Code will be considered through the call for evidence, including whether the Small Business Commissioner should have a greater role in its Administration.
The Call for Evidence will also consider the best way to ensure all companies have responsible payment practices in their supply chains, including whether all company boards should give one of their non-executive directors responsibilities for prompt payment.
The Call for Evidence will be open until 29 November and I encourage businesses of all sizes to respond; I want to understand the impacts, experiences and reasoning’s for particular payment practices and views on what more can be done to enhance the payments process.
I will be depositing copies of the Call for Evidence document in the Libraries of both Houses.
[HCWS971]
Labour Market Update
Greg Clark Excerpts(5 years, 7 months ago)
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The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
I am writing to inform the House that over conference recess I announced the Government’s intention to: legislate to ban employers from retaining tips earned by their staff; consider creating a duty for employers to advertise all jobs as flexible unless there is a good business reason not to; and to consult on whether large employers (those with 250 or more employees) should be required to publish their parental leave and pay policies.
Tipping
The Government will introduce legislation to ban employers from making deductions from tips, ensuring tips go to the workers providing the service. While most employers act in good faith, in some sectors evidence points towards poor tipping practices, including excessive deductions being made from tips left in good faith by customers.
This legislation will give consumers reassurance that the tips they leave are going to the staff, as they intended. It follows a consultation which found a majority of respondents in favour of preventing any employer deductions from discretionary payments, except those required under tax law.
The Government will announce further details in due course, including measures to ensure employers are able to continue to distribute tips via independent and staff-run “tronc” systems.
Flexible working
The ability to work flexibly enables people—both men and women—to balance their work and home lives more effectively. Moreover, flexible working gives employers access to a wider talent pool and enables better matching of applicants and jobs. Employee engagement, performance and productivity are also improved.
However, flexible working is still relatively uncommon, which sometimes holds people back from requesting it. The Government would like it to be clearer from the outset whether flexible working is an option. Research indicates only 9.8% of quality job vacancies are advertised as open some kind of flexible working, yet many more are likely to be.
The Government want employers to consider whether a job can be done flexibly, and to make that clear when advertising. There are many good reasons why a job might not be suitable for flexible working, but where it is, signalling this at the outset will encourage interest from a wider range of candidates and enable both sides to take full advantage of the flexibility.
Transparency on parental leave and pay
Statutory entitlements to parental leave and pay enable mothers who want to return to work earlier to do so and enable more fathers and partners to be their child’s main carer where this is best for the family. Statutory entitlements are also important in closing the gender pay gap, by providing parents with more opportunities to remain in work and to progress their careers.
Many employers offer enhancements to the statutory entitlements, but surprisingly few publicise these policies. This means that job applicants have to ask specifically about these policies—which some may be reluctant to do.
Mandatory gender pay gap reporting, introduced in April 2017, already provides a clear incentive to large employers to review their policies and recruitment procedures and to publicise those that enable them to recruit and retain female talent. The Government want to accelerate that improvement by encouraging large employers to publish their parental leave and pay policies, and will consult on a proposal to require large employers to publish their parental leave and pay policies.
[HCWS977]
Business Investment
Greg Clark Excerpts(5 years, 9 months ago)
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The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
The Government are today publishing a White Paper: “National Security and Investment”.
It sets out the Government’s plans to upgrade their powers to scrutinise investments and other acquisitions on national security grounds. These proposals deliver on the commitment made by the Government in the 2017 Queen’s Speech to bring forward reforms to
“ensure that critical national infrastructure is protected to safeguard national security.”
This country has a proud and hard-won reputation as one of the most open economies in the world. Our economic success stems from our belief in international trade and our support for foreign direct investment. Of course, an open approach to international investment must include appropriate safeguards to protect our national security—particularly in a world where the threats we face are evolving.
This White Paper is the product of the Government’s consultative approach to reform in this area, following on from the Green Paper published in the autumn and subsequent public consultation. The Government have reflected carefully on the feedback provided by a wide variety of stakeholders, including businesses, investors and law firms.
The Government’s existing powers to screen certain mergers for public interest reasons, including national security, derive from the Enterprise Act 2002. We need to make sure they are kept up to date in the light of economic, technological and national security changes.
In June, Parliament enacted secondary legislation to amend the thresholds in the Enterprise Act 2002 for three specific areas of the economy, military/dual-use, computing hardware and quantum technology, enabling the Government to intervene in more mergers that may raise national security concerns.
The White Paper sets out how the Government will address the risks that can arise from hostile actors acquiring ownership of, or control over, businesses or other entities and assets that have national security implications.
The Government will encourage businesses and investors to notify them ahead of transactions and other events that might give rise to national security risks. The majority of transactions raise no national security concerns and the Government expect that they could quickly rule out national security risks in many cases, allowing parties to proceed with certainty.
The Government would be able to “call-in” transactions that may give rise to national security risks to assess them more fully. This “call-in” power would be economy-wide, reflecting the Government’s need for flexibility to address national security risks wherever they arise.
To provide maximum certainty and clarity to business and investors, the Government will publish a statement of policy intent, setting out how the “call-in” power is expected to be used. A draft of this document is published today.
It is important that the Government have a variety of tools available to address risks to national security where they are identified. The remedies proposed by the Government include:
confirmation to proceed, approval subject to conditions and—in the rare circumstances where it is the only available course of action—blocking or unwinding a deal, where this has already taken place.
The Government believe that the proposed package of reforms published today strikes the right balance between maintaining the openness and attractiveness of the UK as a destination for inward investment, while also providing the Government with modernised powers they need to protect the country.
Today’s publication marks the start of a 12-week consultation, during which time we will continue to work with those with an interest in these reforms and consider the feedback received.
I am laying the White Paper before Parliament in the form of a Command Paper.
[HCWS907]
Oral Answers to Questions
Greg Clark Excerpts(5 years, 9 months ago)
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Peter Aldous (Waveney) (Con)
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
Offshore wind has been a fantastic UK success story. Costs have halved and jobs have been created. In my hon. Friend’s constituency, the port of Lowestoft has been a construction base for the Galloper project. It will shortly become the base for East Anglia ONE’s 25-year operations and maintenance work. We want to build on that success. Our clean growth strategy said that we could see a further 10 GW of new capacity in the 2020s. There is the opportunity for additional deployment if that is cost-effective.
Peter Aldous
I am grateful to the Secretary of State for that answer and I will be at the opening of the East Anglia One operations and maintenance base on Friday in Lowestoft. Offshore wind, as he said, is bringing significant benefits to coastal communities, though to realise its full potential there is the need to ensure that local people and businesses have every opportunity to take part in the success story. Can he confirm that this will be the Government’s No. 1 priority in the forthcoming sector deal?
Greg Clark
My hon. Friend makes an excellent point. I hope that the event later in the week goes well; I am sure it will. He is absolutely right that part of the industrial strategy, in particular the local industrial strategies, is to make sure that the benefits of these investments are available to the local workforce, and I know that he will work very closely with new Anglia local enterprise partnership to ensure that that is the case.
Mary Creagh (Wakefield) (Lab)
Britain needs about £22 billion a year of investment in clean energy to meet our legally binding EU renewables targets, but my Committee heard that, according to Bloomberg New Energy Finance, investment has collapsed over the past two years. Given that the Brexit White Paper says that the Government believe that there is no need for a common rulebook on environmental or climate change rules, what confidence can investors in offshore or onshore wind have that the Government will support low-carbon energy if we leave?
Greg Clark
We are very clear in our support for that in the clean growth strategy and, as the hon. Lady can see, in the level of investment that is being made right across the country. It was very clear in the White Paper that followed the Chequers meeting that we had made a commitment to the highest of environmental standards.
Peter Kyle (Hove) (Lab)
I recently visited the Rampion offshore wind farm, which is a stunning achievement, supplying enough power for a third of Sussex’s needs. Is the Secretary of State also looking at how to expand existing wind farms as well as just building new ones, particularly if it can be done in a way that does not have a visual impact from land?
Greg Clark
The hon. Gentleman makes an excellent point. There is the opportunity, through the auctions that have been so successful, for expansions to come forward and be proposed, but he should also be aware that, given the leadership that we have in this area, we are also leading in replacing blades and turbines when they come to the ends of their life. That is a very important source of jobs that will be available to the exports markets around the world as well.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Offshore wind has an excellent strike price of £57.50 per megawatt-hour, yet this Government’s dogma will see consumers locked into paying £20 to £40 more per megawatt-hour for new nuclear. If that was not enough of a hit on family budgets, it has been reported that the Government will use the public purse to let Hitachi off the hook for the cost of any safety breaches at its Wylfa nuclear plant. Is it not time that this Tory Government ended their obsession with outdated, expensive and risky nuclear and put the public and consumers first?
Greg Clark
It is always necessary to have a diverse source of energy supplies, and nuclear has made and does make a big contribution to that: about 20% of our current electricity comes from nuclear. That is very important for households and businesses, including in Scotland. Every new project has to be assessed as value for money for the taxpayer and consumers and that will continue to be a criterion that will be rigorously imposed.
Jeff Smith (Manchester, Withington) (Lab)
Wera Hobhouse (Bath) (LD)
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
The Government are seeking a comprehensive deal on services that will continue to allow our thriving services sector to trade with the rest of the EU, including, for example, through the mutual recognition of professional qualifications and a new economic and regulatory arrangement on financial services.
Wera Hobhouse
The City of London Corporation said of the Brexit White Paper
“the financial and related…services sector will be less able to create jobs, generate tax and support growth”
across the wider economy. What discussions did the Government have with the services sector before the Chequers deal was signed off?
Greg Clark
I and our colleagues in the Treasury have constant discussions with the services sector. It is important that our distinctive financial services sector not be subject to a set of rules in the future that might be very much against its interests. Everyone who knows the City needs to recognise that the flexibility and distinctiveness of our approach must continue.
Rebecca Long Bailey (Salford and Eccles) (Lab)
Airbus, Jaguar Land Rover, BMW, Siemens—just a few of the businesses that have recently spoken out about the Government’s handling of Brexit. They alone provide thousands of jobs and significant investment in the UK, but the Government’s chaos is putting this in jeopardy. The Secretary of State himself was forced to rebuke the flagrant dismissal of his own Front-Bench colleagues, stating that big employers were entitled to be listened to with respect. Would he say that he has now listened to the concerns of business with respect?
Greg Clark
The hon. Lady is absolutely right. Those businesses did speak out. Since the publication of the White Paper, they have also recognised that the zero-friction proposal made in it merits support and they have committed to advocating for it across the rest of the EU, as I hope that she will.
Rebecca Long Bailey
Well, the CBI and the British Chambers of Commerce have both said they are no clearer on the Government’s negotiating position in several key areas, and last night business leaders are reported to have warned the Prime Minister that her customs legislation was not fit for purpose, but the Government pressed ahead, even accepting amendments that their own colleagues state fundamentally undermine the Chequers proposal, and wrecked it, caving in to the hard, no deal Brexiteers. When exactly will the Secretary of State’s Government start paying more than lip service to the concerns of business?
Greg Clark
The hon. Lady is wrong. All the organisations she mentioned have given the White Paper and the Chequers proposals a warm welcome. In the Prime Minister’s Mansion House speech, we committed to minimising frictions at the border. The proposal now is to have zero friction at the border. That is strongly in the interests of business and allows our successful supply chains to continue to prosper. We need the Opposition to recognise the national interest in having a good deal. Almost everyone in the country wants a good deal negotiated between Britain and the EU. Rather than edging for difference and trying to make political points, she should get behind this excellent suggestion for the country.
Eleanor Smith (Wolverhampton South West) (Lab)
Angela Smith (Penistone and Stocksbridge) (Lab)
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
The proposed arrangement is a significant advance on the Mansion House speech. Instead of just minimising frictions at the border, it provides for zero frictions. That has been welcomed by businesses generally, including, at the Farnborough air show yesterday, Boeing, which is of course an important investor in the hon. Lady’s city.
Angela Smith
I thank the Secretary of State for his answer, but I am somewhat surprised. The Government’s White Paper tells us that the facilitated customs arrangement is designed to
“preserve frictionless trade for the majority of UK goods trade, and reduce frictions for UK exporters and importers.”
Will the Minister please tell us which goods will be excluded by the arrangement, and what level of friction business can continue to expect?
Greg Clark
We are very clear about the fact that, as has been recognised by businesses up and down the country, the proposal provides for zero frictions at the border. That is very important for advanced manufacturing, which is itself very important in the city that the hon. Lady represents.
Ruth George (High Peak) (Lab)
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
Eight months ago I told the House that the aim of our industrial strategy was to create prosperous communities throughout the country, and since our last questions session we have implemented that strategy across the United Kingdom.
Last month, at the international business festival in Liverpool, we announced £1.3 billion of investment in the next generation of research and innovation talent. I travelled to Trawsfynydd, in north Wales, to launch the nuclear sector deal, which will drive down energy costs for consumers. In Newcastle, as part of the Great Exhibition of the North, we launched our construction sector deal, aiming to cut build time by 50%. At the same time, the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry) was in Grimsby, helping to unveil stage 1 of a landmark town deal.
Just yesterday I was at the Farnborough air show, where the Prime Minister announced £343 million of investment in civil aerospace, and we announced a new era of space flights in the UK, with a vertical satellite launch site at Sutherland and support for the development of horizontal launch sites at Newquay, Snowdonia and Prestwick.
Ruth George
Businesses in my constituency say that they need exactly the same regulations as those that apply in the European Union so that they can continue to compete with competitors for EU custom. What is the Department doing to ensure that, not just now but in the future, there will be no regulatory divergence and no undercutting of British firms?
Greg Clark
A big part of the White Paper is the commitment to a common rulebook. Our sophisticated supply chains allow goods to be sold throughout the European Union, and businesses have made it clear that they want to continue to do that after Brexit, which is why they have welcomed the White Paper so warmly.
Peter Aldous (Waveney) (Con)
Sir Edward Leigh Gainsborough) (Con)
Greg Clark
I think most people in this country want to have an agreement that means that we do not have checks and bureaucracy at the border and that we can continue the success of our businesses. Part of the negotiation that will take place during the summer is to make sure we can deliver that, and I am sure most Members of this House wish the Prime Minister success in that.
Mrs Emma Lewell-Buck (South Shields) (Lab)
Greg Clark
We have been very clear in commissioning the Matthew Taylor report; we have been in advance of any other country in the world in looking to make sure that as the economy changes we preserve the protections we have always insisted on for workers, and the hon. Lady should welcome that.
James Cartlidge (South Suffolk) (Con)
Martin Vickers (Cleethorpes) (Con)
The Secretary of State referred earlier to the visit of his colleague, the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), to north-east Lincolnshire to sign the Greater Grimsby town deal, which is very welcome and I thank him for his support in achieving that. One of the things that his colleague will have seen is the great opportunity to develop trade through the Humber ports. The Humber local enterprise partnership, the local authority, the Hull and Humber chamber of commerce and local businesses have been working towards the possibility of free port status, post Brexit. Can the Minister assure them that nothing that comes out of the negotiations will prevent that from happening?
Greg Clark
I am grateful to my hon. Friend for his question, and I am sorry that I was unable to be in Grimsby. I could not be in Newcastle and Grimsby on the same morning, but that does not remove my commitment to visit Cleethorpes and Grimsby, and perhaps the free port proposal is one of the things that we could discuss when I do so.
Anna Turley (Redcar) (Lab/Co-op)
Greg Clark
I pay tribute to the hon. Lady and other Members who have worked closely with the development corporation. The discussions have been very positive. They have not concluded yet, but I think everyone recognises that there has been great progress and that there is a very good future for that site.
Stephen Kerr (Stirling) (Con)
The Stirling city region deal is the perfect opportunity for the industrial strategy to deliver for Scotland. Will Ministers meet me to discuss what resources could be diverted from Victoria Street to Stirling to support the industrial strategy’s execution?
Greg Clark
My hon. Friend knows that I am a great champion of devolution and decentralisation, and he makes an intriguing suggestion, which I would be very happy to take up in discussions with him.
Toby Perkins (Chesterfield) (Lab)
Many small care agencies face bankruptcy in the light of the Treasury advice on the way in which sleep-ins are paid, which has now been changed by the courts. The Minister for Energy and Clean Growth, the right hon. Member for Devizes (Claire Perry), did not seem to know too much about this, but may I urge her to avail herself of the facts urgently, because many small agencies will go bust if we do not get this right?
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
May I urge the Secretary of State to visit West Yorkshire to talk to our highly successful textile entrepreneurs? They are not quite gold-plated, but they are not daft and they want to know about frictionless trade. They need to be persuaded, because they do not believe that it is possible after Brexit.
Greg Clark
I am always delighted to go to Yorkshire and to meet industries, including the textiles industry. I hope that the hon. Gentleman will join me so that we can go through the proposals in the White Paper, and the entrepreneurs will see that they will be able to continue to trade free of frictions.
Dr Philippa Whitford (Central Ayrshire) (SNP)
Prestwick, with its clear weather, transport links and aerospace park, is one of the frontrunners to be a horizontal-launch spaceport. In 2016, the then Transport Minister said that the Government would no longer be picking spaceport sites, but the narrative around the current grant process seems to be reversing that. Will the Business Secretary clarify who will choose where launch facilities are developed: the space industry or the Government?
Greg Clark
I am surprised that the hon. Lady has not welcomed the fact that the first commercial rocket site in Europe will be in Sutherland in the north of Scotland. We are keen to bring the next wave of innovation, which is horizontal launch, and it is the UK Space Agency, which brings together the expertise that is required, that will advise on the right location for it.
Several hon. Members rose—
Industrial Strategy
Greg Clark Excerpts(5 years, 10 months ago)
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The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
As part of the industrial strategy, the Government committed to making the most of the UK’s strengths, so we can be at the forefront of new technologies and emerging industries in the years ahead. The construction sector is fundamental to our economy as we invest in our future; building the homes and infrastructure we rely on.
The construction sector deal aims to drive a substantial improvement in the productivity growth of the sector in the coming years, by increasing the use of digital and offsite manufacturing technologies, creating new jobs and training the workforce in new skills, and supporting UK firms to exploit export opportunities in a rapidly expanding global construction market. The deal will support the development of affordable, easy to construct homes, schools and other buildings which can be quickly and sustainably manufactured offsite and then assembled when and where needed. The deal will boost the delivery of the Government’s ambition to build 1.5 million new homes by 2022.
The construction sector deal will deliver:
£420 million of investment to transform construction through developing and commercialising new digital and offsite manufacturing technologies for construction, which will aim to reduce the cost of new buildings by a third, and halve the time taken to deliver them;
Cheaper energy bills for families and businesses—supporting the industrial strategy clean growth mission to halve the energy use of new builds by 2030;
25,000 construction apprenticeship starts and 1,000 construction T-level placements; and
Supporting the UK construction sector to compete in the global market for infrastructure which is worth US $2.5 trillion a year.
With almost half of the economy reliant on the built environment and the services it enables, this deal brings together the construction, manufacturing, energy and digital sectors to deliver innovative approaches that improve productivity in the construction sector and accelerate a shift to building more efficient, safer, healthier and more affordable places to live, work and learn.
Sector deals, where industries are invited to come forward with plans for their future, embody the ethos of our collaborative approach. They show how industry and the Government, working in partnership, can boost the productivity and earning power of specific sectors. We have already struck ambitious deals with the artificial intelligence, life sciences, automotive and creative industries sectors with the nuclear sector deal announced last week, and we look forward to building on this in the months ahead.
I am placing a copy of the “Construction Sector Deal” in the Libraries of both Houses.
[HCWS831]
Industrial Strategy
Greg Clark Excerpts(5 years, 10 months ago)
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The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
As part of the industrial strategy, the Government committed to making the most of the UK’s strengths, so we can develop the technologies that will transform existing industries and create better, higher-paying jobs in every part of the United Kingdom. The nuclear sector is an undoubted strength of our economy and one of the most advanced in the world, from research, fuel production, generation through to decommissioning, waste management, transport and our world-class regulatory system—it is an industry which offers huge opportunity for the future.
Sector deals, where industries are invited to come forward with plans for their future, embody the ethos of our collaborative approach. They show how industry and the Government, working together, can boost the productivity and earning power of specific sectors. We have already struck ambitious deals with the artificial intelligence, life sciences, automotive and creative industries sectors and we look forward to building on this in the months ahead.
The Government have worked closely with the sector champion Lord Hutton and industry leads from the Nuclear Industry Council to develop a number of proposals by 2030, which include:
30% cost reduction in the cost of new build projects
Savings of 20% in the cost of decommissioning compared with current estimates
Women to make up 40% of the nuclear sector by 2030
Win up to £2 billion domestic and international contracts
The deal contains mutual commitments to drive greater productivity, innovation and exports by: adopting innovative advanced manufacturing and construction techniques in new nuclear projects: supporting advanced nuclear technologies including small modular reactors (SMRs) and a range of research and development activities; a joint review of the decommissioning pipeline to achieve greater value for the taxpayer and to boost exports; a supply chain competitiveness programme to support UK business to build capabilities to win work domestically and internationally; and a range of proposals to support a future workforce including a new apprenticeship standard and a commitment to a more diverse workforce, including a target of women making up 40% of the nuclear sector by 2030.
The UK has consistently been a world leader in nuclear technology and has been at the forefront of many new developments in the industry. This deal will continue that tradition through the establishment of a new framework to support the development and deployment of SMRs and the innovative technologies that support them. This support is designed to challenge the industry to bring forward technically and commercially viable propositions that would lead to the deployment of new reactors that would be investable and cost competitive in the energy system. This builds on the package announced in December 2017 of up to £44 million for research and development funding (up to £4 million in phase 1 and, subject to Government approval, up to £40 million for phase 2) for “advanced” modular reactors. I am pleased to announce the following companies have made credible propositions from a range of UK and international concepts and will receive grant funding to undertake detailed studies:
Advanced Reactor Concepts LLC;
DBD Ltd;
LeadCold;
Moltex Energy Ltd;
Tokamak Energy Ltd;
U-Battery Developments Ltd;
Ultra Safe Nuclear Corporation;
Westinghouse Electric Company UK Ltd.
The Government remain committed to fusion alongside fission and announced £86 million, in December 2017, to create a new national fusion technology platform at Culham in Oxfordshire. The Government are also working in partnership with the Welsh Government to develop a £40 million thermal hydraulics facility in north Wales as part of the nuclear innovation programme.
I have deposited a copy of the “Nuclear Sector Deal” in the Libraries of both Houses.
[HCWS804]
Leaving the EU: Airbus Risk Assessment
Greg Clark Excerpts(5 years, 10 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mark Tami (Alyn and Deeside) (Lab)
(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy to make a statement following the publication on Friday of the Airbus Brexit risk assessment report and its implications for future investment and job security in the UK.
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
The aerospace sector is one of the UK’s greatest manufacturing strengths. Directly and through its supply chains, it employs in the UK around 300,000 people in high-skilled jobs, with an average salary of £41,000—that is 43% above the national average. Of the sector’s £33 billion turnover, some 90% is accounted for in exports. From Bombardier in Belfast to Airbus in Filton, the supply chain that the sector operates is complex, precise and just-in-time. The industry is in demand around the world and that demand is growing rapidly, with the sector doubling in size every 15 years. Airbus is a very important part of that success, employing 14,000 people across 25 sites, with 110,000 people working in the supply chain of 4,000 small, medium and large companies.
On Friday, Airbus published a risk assessment, in which it stated to suppliers and to the UK and EU member states that if an agreement between the EU and the UK were not reached by 29 March 2019, its production would be likely to be severely disrupted, with a significant impact on the company. It also said that any agreement that involved significant change to customs arrangements would take time to implement through Airbus’s supply chain, and that any agreement that involved new procedures, complexity or frictions would undermine the efficiency of the company’s operations. That is completely consistent with what every part of the industry collectively has been saying directly, as well as through the ADS industry trade body and the international body the General Aviation Manufacturers Association, including in a letter to Michel Barnier at the European Commission earlier this month. Any company and any industry that supports the livelihoods of so many working people in this country is entitled to be listened to with respect.
The Government have been clear that we are determined to secure a deal with the EU that meets the needs of our aerospace firms and the thousands of people whose livelihoods depend on them and that, in particular, products made in the UK can be approved for use across Europe, that there should be no tariffs or any unnecessary friction in the trade between the UK and the EU, and that skilled employees will be able to work across the multiple sites of an integrated operation. Those objectives have been clearly set out by the Prime Minister in public and in our negotiations.
In the months ahead, my colleagues and I will work closely with businesses to ensure that, under the terms of our new relationship, we can continue to enjoy the prosperity that working in aerospace brings to so many people in all parts of the United Kingdom.
Mark Tami
I thank you, Mr Speaker, for granting this important urgent question and I thank the Secretary of State for his response.
Does the Secretary of State agree that the continued operation of Airbus in the UK is vital to the UK economy and that we need to take seriously its worries and concerns? Alternatively, does he support the comments of the International Trade Secretary, who said that we should ignore the views of business? Or does he agree with the views of the Health Secretary, who said that it was inappropriate of Airbus to raise concerns? Finally, does he support the more direct approach of the Foreign Secretary, who said, “F*** business”? I know that the Foreign Secretary has to be elsewhere today; I believe that he has gone as far as Afghanistan to avoid the Heathrow vote. Are not those comments indicative of the chaos in Government over Brexit and of the Government’s approach to anyone who dares to raise genuine concerns?
Airbus has been raising those concerns privately for 12 months and getting absolutely nowhere. Can the Secretary of State explain why it is now, when it has done it publicly, that it is shouted down by Cabinet Ministers? Will he meet me and representatives from Airbus to address the serious concerns raised in the report? Does he accept that the lead-in times for investment in aerospace are long and that the sums of money are huge? For Airbus, it is all about securing the next generation of wing work, and these decisions are being taken now.
Is it not the case that, without clarity on Brexit, investment could be placed outside the UK—either in the EU itself or in low-cost producer countries such as China where the company has a plant? Airbus’s concerns are real and shared by many other manufacturers such as BMW and Siemens. The Government need to wake up and listen rather than just address Tory infighting.
Greg Clark
I recognise that the hon. Gentleman has more than 6,500 people employed in his constituency in good jobs, and many more in the supply chain. Members from all parts of the House have constituents whose prosperous careers and excellent opportunities come from working in this important sector. Let us be clear: this sector is one of our proudest strengths and it is expanding. The opportunities around the world grow every year and the excellence that we have needs to be nurtured and cherished. I take seriously the representations of all businesses because we are talking about not speculation or visions of the future, but the reality of the lives of many hundreds of thousands of people across the country, which is important.
It is the case that we should listen to businesses. Of course, what Airbus has said was consistent with what it has said before and consistent with what it has said to Select Committees of this House. Very importantly, it was addressed equally to the European Commission and to member states of the European Union. It is very clear that, in order to have the agreement that we seek, it is necessary that both sides of the discussions should participate. Airbus has been clear that it is in the interests of the whole country and the whole company that that should be the case. I hope that that message will be heard in Brussels as well as in this country.
The hon. Gentleman asked questions about listening to business. All Government Members recognise that the livelihoods of millions of people, and the prosperity of our country, depend on business being successful. We will not always agree with everything that businesses say, but they have the right to be heard. The hon. Gentleman was rather one-sided in his representations; I think that he should direct some of his recommendations to his own Front Benchers, who have not been a picture of clarity on what they would like from these negotiations.
Mr Kenneth Clarke (Rushcliffe) (Con)
Will my right hon. Friend explain to some of his Cabinet colleagues and others that it is simply not going to be possible to opt into most of the benefits of the single market and the customs union, while rejecting every trade rule and regulatory arrangement that the member states of the EU accept as part of that deal? Does he also agree that if, at the end of our negotiations, we start erecting new tariff barriers, new customs procedures and new regulatory divergences, it is perfectly obvious that we are going to deter inward investment from companies such as Airbus, BMW, Siemens and many others, with long-lasting damage to our economy?
Greg Clark
It is imperative that we do not do that. I am actually more optimistic than my right hon. and learned Friend about the prospects of a deal that will avoid that. Part of what this company and others have said is that it is strongly in the mutual interest of this international business that there should be an orderly agreement that allows a very successful company to continue to trade without friction. I think that that is in prospect.
We are leaving the European Union; that decision has been clearly taken. The task before us is to make an agreement that implements that decision and which, at the same time, ensures that these avoidable threats of frictions and tariffs do not take place. That is absolutely within our grasp and it is what the whole House should back during the months ahead.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
Thank you, Mr Speaker, for granting this urgent question. I congratulate my hon. Friend the Member for Alyn and Deeside (Mark Tami) on securing it and on so eloquently setting out the importance of Airbus to our economy and the 110,000 workers whose livelihoods depend on it.
Airbus is not alone. Last week we heard from: BMW, which has 8,000 workers; Unipart, with 6,000 workers; Siemens, with 15,000 workers; and INEOS, which has 18,500 workers. These are the ones that have put their heads above the parapet, to be shot down by their own Government. The Secretary of State may say that he is listening, but the Health Secretary calls Airbus “completely inappropriate”, the Trade Secretary blames the EU and it would be unparliamentary to fully quote the Foreign Secretary, wherever he is.
Businesses are told to shut up when they call for clarity, Labour MPs are accused of scaremongering and Conservative MPs are called traitors. This Government are so insecure—so at odds with themselves and the country—that they cannot stand scrutiny. Their chaotic handling of Brexit is dividing the country, not bringing it together, and it is risking our industrial base. They should abandon their red lines, rule out no deal, accept that a new customs union and single market is in all our interests, and give business and workers the certainty that they need—or step aside for a Labour Government who will.
Greg Clark
We listen to the voice of business—large and small, across the country. Let us reflect on the months past. The hon. Lady knows that, around a year ago, business—again, large and small, across the country—said how important it was to have an implementation period. That proposal was put forward, adopted by the Prime Minister and has now been agreed with the European Union.
In her Mansion House speech, again, the Prime Minister responded to what business communicated very clearly in saying that we should be able to continue to be part of bodies like EASA—the European Aviation Safety Agency—which is responsible for aviation safety. That was also something that was recognised. Business recognises that this Government do listen and do act on the advice that business gives during these negotiations. It is an approach that is serious and sober. It recognises the challenges and complexity of the negotiations and addresses them in a responsible way.
I am glad that the hon. Lady calls for a degree of cool-headedness and consensus around this, because 80% of colleagues—80%-plus, I think—were elected on a platform that recognised the importance of leaving the European Union. What is before us is to make sure that the deal that we get is something that can be supported. But at every turn, her party changes its position—not for any reason of substance, but to maximise political advantage: shape-shifting to try to catch the Government out. In the past two years, we have had from Labour, at my last count, 15 tests, five red lines, four bottom lines, 170 questions and four key messages, but no coherent policy. Meanwhile, we in the Government are getting on with the task in hand, and that is precisely what she should do.
Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)
May I thank my right hon. Friend for coming so quickly to the House? When he was answering the original question, did he notice the irony that Siemens, among many other companies, has already been showing its faith in the UK even before this, with a £200 million investment in Goole to make sure that it is able to be here because it is where the talent lies? Would he not also consider it slightly ironic if the complaints from Airbus were such that it actually moved its production to China, given that China has never even been in the European Union?
Greg Clark
My right hon. Friend is right. I hope that he would acknowledge that my Department and this Government are energetic in promoting the advantages of locating in Britain, and not just at the new facility in Goole—I had the great privilege of opening the Siemens blade factory in Hull, employing 1,000 people. People locate in this country because it is a good place in which to invest. We have an environment of innovation and excellence—it is a tribute to the workforce—and we want to keep it that way. It is therefore incumbent on us, when we have industrial investors who are committing for years ahead, to listen to what they say about the requirements from the negotiation. He and I completely agree that in that relationship, we want to make sure that we do not have tariffs and we do not have frictions. That is what the company wants, that is what we want, and now we need to agree it with our European counterparts.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Airbus’s risk assessment is sobering news for those drunk on the fantasies of Brexit. Airbus has forecast “severe disruption” and “interruption of production” in the UK, forcing it to switch investment planning away from the UK. Airbus says that this is not “Project Fear” but a dawning reality. The fact is that business after business is shouting, “Brace, brace.” At the heart of this is the lack of any plan or any sense over the customs union from this Government. This, coupled with no sign of any agreement over the EU-US open skies arrangement, means that Airbus is taking flight while the planes it already has in service could be stuck on the ground here.
The UK Government’s disastrous plan to leave the EU customs union and single market risks 80,000 jobs by 2030 in Scotland. Will the Secretary of State provide details about how the Government will protect 8,000 jobs and £541 million of activity in Scotland indirectly supported by Airbus? What technical discussions has he had with Airbus and sectoral organisations on the impact Brexit will have on the industry? In the light of this, what policy changes, if any, will he take forward?
Greg Clark
The hon. Gentleman talks about the impact of Brexit. It may have escaped his attention that we are negotiating the terms of our future economic partnership with the rest of the EU. The representations that have been made by Airbus—as I say, directed at the UK but also at other member states and the Commission —are about what that future economic partnership should look like. I hope there will be a broad consensus in the House that it should be a regime that allows fantastic sectors and companies within them to not only continue to export in a just-in-time system in which any delay at the border undermines the business model, but also to expand production in a rapidly expanding market, not just in Europe but around the world. That is what we are negotiating, and that is the context in which Airbus has given advice to us and the other side of the negotiations.
Several hon. Members rose—
John Redwood (Wokingham) (Con)
Does not Boeing’s decision to make a major manufacturing investment in this country show that a complex supply chain can be run with a lot coming in from outside the EU perfectly well and give the lie to the idea that we will not be able to supply the wings to Airbus?
Greg Clark
I want Britain to be the best place in the world to produce advanced manufacturing products, and that means we should be tenacious in looking at every way to make the supply chain competitive. Given that our parts go backwards and forwards between the UK and the continent, if we can avoid frictions, as I am certain we can, that enhances our ability to compete, which is to the advantage of Boeing as well as any other company in the industry.
Hilary Benn (Leeds Central) (Lab)
Is it not pretty damning that the Secretary of State has had to come to the Dispatch Box today to say that Airbus should be treated with respect when it tells the truth, rather than be criticised? Since the whole House knows that he understands what is at stake here, does he agree that the fact that the Cabinet is still arguing about what kind of customs arrangements it wants two years after the referendum is why a growing number of businesses despair at the Government’s inability to get a grip of this issue?
Greg Clark
I disagree with the right hon. Gentleman. On the first point, we are an open economy. Businesses that employ people here are perfectly free to speak out and have a right to do so. It is incumbent on the Government to listen to what they say and factor that into the negotiations we are having. We have been very clear about that.
When it comes to the negotiation of our future customs arrangements, the right hon. Gentleman knows, as Chair of the Select Committee on Exiting the European Union, which has given this extensive scrutiny, that up to now we have been discussing the terms of our withdrawal. We are coming on to talk about the future economic partnership. We are negotiating and setting out what we want to achieve through that, and this was always the time when that would be done. For evidence from Airbus and other companies to come forward at this time is to be expected, given the focus of the discussions over the weeks ahead.
Anna Soubry (Broxtowe) (Con)
A small business in my constituency that employs 180 people is part of the Airbus supply chain, so this matters very much to the good people of Broxtowe. I congratulate the Secretary of State on his statement and welcome it, but Airbus is not alone in having grave concerns about what the Government’s position will be on Brexit and seeking clarity. Will he assure people first that the Conservative party remains the party of business, and secondly that when British businesses speak out, they should be able to do so without fear or favour and be listened to with respect?
Tom Brake (Carshalton and Wallington) (LD)
When the Health Secretary suggested that Airbus should get behind the Prime Minister’s position, which of the positions on customs was he referring to: a customs partnership, maximum facilitation or customs arrangements?
Greg Clark
If the right hon. Gentleman had read what Airbus said, on which my right hon. Friend was commenting, he would know that it gave a forensic analysis of its requirements when it comes to imports and exports. The import of that was that it needs to avoid frictions and tariffs, which is precisely what the Prime Minister has committed to.
Sir Desmond Swayne (New Forest West) (Con)
There are no tariffs on the aerospace industry under world trade rules, are there?
Greg Clark
The aerospace sector includes various components that do attract tariffs, and it is very important that we should have zero tariffs on all such components.
Emma Reynolds (Wolverhampton North East) (Lab)
I am pleased that the Secretary of State is being sensible and listening to the concerns of business, unlike some of the disgraceful comments of his colleagues. Will the Secretary of State tell the House what assessment his Department has made of the impact on jobs and investment in the aerospace sector, and the impact not only on Airbus, but on companies in the supply chain, such as UTC Aerospace Systems in my constituency, of leaving the single market and the customs union?
Greg Clark
The supply chain of Airbus and indeed of every company in the sector is pervasive right across the UK, and many employers—small and large—across many of our constituencies contribute to it. The hon. Lady asks about the impact of leaving the single market. The purpose of the negotiations in the months ahead is to make sure, as we leave the European Union and as we leave the single market—she knows that it is not possible to be a member of the single market and to be leaving the European Union—that we have an agreement that allows us to trade without frictions and without tariffs. That is our purpose, and it is what the Prime Minister has very clearly set out. It is within our grasp, and I am confident we will be able to achieve it.
Stephen Crabb (Preseli Pembrokeshire) (Con)
Is not the truth that the kind of Brexit deal that will fully safeguard our industrial base will be one that requires significant compromises? Does my right hon. Friend agree that we are fast approaching the moment when we need to spell out, for the benefit of business and industry, what those compromises look like?
Greg Clark
My right hon. Friend is right that any negotiation of course involves give and take. That is true on both sides, and it is important to remember that these observations have been addressed to the European Union as well as to the UK. My right hon. Friend talks about the time. As I said to the Chairman of the Exiting the European Union Committee, the right hon. Member for Leeds Central (Hilary Benn), now is the time when we are moving on from discussing the terms of our withdrawal to what our future economic partnership looks like. This is precisely the time at which we will set out and agree, I hope, a long-term future in which Airbus and many other companies can prosper.
Darren Jones (Bristol North West) (Lab)
Airbus and its supply chain are significant employers in north Bristol, so will the Secretary of State set out what assessment his Department has made of the number of jobs that need to be put at risk, the number of families’ lives that need to be devastated and the amount of damage that needs to be done to British industry before the threshold is met for the definition of a duff deal on Brexit, and will he at that stage join me and others in calling for a people’s vote?
Greg Clark
I think the hon. Gentleman would be more productive if he engaged with the substance of the negotiation. We are leaving the European Union, and what is required is to reach an agreement that avoids frictions and tariffs. It is perfectly possible to agree such an accord with the European Union. That is our purpose, and we will faithfully implement it.
Antoinette Sandbach (Eddisbury) (Con)
Thousands of jobs in the north-west depend on Airbus and its supply chain there. Does the Secretary of State agree that close regulatory alignment is also a requirement to help to ensure that trade is as frictionless as possible?
Greg Clark
My hon. Friend is right in alluding to the fact that an aeroplane, which is what we are talking about, is a combination of products from different countries. They need to come together—this is inherently international—so to have standards for wings that are different from standards for engines and parts of the fuselage would clearly be incompatible with having a plane that flies. There is good sense in having an agreement that brings coherence to what is a single product manufactured in different parts of Europe.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
I draw the House’s attention to my declaration in the Register of Members’ Financial Interests.
My constituents, many of whom work at Airbus plants in Newport or across the Severn bridge in north Bristol in the constituency of my hon. Friend the Member for Bristol North West (Darren Jones), also face devastation from the prospects of a hard Brexit. Will the Secretary of State therefore join me in condemning the leader of the Welsh Conservatives for his comments describing Airbus’s remarks as “hyperbole”, “threats” and “exaggerating”, and agree with his ministerial colleague, the Under-Secretary of State for Defence, the hon. Member for Aberconwy (Guto Bebb), who has described senior Cabinet Ministers’ comments as “both unworthy and inflammatory”?
Greg Clark
I have said very clearly, as I hope the hon. Gentleman would acknowledge, that it is entirely reasonable for any firm that employs people and pays taxes in this country to contribute its expertise and experience to the discussions that we are having.
Mr David Jones (Clwyd West) (Con)
Article 50 provides that the withdrawal negotiations should take into account the framework for the future relationship between the departing member state and the continuing EU. Does my right hon. Friend not agree that the lack of clarity, about which Airbus is quite reasonably complaining, is a consequence, at least in part, of the flat refusal by the European Union to discuss that future relationship?
Greg Clark
One of the things that Airbus has set out is what it regards, correctly in my view, as the serious consequences for it of a Brexit without an agreement. It is in all our interests, on both sides of the channel, to have an agreement that avoids that. My right hon. Friend is right that Airbus and the various trade associations, some of them international, to which it belongs, have made the same points to other member states and to the European Commission. I hope that it will be heard in Brussels as well as in every other part of the European Union.
Several hon. Members rose—
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
These warnings from Airbus, other manufacturing companies and, indeed, other sectors are not new to the British Government, as their own economic impact assessment shows that leaving the single market and the customs union will be hugely damaging. Is not the reality that for the Welsh economy the UK’s Brexit policy is a game of Westminster roulette where every chamber is loaded?
Greg Clark
The hon. Gentleman should be more constructive. Given that the whole country—the United Kingdom—voted to leave the European Union, we should be engaged in making sure that we have the best deal possible. I talk regularly with colleagues in Wales about what is required in the terms of that agreement. He should contribute to that, rather than wishing away the results of a referendum that clearly he did not want.
Jack Lopresti (Filton and Bradley Stoke) (Con)
If Airbus makes good on its ridiculous threats—and I do not think it will for one minute—how much of the billions of pounds of taxpayer subsidy, paid for by the British taxpayer, would it have to pay back?
Greg Clark
I disagree with my hon. Friend. I think that the company has set out what it requires to be agreed in the negotiations so that it can continue to prosper. It is true that the company, like most companies in the aerospace sector, has been part of a successful investment with the Government in innovation and training. That is one foundation of our success, and I very much want that to continue.
Mr Pat McFadden (Wolverhampton South East) (Lab)
Fourteen thousand jobs directly affected; over 100,000 in the supply chain, including in our crucial aerospace cluster in Wolverhampton. What does the Secretary of State think is in the minds of leading Brexiteers when they hear warnings like this, which are anything but ridiculous? Does he think that they take them to the heart, or do they in the end believe that this is a price worth paying, because the overall imperative of controlling immigration comes before any economic or employment consideration?
Greg Clark
My experience gives me confidence that the evidence and the facts will ultimately determine the outcome of the negotiations; respect for the facts on both sides of the negotiations will be what determines a solution in the interests of both sides. That is what I am determined to pursue. When companies offer evidence, as others are completely free to do, it should be considered in a serious and sober way, and used to inform those discussions.
Mr Laurence Robertson (Tewkesbury) (Con)
The aerospace industry is important to my Tewkesbury constituency. Did the Secretary of State notice, on the day of the announcement, that American company GE Aviation announced that it was going to rebuild its propeller business, which supplies a significant proportion of the world’s propellers, in my constituency of Tewkesbury, here in the United Kingdom? Is that not a vote of confidence in what we are doing?
Greg Clark
My hon. Friend is absolutely right. Our right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) pointed out earlier that companies invest here because it is a good place to invest. My hon. Friend’s constituency and the area around it have proved successful because there is a critical mass—a cluster—of related firms. It is important that we do everything we can to ensure that we maintain and add to the strength of that cluster, and I am absolutely determined to do so.
Anna McMorrin (Cardiff North) (Lab)
Ideology before jobs; doctrine before the economy. It used to be that the Conservatives were the party of business, but now they are the party of fears. When will the Government give clarity to business and hard-working families, heed warnings, and commit to staying in the single market and the customs union?
Greg Clark
Day in, day out, I meet businesses and persuade them of the advantages of this country. I have to report that one of their concerns is the policies of the hon. Lady’s Front Benchers, which are a very significant deterrent to investment in this country.
Mr Mark Francois (Rayleigh and Wickford) (Con)
Some months ago, when I visited Airbus at Broughton, I was briefed in detail about its considerable investment in both capital and skills for specialised wing work. Is it not a fact that it would be extremely expensive for Airbus if it were ever to contemplate trying to relocate that work, be it to Hamburg or Toulouse?
Greg Clark
My right hon. Friend takes too pessimistic a view. We do not want Airbus to be located in this country because it is too difficult for the company to go elsewhere; we want it to be here with enthusiasm because this is a good and profitable place to invest. I am determined that the deal we secure and the investment we make through our industrial strategy will add to our strengths and make us even more attractive. We should have a counsel of optimism rather than defensive pessimism.
Alison McGovern (Wirral South) (Lab)
Unlike the right hon. Member for Rayleigh and Wickford (Mr Francois), my constituent Kyle Robinson, a Unite shop steward, works at Broughton every day. He wrote to me this weekend to say that the current situation for him and the families I represent is potentially catastrophic. Will the Secretary of State ensure that when he takes up the invitation from my hon. Friend the Member for Alyn and Deeside (Mark Tami) to meet him and the company, the unions get an invite as well?
Greg Clark
The company has good relations with the trade unions and meets them regularly, as indeed do I. The hon. Lady should reflect that when the country took the decision to leave the European Union, there was always going to be a period before the negotiations were concluded when anxieties would be felt. Our purpose and determination is that those negotiations should be concluded so that there will be confidence to invest in the future and we can create many more jobs for her constituents.
Robert Halfon (Harlow) (Con)
Given what my right hon. Friend the Member for Wokingham (John Redwood) said, and given Boeing’s £40 million investment, is it not important that we listen to all voices in this argument, rather than concentrating on one voice, which may have a different view about Brexit, disproportionately more than others?
Greg Clark
Companies in the aerospace sector—big and small—report very similar requirements: we should avoid frictions and tariffs. That is consistent with many other employers who create valuable jobs in this country. It is important that we listen to not just one voice but them all.
Sammy Wilson (East Antrim) (DUP)
Since aerospace regulations tend to be made on a worldwide basis rather than on an EU basis, the tariffs on manufactured goods are low or zero, and the UK is an important market for Airbus. Does the Secretary of State accept that we should take some of these warnings with a pinch of salt? If Airbus has concerns, it ought to direct them towards the EU negotiators who seem to be putting every obstacle in the way of the Prime Minister’s objective of frictionless future trade.
Greg Clark
We need an agreement. The right hon. Gentleman is right that regulatory standards are increasingly international, but the idea that we would find ourselves unable to operate to the standards required for aircraft produced in Europe would be unacceptable not only to Airbus, but to Bombardier in Northern Ireland, which communicated in very similar terms its requirements for the future.
Richard Graham (Gloucester) (Con)
Given that the clear aim of the Government, and indeed Airbus Group, is to achieve a frictionless and zero-tariff exit agreement, has not the statement from Airbus generated more heat than light? Is not the simple truth that we make the engines, wings and landing gear for the Airbus, that it is incredibly important that we continue to do so, and that there is no reason for us not to arrive at an agreement that enables us to do so?
Greg Clark
I agree with my hon. Friend. I hope that the House can tell that I regard the prospect of a good agreement as being within our grasp. That is our objective, and it is what this company and many others want from us.
David Hanson (Delyn) (Lab)
Airbus makes great play in its statement of the need to remain in the European Aviation Safety Agency, because regulating in that way means that planes can fly. What confidence can the Secretary of State give to my constituents, including the chair of the trade union group and the 1,500 people in my patch who work there, that we will still have that proper regulation after Brexit?
Greg Clark
That is precisely what the Prime Minister set out in her Mansion House speech: we want and need to secure an agreement such that we will not require a different set of regulatory standards. I am confident that we will be able to agree that.
Vicky Ford (Chelmsford) (Con)
Airbus is also a key player in the space sector, which is important for many jobs in my constituency. Can the Secretary of State confirm that the partnership that we are looking for will cover co-operation on standards and a deal on services, so that maintenance contracts and the like can continue to be fulfilled?
Greg Clark
My hon. Friend is absolutely right that there is no hard and fast distinction between manufactured goods and services, and that is especially illustrated in the aerospace sector. If, for example, Rolls-Royce sells an engine, the money that it makes in the years ahead is from maintaining and servicing that engine. That involves skilled engineers being able to travel, so it is very important—again, as part of our agreement—that such services should continue to be supplied uninterrupted.
Several hon. Members rose—
Mr Chris Leslie (Nottingham East) (Lab/Co-op)
Apparently it was at a Foreign Office reception in honour of the Queen’s birthday that the Foreign Secretary applied his four-letter expletive to the concerns of Airbus and business about leaving the single market. I can think of a few suggestions myself, but what four-letter word comes to mind for the Secretary of State when he thinks about the Foreign Secretary?
Greg Clark
For all of us, it is “jobs” that we want to secure from our negotiations—good jobs—and we are determined to do so.
Mr Philip Hollobone (Kettering) (Con)
Is it not the case that the United Kingdom has attracted more foreign direct investment than most, if not all, our European partners, and is it not the case that today, two years on from the referendum, there is more foreign direct investment in our economy than there was in 2016?
Greg Clark
My hon. Friend is absolutely right. He will know that I spend time travelling around the world to encourage overseas investors to invest in our country and our economy. One of the reasons why they choose to do so is that we are a place of skills and ingenuity. We are also a place from which it is possible to export around the world, and we want to be able to maintain that. That is my purpose.
Jessica Morden (Newport East) (Lab)
Many of my constituents work in Newport and in Filton. I reiterate to the Minister that the Government’s failure to address the issues that Airbus raised about Brexit mean uncertain times for the workforce, and that includes the 500-plus apprenticeships that have been offered over the last five years in Wales. This is about jobs for our young people.
Greg Clark
I am glad that the hon. Lady refers to the 500 apprenticeships because, as she will acknowledge, the sector has prospered as never before during the last few years, during which we have had a fantastic programme of joint investment in skills and in the technology of the future. That has been this Government’s deliberate policy. Through the industrial strategy, we are taking that forward, and I am determined that we will be able to create markets around the world—including the European Union—for those products to be exported to.
Jeremy Lefroy (Stafford) (Con)
I thank my right hon. Friend for his comments and for his support for businesses on all sides that wish to make their views known, because it is important that our constituents’ jobs are protected. Will he adopt the same pragmatic attitude towards his input into the negotiations and encourage that from all sides, including Brussels?
Greg Clark
I am grateful to my hon. Friend. If one has the privilege, as I and many of us do, of visiting the shop floors and workforces around the country, one sees how important these jobs are. These are good jobs providing careers and opportunities, as well as decent incomes for workers and their families. It is important that we have that always in mind as we approach these negotiations. If we do, a sensible outcome will, I believe, prevail.
Stephen Timms (East Ham) (Lab)
Is it not the truth that Airbus has done a great public service by injecting much-needed frankness and realism into this debate, and will the Secretary of State commend it for being willing to do so?
Greg Clark
As I have said to colleagues across the House, Airbus and other companies in the sector, like many other companies, have been very consistent in their approach for many months, including in evidence to Select Committees on which some Members in the Chamber sit. This has caught the country’s attention now, but it is consistent with what the company has been saying for some time.
Iain Stewart (Milton Keynes South) (Con)
I declare an interest, having visited the Airbus headquarters recently. Airbus has a manufacturing facility in Alabama, USA, which is outside the customs union. It exchanges products, parts and labour without impediment. Does that not give us hope for the future?
Greg Clark
In the context of Europe, the company’s arrangements are remarkably effective. It combines products from neighbouring EU countries and, in many cases and in many markets, beats the competition hands down. Why would we want to disturb something that works?
Karin Smyth (Bristol South) (Lab)
Bristol, home of Concorde, is proud of its aerospace industry, to which Airbus is critical. It is also critical to the provision of good apprenticeships in my constituency. How will the Secretary of State’s industrial strategy be delivered if companies such as Airbus are not here?
Greg Clark
Not only will Airbus be here, but it will be expanding its operation and recruiting more apprentices for very successful careers.
Robert Neill (Bromley and Chislehurst) (Con)
May I welcome the Secretary of State’s firm restatement of a properly Conservative position that respects business and puts pragmatism above ideology? Will he make sure that the same applies to negotiations on our key services sector, which represents 80% of the economy?
Greg Clark
My hon. Friend is right. It is important that services, which make such a good contribution to our economy, can continue to prosper. That means that, whether in financial and professional services, or in the oil and gas sector in which we have such expertise, we can fly people into other countries, have them ply their trade and give advice and help, and then have them come back again. We can do that at the moment; we need to be able to do it in the future.
Chris Ruane (Vale of Clwyd) (Lab)
It was a Tory Government who shed more than 8,000 jobs at Shotton in 1980—the biggest lay-off in one day in British industrial history. We will see history repeat itself, with 6,500 jobs lost at Broughton, if the Secretary of State does not pull his finger out. Why are he and his party prepared to sacrifice those Airbus workers’ jobs and futures for party political ideology?
Greg Clark
I am not, but if the hon. Gentleman wants to talk about job losses, he should refer to the periods when his party has been in power and the devastation to the economy that that has caused. We are determined that industries that are successful now will be successful in the future. The policies of Labour Front Benchers, which are seemingly predicated on the idea that if it works, it has to be subsidised, and if it still works, it has to be nationalised, will attract no confidence in this country.
Charlie Elphicke (Dover) (Ind)
Has the Secretary of State noticed that the European Union sells us £100 billion more in goods than the other way around? Does that not underline that, rather than following the defeatism of the Labour party, we should be bold and courageous in putting forward maximum facilitation and trade with the EU?
Greg Clark
Given my hon. Friend’s constituency, he knows the importance of having no frictions at the border. As he describes, there is a common interest between the two sides of the negotiations, which I am sure will lead to a successful outcome.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Yesterday, the Health Secretary said that it was “completely inappropriate” for businesses such as Airbus to make warnings about moving jobs because of Brexit. Will the Secretary of State confirm that the Health Secretary was wrong and that, in a democratic country, it is entirely appropriate for such businesses to raise their concerns? What will he do to protect the thousands of jobs in the aerospace sector in the north-west and across the country that will be put at significant risk if the Government pursue their plan of leaving the customs union and single market?
Greg Clark
As I think I made it clear throughout my statement, I do not agree—unusually—with my right hon. Friend on this point. I think that businesses have a right to speak out if they pay taxes and employ people, and we are determined that they will be able to continue to succeed in the future.
Kevin Foster (Torbay) (Con)
Having visited the Airbus facility in Bristol, I am pleased to note the tone and nature of the Secretary of State’s remarks. Will he confirm that the aviation industry is increasingly working on a global basis—there are even direct flights from here to Australasia now—and that that will not change after Brexit?
Greg Clark
My hon. Friend is absolutely right. We want to be able to take advantage of increasing global opportunities, but to do so without losing the advantages that we have from what have been very successful trading relationships within Europe.
Mike Gapes (Ilford South) (Lab/Co-op)
When the Secretary of State said that there should be no unnecessary friction, was he referring to discussions within the Cabinet or to the economy?
Greg Clark
When a matter is complex and requires a forensic attention to what companies require, there will of course be discussions, and sometimes people will not agree with each other. What is important is for those discussions to be concluded in a way that is productive for the whole economy.
Several hon. Members rose—
Energy Policy
Greg Clark Excerpts(5 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
Mr Speaker, I wish to make a statement about the proposed Swansea Bay tidal lagoon.
Britain’s energy policy on electricity generation is based on meeting three needs: ensuring that we can count on secure and dependable supplies of electricity at all times; minimising the cost of supplies to consumers and taxpayers; and meeting our greenhouse gas emission reduction obligations. To those three requirements we have added, through our industrial strategy, a further ambition, which is to secure long-term economic benefits, in terms of jobs and prosperity, from the decisions that we take.
Our policy has been successful. Britain has one of the most secure and reliable electricity supply sectors in the world. Last winter, one of the coldest in recent years, the margin of capacity in our electricity generating system was more than 10%—around twice what it was in 2016-17. We have the strongest record in the G7 for reducing our greenhouse gas emissions. Between 1990 and 2016, the UK reduced its emissions by more than 40%. We have massively increased our deployment of renewable generation: renewable electricity now makes up almost 30% of our generation; our renewable capacity has quadrupled since 2010; and in two years the auction price of offshore wind has fallen from £114 per MWh to £57.50 per MWh. Coal, the most polluting fuel, contributed less to generation in Britain last year than in any year since the industrial revolution. All that has been achieved while the UK has maintained a position in respect of electricity’s overall cost to households that is well below the average for major European countries.
Nevertheless, the cost of electricity is significant for households and for businesses, and the policy-related costs have been growing. We have made a clear commitment to bear down on those costs. It is in that context that the Government have assessed whether they should commit consumer or taxpayer funds to the programme of six tidal lagoons proposed by Tidal Lagoon Power Ltd, with the first being the proposed project at Swansea. We believe in renewable energy and we believe in the benefits of innovation. The conclusion of our analysis, which has been shared with the Welsh Government, is that the project and the proposed programme of lagoons do not meet the requirements for value for money, so it would not be appropriate to lead the company to believe that public funds could be justified.
The proposal for the Swansea tidal lagoon would cost £1.3 billion to build. If successful to its maximum ambition, it would provide around 0.15% of the electricity we use each year. The same power generated by the lagoon over 60 years for £1.3 billion would cost around £400 million for offshore wind, even at today’s prices, which have fallen rapidly and which we expect to be cheaper still in future. At £1.3 billion, the capital cost per unit of electricity generated each year would be three times that of the Hinkley Point C nuclear power station. The Hendry review found that if a full programme of six lagoons were constructed, the cost would be more than £50 billion, and it would be two and a half times what it would cost Hinkley to generate a similar electricity output. It is estimated that enough offshore wind to provide the same generation as a programme of lagoons would cost at least £31.5 billion less to build.
Taking all the costs together, I have been advised by analysts that by 2050 the proposal that was made, which would generate around 30 TWh of electricity per year, could cost up to £20 billion more to produce, compared with generating that same electricity through a mix of offshore wind and nuclear, once financing, operating and system costs have been taken into account. That could cost the average British household consumer up to an additional £700 between 2031 and 2050, or the equivalent of £15,000 for every household in Wales. However, in recognition of the potential local economic benefits that might result from a lagoon in Swansea, I asked officials to go back to consider what additional benefit could be ascribed to a number of other factors, including a beneficial impact on the local economy. For £1.3 billion, a Swansea lagoon would support, according to the Hendry review, only 28 jobs directly associated with operating and maintaining the lagoon in the long term.
Officials were also asked to make an assessment of the potential for valuable innovation and cost reductions for later lagoons that might come from embarking on a programme of construction. Independent advice concluded that the civil engineering used in Swansea bay offers limited scope for innovation and capital cost reduction—estimated at 5%—in the construction of subsequent facilities.
I asked for an assessment of the export potential of embarking on a programme of implementing the technology, but the Hendry review concluded that it would take
“a leap of faith to believe that the UK would be the main industrial beneficiary”
of any such programme. On energy reliability, the generation of electricity would be variable rather than constant, with a load factor of 19% compared with around 50% for offshore wind and 90% for nuclear.
The inescapable conclusion of an extensive analysis is that, however novel and appealing the proposal that has been made is, even with these factors taken into account, the costs that would be incurred by consumers and taxpayers would be so much higher than alternative sources of low carbon power that it would be irresponsible to enter into a contract with the provider. Securing our energy needs into the future has to be done seriously and when much cheaper alternatives exist no individual project and no particular technology can proceed at any price. That is true for all technologies. The fact that this proposal has not demonstrated that it could be value for money does not mean that its potential is not recognised. My Department is also in receipt of proposals from other promoters of tidal energy schemes that are said to have lower costs than the Swansea proposal, although these are at an earlier stage of development. Any proposals must be able credibly to demonstrate value for money for consumers and public funds.
I am sure that many people in the House and beyond would wish that we were in a position today to say yes to the Swansea proposals. I have appreciated the contribution of Charles Hendry, whose constructive report led to this further analysis being made, and the engagement of the Secretary of State for Wales and Members of the Welsh Assembly, including the First Minister and the Leader of the Welsh Conservatives, Andrew R. T. Davies. All of us have a requirement to be responsible stewards of taxpayers’ and consumers’ money and to act at all times in their interests. It is in discharging that responsibility rigorously that I make this statement today, and I commend it to the House.
Bill Esterson (Sefton Central) (Lab)
I thank the Secretary of State for the somewhat late advance sight of his statement—I think we understand why—and give the apologies of my hon. Friend the Member for Southampton, Test (Dr Whitehead), who would normally respond to this statement, but who is a victim of the Transport Secretary’s failure to run the trains on time; a failed policy if ever there was one. I am afraid that this statement is evidence of yet another failed Government policy; it is a missed opportunity for the domestic economy and for our export potential.
The Government really should be ashamed about what we have heard from the Secretary of State today. When he announced the cancellation of the project, my hon. Friends said, “Shame”. They were right to do so as this is indeed shameful. It is another broken promise by the Conservative party—we have seen lots of those recently, too. I remind the House that, in 2015, the Conservative manifesto committed to building the Swansea Bay tidal lagoon. The Government appointed Charles Hendry to produce a report to do just that. It has been one year, five months and 14 days since he published his final report. The report stated:
“The aim now is that we should move to secure the pathfinder project as swiftly as possible.”
During this time, the Minister has received letters signed by more than 100 MPs from all parts of the House in support of the project, along with interventions and questions indicating the strength of feeling in this place. There has been unanimous support from across industry, but the handling of the project by this Government has been atrocious. Not only have the Government taken an inordinate amount of time to come to the House; hon. Members, Tidal Lagoon Power, the Welsh Government, the trade unions and other stakeholders have been left to find out about development through leaks in the press
It emerged in a joint hearing of the Business, Energy and Industrial Strategy Committee and Welsh Affairs Committee last month that a BEIS Minister had not spoken to Tidal Lagoon Power for 16 months. Will the Secretary of State set out how we can trust his word that he wants to talk to other marine developers and bring forward the other projects to which he referred in passing, when his Department has not even spoken to Tidal Lagoon Power for more than a year? This is no way for the Government to conduct themselves over an issue that is so important for Wales, our environment and the whole wider UK economy.
Approving the lagoon would have been a positive step, taken by a Government with a clear vision for the future, willing to lead the way in new, innovative technology and strongly supporting British industry. It would have been a step taken by a Government able to provide businesses with certainty in uncertain times, rather than the insulting, undermining and questioning rhetoric that we have heard from the Secretary of State’s Cabinet colleagues. We have heard a lot from him and his colleagues about the industrial strategy and supporting new technologies, revitalising our manufacturing sector, encouraging UK-based supply chains and creating jobs outside London. Well, so much for that industrial strategy. Swansea Bay tidal lagoon could have helped to deliver on each of these objectives, so will the Secretary of State outline which assessment criteria were used to decide against the project, over and above a simple cost calculation?
The project would have required 100,000 tonnes of steel, with a significant proportion expected to be produced nearby at Port Talbot. It would have used first-of-a-kind, precision-engineered, bi-directional turbines, with the vast majority of components built in the UK, establishing new UK-based supply chains. It would have created more than 2,300 jobs in Swansea and paved the way for the creation of a new domestic industry with substantial export potential. The Hendry review was commissioned by the Government. Given that the Secretary of State is ignoring his own review, what alternative analysis did he carry out to support his decision to cancel the project? That this Government, especially in the excessive time that they have taken to make a decision, do not value the wider benefits of the project is disappointing to say the least.
One very good way of offsetting the impact on climate change of expanding airport capacity would be to expand renewable energy production. Is not it remarkably ironic that this statement has been made on the same day as the Heathrow vote? There is a fine judgment to be made on Heathrow tonight. Giving the go-ahead to the Swansea Bay tidal lagoon would have made supporting Heathrow just that little bit easier.
Greg Clark
On the hon. Gentleman’s last point, my understanding is that the Welsh Government support the option of a third runway at Heathrow; I am not sure whether that is a co-ordinated position.
The hon. Gentleman asked a number of questions. I understand his disappointment that we have not been able to approve the proposal, but he will know that we all—be it the UK Government or the Welsh Government —have to be responsible stewards of taxpayers’ and consumers’ money. He asked about the analysis that has been made and the time that has been put into this decision. It was the request of the Welsh Government and the recommendation of Charles Hendry that we consider alternative suggestions as to the economic impact of the proposal. That is what we have done, and I have been willing to extend the analysis and leave no stone unturned to see whether this project can be approved.
The hon. Gentleman knows that our record on renewables is one of the strongest in the world, particularly for offshore wind, in which Wales—as well as every other part of the United Kingdom—is a huge beneficiary. We have quadrupled our deployment of renewables since 2010. We are the world’s leader in offshore wind, creating jobs and exports around the world. If we were to use the funds at less value for money—that is, take them from that very successful supply chain and deploy them instead to the programme of a tidal lagoon—the consequence would be job losses in Wales and other parts of the United Kingdom. It is the commitment to continue what has been a successful strategy of achieving jobs all around the country in offshore wind that provides the reason why we need to be rigorous about this.
Listening to the hon. Gentleman, one would think that what ordinary working people and businesses have to pay for their energy is a matter of complete indifference to him. Is there any limit at all to what he would he would make consumers pay? The Swansea lagoon would cost three times as much—I repeat, three times as much—as having the same electricity generated by offshore wind here in the UK. The whole tidal programme would cost £50 billion when we could have the same amount from wind for nearer to £20 billion. Is it Labour’s policy to charge £700 per household more than is needed in the first place? As for economic development in Wales, it would be cheaper to write a cheque for £15,000 to every single household in Wales than to subsidise this particular proposal. I am afraid that his response sums up the approach of spending whatever it takes, no matter how wasteful of consumers’ and taxpayers’ money that is.
The hon. Gentleman talks about industrial strategy, but the clue is in the word “strategy”. A strategy does not spray consumers’ or taxpayers’ money on any proposal—it requires a rigorous assessment. We are a leader in offshore wind because we took a decision to focus on a technology for which costs could come down and there was a massive global market in which we could create jobs. What he proposes would reverse that by doling out subsidy to whoever asks loudest, rather than what has been rigorously assessed. That is not strategic.
In summary, Labour would pay £700 per household for less reliable electricity, fewer exports from offshore wind and fewer jobs, including in East Anglia, on Teesside and in Scotland—and, yes, in Wales and Northern Ireland, too. It would saddle taxpayers with a decommissioning cost of over £1 billion. We will always put the interests of taxpayers, and working people who pay bills, first. I would hope that a responsible Opposition would acknowledge the seriousness of the analysis that has been made and recognise that its conclusion is rigorous.
Stephen Crabb (Preseli Pembrokeshire) (Con)
Even Conservative Members who have been the strongest supporters of the lagoon project have always known that there was a serious value-for-money question to be answered. Will my right hon. Friend confirm that every single avenue was explored to try to find a financial solution to make this happen, and that today’s announcement does not close the door on future investment in tidal and wave power that would give us reliable, clean energy into the 21st century and beyond?
Greg Clark
I can confirm that. Anyone who has concentrated on this proposal and seen the assessment that has been made would conclude that my hon. Friends and I have left no stone unturned in looking at all possibilities that might improve the economic case. However, when the conclusion is that something is so much more expensive than other low-carbon technologies, we have to follow that evidence and protect consumers and taxpayers from paying so much more than they need to pay. My right hon. Friend is absolutely right that we continue to believe in innovation. We have spent £100 million on new energy research and development. We will continue to do that. We have had other proposals that suggest they would be cheaper. I am very happy to continue work with other promoters of schemes to see whether what would be an attractive proposal can be implemented in a way that would be value for money.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
I thank the Secretary of State for advance sight of his statement.
Eighteen months ago, an independent review commissioned by the UK Government said that moving ahead with the Swansea Bay tidal lagoon would be a “no regrets policy”. Well, plenty of people are regretting this decision today. The Welsh Government were willing to put £200 million into the scheme if it went ahead. It was described as a world-leading opportunity to establish Wales as a centre for expertise and manufacturing, and a long-term source of low-carbon energy. This statement is, yet again, pulling the plug on a Tory promise.
In Scotland, we know how Wales feels. We witnessed the promised £1 billion for carbon capture and storage in Peterhead being pulled for no good reason, stunning both the public and the companies that had bought into the promise, surrendering the technological lead, and costing the taxpayer £100 million. Now it is back—it is flavour of the month—but, of course, grossly underfunded. Here we go again.
The Secretary of State hides behind the scale when making the comparison. He says that he cares about consumers, but this Government are happy to see bill payers paying through the nose for the calamitously bad deal that is Hinkley C. The Government’s disastrous deal with EDF on the strike price will see them pay at least £30 billion over 35 years. At a time when offshore wind strike prices are dropping dramatically, they seem to waste more and more on failing nuclear.
Will the Secretary of State confirm that this and other renewable support is being withdrawn in order to subsidise the likes of Hitachi’s Wylfa nuclear plant? That company has requested loans and guarantees of £12 billion, as per the secret negotiations. Will he admit that this is yet another mistake, and will he have the backbone to categorically rule out any other public bail-outs for failing, costly and desperate nuclear providers?
Greg Clark
The hon. Gentleman represents a country that has prospered from the development of the offshore wind industry. The truth is that if a decision had been taken to subsidise this proposal, that money would have come out of the budget for offshore wind, which would have led to job losses in Scotland and elsewhere around the United Kingdom. He mentions a proposed subsidy. The truth is that if a project that is not viable is subsidised by the taxpayer, it is simply a taxpayer-subsidised unviable project. That is no basis on which a project can be approved.
The hon. Gentleman refers to the nuclear power programme. If he regards the price agreed for the power from Hinkley Point C as too high, that is all the more reason for him to oppose this proposal, because it is so much costlier. He must accept that there is a responsibility for the use of consumers’ and taxpayers’ money that comes with being in office. When a proposal is so out of kilter with what can offer value for money, the necessary decision must be made, and he should respect that.
John Redwood (Wokingham) (Con)
I accept that, on the Secretary of State’s figures, this would be a very bad investment, but can he tell us about the amortisation period of the investment? Surely a barrage will last a lot longer than, say, a wind farm. Will he explain why his advisers think that the project would generate so little power on a not very reliable basis, given the reliability of the tides?
Greg Clark
My right hon. Friend is correct to point to the amortisation. As someone who has spent a career in finance, he is aware that in discounting the value of earnings in future generations, the great majority of the value is in the earlier years, and that has been the standard basis of the assessment made. What has not been taken into account is the prospective decommissioning cost of the proposed lagoon, which has been estimated at £1 billion. That has not been included in the analysis, but it would be a further liability for the taxpayer.
Rachel Reeves (Leeds West) (Lab)
I have to say that I am slightly surprised by the Secretary of State’s tone. In answer to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), he said that this project was “so out of kilter” with other ways of producing energy and that the costs are much higher. In that case, can I gently ask why on earth it has taken five years to come to this decision? What lessons has the Secretary of State learned from the decision-making process around the tidal lagoon project? Frankly, a lot of effort has been put into this project by business, the Welsh Government and others, and I think that many people have lost confidence in the Government’s programme for renewables because of this.
Greg Clark
The hon. Lady will know, as Chair of the Business, Energy and Industrial Strategy Committee, that the Government’s programme of renewables has resulted in the biggest reduction in the cost of the deployment of renewables that we have seen in this country, and that deployment has increased threefold. The success of that strategy is evident. I was asked by many Members, the Welsh Government and many businesses to make sure that every aspect that could contribute to a value-for-money case had been considered —the impact locally, the prospects for exports and the prospects for innovation—and it was right to do so and to leave no stone unturned. I think that that was the right approach, and when the Select Committee scrutinises the decision, I think it will regard the process as having been exhaustive and rigorous.
David T. C. Davies (Monmouth) (Con)
Does my right hon. Friend agree that the relentless criticism by environmental groups and Opposition Members of the £92.50 per megawatt-hour strike price for Hinkley—not least in this House a few weeks ago—has made it virtually impossible for any Government ever to agree to pay a higher strike price than £92.50, and that this project was coming in at a significantly higher price, according to the person responsible for it?
Greg Clark
I saw the evidence given to the Committee inquiry chaired by my hon. Friend and the hon. Member for Leeds West (Rachel Reeves). He is right that we made a commitment, in approving Hinkley Point C, that future projects had to come in at a lower price. I think it is the case that evidence to the inquiry cited a strike price on a comparable basis of not £92.50, but £150, which demonstrates the force of my hon. Friend’s point.
Sir Edward Davey (Kingston and Surbiton) (LD)
I was Secretary of State for Energy when the tidal lagoon story began, so may I tell the current Secretary of State with responsibility for energy that his statement is wrong, wrong, wrong? The evidence that the price of future tidal lagoons would fall dramatically after the first lagoon at Swansea is overwhelming. That was exactly what happened with other renewable technologies, including offshore wind, as he has admitted. Will he promise the House today that he will publish every scrap of evidence and analysis that he has used to take this decision, and hold a debate in Government time on that analysis and evidence?
Greg Clark
The right hon. Gentleman will see from the analysis, and indeed from the conclusions that Charles Hendry and others have pointed to, that the technology inherent in the construction of the lagoon programme—whether building sea walls or the turbines—is not subject to the same degree of cost reduction as other energy technologies. We will be very open about this and publish whatever is not covered by a non-disclosure agreement with the companies concerned. He is, of course, welcome to scrutinise that.
Several hon. Members rose—
Richard Graham (Gloucester) (Con)
I have to say that this is a sad day for Swansea, for Gloucester—the home of Tidal Lagoon Power plc—and, indeed, for other innovative sources of marine energy more widely. Since the project was entirely financed by entrepreneurs and institutional investors, not by the Government, the only real point of argument was the price at which the Government were prepared to buy the energy through the grid. Will the Secretary of State tell us at what price he would have approved the Swansea project? Will he also confirm that his Department will lay out a programme of how it will develop a real strategy for taking forward tidal and other forms of marine energy?
Greg Clark
I know that my hon. Friend has been a great champion for this technology and that he will be disappointed with the conclusion that has had to be reached. At the point of considering any proposal, we are required to examine the cost of alternatives, and the costs of low-carbon alternatives, including offshore wind and nuclear, were more competitive than those for this programme. It is not possible to specify a particular price, because such an assessment has to be made at the point of a decision. However, I have said very clearly that far from being against tidal technology, I am in favour of it, but a value-for-money case has to be presented. We will continue to be open to proposals that can demonstrate such a case.
Albert Owen (Ynys Môn) (Lab)
I am disappointed by today’s announcement. It sounds as if the Government have given up on innovation, marine energy and their own industrial strategy. The Secretary of State discussed wind energy. It would not be at the price it is today if we had not had a decade of subsidies through renewable obligations, which many Government Members opposed. Will he assure me that other marine energy projects such as those in my constituency and across the country will not be jeopardised and crowded out by the price of wind today, and that there is a level playing field for innovation in marine energy?
Greg Clark
The hon. Gentleman would accept that the commitment that I have given to pursue alternative energy sources, including projects in his constituency, has been clearly demonstrated. Of course we are open to innovation—we fund innovation. The assessment by independent experts is that the prospective cost reduction for this technology is not the same as that enjoyed by offshore wind. When it comes to future proposals, of course I will consider them rigorously, and if they can demonstrate value for money they can be contenders.
Glyn Davies (Montgomeryshire) (Con)
Like many others on both sides of the House, I am disappointed that the Swansea tidal lagoon and associated lagoons are not economically viable. The Government have a responsibility to protect the interests of consumers who pay electricity bills. What we all want to hear from the Secretary of State is that he is committed to looking at other schemes that might offer the potential to use tidal energy around our coasts and the power of the production of our marine environment in which our islands live.
Greg Clark
I will. I welcome my hon. Friend’s remarks. We have a substantial programme of investment in innovation. Indeed, when it comes to the costs, to pay £30 billion more than is required to generate the same amount of electricity crowds out the ability to fund genuine projects that can reduce the price of energy.
Carolyn Harris (Swansea East) (Lab)
Swansea Bay tidal lagoon is in my constituency. The Secretary of State will never understand the frustration and anger felt in my city today. It prompts the question of just who is speaking for Wales in the Cabinet, because it is certainly not the Secretary of State for Wales. We have not had electrification; we have not had the tidal lagoon. If he does not do the job properly, it is time to move on, I fear.
Greg Clark
My right hon. Friend the Secretary of State for Wales has been vigorously engaged in making sure that every aspect of the analysis of this project has been conducted, including the impact on the local economy. The hon. Lady is familiar with the figures and the economics of the project, and because she is aware of the proposal she knows of its distance from being value for money, which causes higher bills for her constituents, including intensive energy users such as the steelworks in south Wales, which is something that any responsible Government have to take into account. I think she knows that this has been done in a rigorous way.
Jeremy Lefroy (Stafford) (Con)
The question is not simply about cost, although that is important, but about energy security. Tidal lagoons are one of the best and most secure ways, under British control, of ensuring that we generate power for the future. Will the Secretary of State please have a look at this again?
Greg Clark
Of course we look at energy security, and having a diverse energy supply is important. In so doing we have to look at the contribution that is being made, and it is much more cost-effective to diversify our energy by commissioning sources that, in many cases, are a third cheaper than what is proposed. We can do more of it if we adhere to value for money.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
This announcement will be met with widespread anger in the communities that I represent, and it is the second broken promise from the 2015 Tory manifesto on top of the cancellation of electrification. Will the Secretary of State outline how detailed the discussions were with the Welsh Government regarding joint equity in the project? If the Welsh Government determined that they wanted to increase their equity share and go it alone, would the British Government stand in their way?
Greg Clark
The commitment given was to enter into discussions to see whether the project could be financed. We have done that rigorously, including with the Welsh Government. I think there have been more than 10 meetings with the Welsh Government this year alone to consider whether this was possible and to make sure we were looking at every possibility. The conclusion we have drawn is that it cannot be justified in terms of value for money. It was right to work with the Welsh Government to look at all the possibilities, but we have to abide by the conclusions of a serious analysis.
Mark Pawsey (Rugby) (Con)
The Secretary of State’s statement will have been listened to with great concern at GE Power Conversion in Rugby, which would have manufactured the turbines for the tidal lagoon. A great deal of development has been done there within a mostly British supply chain. UK manufacturing missed out on the manufacturing of wind turbines because of a lack of a commitment to the sector in its early years. Does the Secretary of State agree that it is important that we do not miss out on the manufacturing opportunities that can arise from harnessing tidal power?
Greg Clark
My hon. Friend is right that it is important to take a long-term and strategic approach. That is exactly what we did with offshore wind, identifying a technology in which the supply chain could be located in the UK and creating jobs right across the country. That has been a great success. The opposite of that, however, would be to spread very thinly very expensive projects that do not, as the analysis demonstrates, have the potential for exports that offshore wind and others enjoy. That would reduce the economic prospects for firms across the country.
Chris Elmore (Ogmore) (Lab)
Part of the role of government is that a Secretary of State will have a vision for delivering and a vision for ideas. The Secretary of State has shown today that he does not have any vision for delivering services and improvements to the economy for the people of south Wales. We have had the scrapping of electrification and we are clearly no further forward with various projects the British Government can fund. Can we have a guarantee from the Secretary of State about when the British Government are going to start investing, so that the people of Wales can have some faith? All he is proving right now is that, with the Welsh Secretary and the British Government, the Tories really are failing Wales.
Greg Clark
The Swansea city deal, to name one case in point, will be welcomed by the hon. Gentleman. In terms of planning for the future, making commitments that put on bill payers or taxpayers costs that are three times higher than are justified is no strategy for the long term. To saddle businesses and industries with such costs is a strategy for uncompetitiveness.
Antoinette Sandbach (Eddisbury) (Con)
I thank the Secretary of State for his very sensible decision. Will he confirm that it would have put an additional 31p on every household’s bill in my constituency every year for up to 65 years, leading to £370,000 a year flowing out of my constituency on energy bills to pay for this uneconomic project?
Greg Clark
My hon. Friend is right that £700 per household across the UK cannot be justified, either for consumers in Wales or in any of our constituencies.
Stephen Kinnock (Aberavon) (Lab)
The Swansea Bay tidal lagoon would also have been in my constituency. I can tell the Secretary of State that today the people of Aberavon see this as yet another betrayal of the interests of the people of Wales. They also understand that the project would have had tremendous benefits for the steel industry. Will the Secretary of State today please promise to publish the cost-benefit analysis for the steel industry and the massive opportunity cost of not going ahead both for the steel industry and the steel supply chain? Will he publish that information?
Greg Clark
The hon. Gentleman and I engage closely with the steel industry. In fact, the steel content of the proposed lagoon would have been about a third of a month’s output of the Port Talbot plant. He knows perfectly well that one of the challenges facing the steel industry in this country is energy prices. I would have thought that he would want to take steps to reduce the burden of energy costs on businesses such as the steel industry.
Bim Afolami (Hitchin and Harpenden) (Con)
As a member of the Public Accounts Committee, I can say that value for money is very important to the House and should always be, and I accept the Secretary of State’s assessment in this regard. However, will he confirm to and reassure the House that the Government are not giving up on marine energy or renewable energy, and set out further plans in due course?
Greg Clark
I will indeed. We have an energy innovation fund that can bring forward new technologies, but when it comes to the point of mass deployment, they have to be value for money and show that consumers and taxpayers will not see increased bills as a result.
Thangam Debbonaire (Bristol West) (Lab)
I am disappointed that the Secretary of State does not seem to understand that the Government are not just responsible for stewardship of taxpayers’ money. Their stewardship of the Earth is what counts here, as does their stewardship of investment in our economy and shepherding an industry from its nascent stages to something commercially viable. This country has so much potential marine energy. Will the Secretary of State please reiterate his commitment, which he should have, to investing in that marine energy today?
Greg Clark
This proposal is not commercially viable and the prospects are that it will not become commercially viable. If technologies are proposed through the test beds and our innovation programme, no one would be more pleased than I to deploy them as part of our energy mix, but we have to take into account the impact on bill payers and taxpayers.
Chris Davies (Brecon and Radnorshire) (Con)
I thank my right hon. Friend for his statement. I confirm that there is also great disappointment from Conservative Members that this scheme is not going ahead, but with disappointment there is also realism. The figures that he quoted make it clear that if the scheme went ahead, the burden on our children and grandchildren would be enormous. He has already confirmed that he is still looking into tidal energy. Will he also confirm that if and when it is suitable to proceed with tidal energy, Swansea and the south Wales coast will be looked at first and foremost for future investment?
Greg Clark
Of course. The test is that the deployment of a technology can be done at good value for the taxpayer. That is the challenge for any new technology, and if it can be demonstrated that it meets that challenge I will be very pleased to welcome it.
Nick Thomas-Symonds (Torfaen) (Lab)
The Secretary of State was very specific in the figure that he gave for the number of jobs he expected to be created in operation and maintenance of the lagoon—it was 28. Can he be equally specific about the number of jobs that he has been advised would have been created in the UK-wide supply chain during the construction phase?
Greg Clark
The figures are taken from the Hendry report—these are not Government figures; they were laid out there. The number of jobs created during the construction period would have been 2,260, but they would have been for the very limited period of construction. In terms of value for money, of course, the permanent jobs are what needs to be assessed.
Kevin Foster (Torbay) (Con)
Will the Secretary of State reassure me that he will continue to make these types of decisions based on clear analysis, rather than political convenience?
Greg Clark
It has to be the case that when we take decisions that have consequences for consumers and businesses that already face, in energy-intensive industries, high energy costs, we have to act responsibly both for households and the future competitiveness of those companies.
Chris Ruane (Vale of Clwyd) (Lab)
The proposed lagoon off the north Wales coast would have stretched from Llandudno to Prestatyn in my constituency, protecting a very vulnerable coast. In assessing the viability of a tidal lagoon, what recognition does his Department give to the impact of lagoons in combating coastal flooding?
Greg Clark
Part of the energy assessment that has been made is what would be the best way to secure our energy supplies of the future competitively and so that costs for taxpayers and bill payers are minimised. As I made clear in my statement, I added to that assessment considerations of the local impact and the prospects. I could not have gone further in embracing all the different aspects, and I hope that the hon. Gentleman will reflect that that was the right thing to do.
Mr Philip Hollobone (Kettering) (Con)
It is clear from what the Business Secretary said that this was not even a marginal decision that could have gone either way, and that by a country mile the Government have decided that this scheme is simply not financially viable. What I do not understand is why there is such a big gap in the Business Secretary’s analysis and that of Tidal Lagoon Power Ltd. What is his assessment of why that gap is so wide?
Greg Clark
With any proposal, it is important to do due diligence and check the basis of the calculations, and in this case, in so doing, as my hon. Friend stated, we found the gap to be so wide that the proposal could not be responsibly backed. As I have said to hon. Members, however, any proposal that is competitive will be welcomed.
Owen Smith (Pontypridd) (Lab)
This is another blatantly broken promise to the people of Wales, but I will leave that aside. The Secretary of State has given umpteen speeches talking about the need for this country to invest in new technologies and innovation and lamenting that we have failed to capitalise on great British ideas in the past. Does he not see the huge gap now between that laudable rhetoric and his short-term accountancy decision today?
Greg Clark
Part of the assessment, and part of that which Charles Hendry made in this analysis, was of the technology’s export potential, and a great proportion of the global potential is within this country, so it does not have the potential the hon. Gentleman describes. In fact, Charles Hendry concluded that any benefits from the technology would be limited to design and consultancy, rather than substantial industrial benefits.
Anna McMorrin (Cardiff North) (Lab)
This Government consistently let Wales down, and on this the Secretary of State is completely and utterly wrong. It is his duty to provide leadership here. The National Audit Office states that the lagoon either matches or outperforms Hinkley across its three value-for-money tests. If he supports the tidal industry, how can he not be prepared to support the project that makes it possible?
Greg Clark
In terms of support for Wales, for every £100 of public funds spent in England, £120 is spent in Wales, and the NAO, which scrutinises all such decisions and proposals, will find that this one was taken in complete conformity with the standards of probity required.
Tonia Antoniazzi
I have been a teacher in Wales for 20 years, and I am devastated by today’s news. Pupils throughout Wales have been studying an exciting new future promised to Wales by this Government, and now it is not going to happen. The fig leaf of a city deal will not hide the Government’s shortcomings in Swansea. This is a clear dereliction of duty. If they have no aspiration for Wales, what aspiration does the Secretary of State expect for our future generations?
Greg Clark
I am surprised that the hon. Lady would turn her nose up at a £1.3 billion city deal. I would have thought she would welcome it on behalf of her constituents. It does her constituents, young and old, no service to saddle them with energy bills much higher than if we have regard to the price that ordinary people would pay in their bills and which businesses would incur when trading. That is responsible government.
Business, Energy and Industrial Strategy
Greg Clark Excerpts(5 years, 10 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Margaret Beckett (Derby South) (Lab)
(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy to make a statement on the announcement by Rolls-Royce of 4,600 redundancies over the next two years.
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
Rolls-Royce is one of our most important companies. It is a world leader in new technology, and plays a vital role in our industrial strategy. I spoke to Warren East, the chief executive, yesterday evening. Mr East explained that the company’s view is that the job losses are a necessary part of a drive to make the business more efficient and therefore more competitive. The jobs are principally in management and corporate support facilities rather than engineering and operational roles. Rolls-Royce has informed me that the announcement does not reflect a reduction in growth by the company; indeed, it reflects the reverse. It has a growing order book amounting to more than £170 billion, and Mr East told me that it would need more staff directly employed in both the manufacture of components and assembly to meet that demand.
[Official Report, 14 June 2018, Vol. 642, c. 1088.]
Letter of correction from Greg Clark.
An error has been identified in my answer to the urgent question on Rolls-Royce Redundancies.
The correct response should have been:
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
Rolls-Royce is one of our most important companies. It is a world leader in new technology, and plays a vital role in our industrial strategy. I spoke to Warren East, the chief executive, yesterday evening. Mr East explained that the company’s view is that the job losses are a necessary part of a drive to make the business more efficient and therefore more competitive. The jobs are principally in management and corporate support facilities rather than engineering and operational roles. Rolls-Royce has informed me that the announcement does not reflect a reduction in growth by the company; indeed, it reflects the reverse. It has a growing order book amounting to more than £78.5 billion, and Mr East told me that it would need more staff directly employed in both the manufacture of components and assembly to meet that demand.
Rolls-Royce Redundancies
Greg Clark Excerpts(5 years, 11 months ago)
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Margaret Beckett (Derby South) (Lab)(Urgent Question)
To ask the Secretary of State for Business, Energy and Industrial Strategy to make a statement on the announcement by Rolls-Royce of 4,600 redundancies over the next two years.
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
As the right hon. Lady has said, Rolls-Royce announced this morning that as part of an ongoing restructuring of its business, it intends to reduce the size of its worldwide management and support workforce by up to 4,600. As the company’s main management base is in Derby, it has said that that is where the biggest reduction will be felt. Although the company will embark on a statutory consultation with staff and unions, it is obvious that the news will come as a blow to the workforce, and that this is a very worrying time for the dedicated and talented employees who did nothing to bring it on themselves, but who will be affected.
Rolls-Royce is one of our most important companies. It is a world leader in new technology, and plays a vital role in our industrial strategy. I spoke to Warren East, the chief executive, yesterday evening. Mr East explained that the company’s view is that the job losses are a necessary part of a drive to make the business more efficient and therefore more competitive. The jobs are principally in management and corporate support facilities rather than engineering and operational roles. Rolls-Royce has informed me that the announcement does not reflect a reduction in growth by the company; indeed, it reflects the reverse. It has a growing order book amounting to more than £170 billion,[Official Report, 25 June 2018, Vol. 643, c. 3MC.] and Mr East told me that it would need more staff directly employed in both the manufacture of components and assembly to meet that demand. The company has told me that it will continue to recruit engineers, technicians and apprentices. It is continuing to invest in research and development. It invested £1.4 billion last year, and about two thirds of that investment was in the United Kingdom. Last year it filed 704 patents, more than any other single UK company.
When I visited Rolls-Royce at Derby just a few weeks ago, it was to break ground on the new test bed, part of an £150 million investment to ensure that the next generation of aero-engines will be built in Derby for many years to come. We will work closely with the company, the unions, the local enterprise partnership, councils and, of course, the right hon. Member for Derby South (Margaret Beckett) and other colleagues to ensure that each and every worker is supported in finding new work. We will continue to support a company, and an industry, of which we can be proud, and our biggest contribution will be to ensure that everyone in Derby, and in Britain as a whole, is able to benefit from a growing, modern economy that creates good jobs now and will do so long into the future, so that when jobs are lost, people can find new ones to support themselves and their families.
Margaret Beckett
I thank the Secretary of State for his statement. I hope that he understands clearly the enormous economic and social impact that this announcement will have—particularly, as he said, on the city of Derby, but throughout the east midlands and anywhere else in the country where manufacturing is considered important, and particularly where manufacturing excellence is highly regarded.
I was pleased to hear the Secretary of State say that he recognised the huge importance of a world-class company such as Rolls-Royce, especially as we approach our departure from the European Union. These are the kind of jobs, and this is the kind of industry, that we want for the future, because of its export potential and because of its potential throughout the world. However, will the right hon. Gentleman say a little more about what the Government can do to address some of the problems that will be caused as an inevitable consequence of the announcement? I heard the company’s chairman say this morning that he hoped that most of the redundancies would be voluntary, and that the company would abide by agreements made with the trade unions, but that there might be some compulsory redundancies. What can the Government do to ease the situation?
I was pleased to hear the Secretary of State note the company’s emphasis on the need for continued investment. I know that, as he said, it is continuing to hire engineering expertise and to maintain its apprenticeship programmes, and to do the things that we hope it will do for the future of the company and of our country, but I want to press him a little more on just how close a relationship the Government have with Rolls-Royce. I know that he visited the company recently, but I think that that was his first ever visit.
I am mindful of the fact that we have corresponded with the Department about the issue of investment in small modular reactors. The company invested substantial resources of its own money in that technology, without any corresponding commitment, even in decision making frankly, by the Government, which I know has been a great disappointment to the company, especially as this technology is thought to have great export potential.
The Secretary of State referred to the need for continued investment, and I note that the title of his Department includes the words “industrial strategy”, which I welcome, but if there is an industrial strategy, what is it if it does not include a strong partnership with companies such as Rolls-Royce that might, one would hope, avert announcements like today’s?
Greg Clark
I am grateful to the right hon. Lady for bringing this matter to the House in such a timely way. She has a long record of engagement with what is not only a very important employer but a very important national force. It is important to stress the point I made in my statement, and which Mr East has emphasised: the company is expanding its production. It expects to employ more apprentices, technicians and engineers, and has a growing order book; it has a waiting list for orders to be placed. As the right hon. Lady knows, that is in the context of growth in manufacturing in Derbyshire and across the east midlands, and it is very important that that is supported.
The skills among the employees whose jobs are under threat are valuable. The fact that they may be in management does not mean that they are not highly valued, in an economy nationally and in the east midlands that has a great demand for those skills. We will work very closely through the rapid response service that the Department for Work and Pensions provides to make sure that opportunities are offered, whether they are new jobs for existing employees or new opportunities to train in an expanding manufacturing sector in the east midlands. As the right hon. Lady knows, Infinity Park, for example, is continuing to attract new investment; just in recent days Airbus has announced an intention to establish an important facility there.
Our relationship with Rolls-Royce is very close, and it is at the heart of the industrial strategy; it is one of our most important aerospace partners. I have met numerous times with the management of the company all around the country. Since 2015 some £150 million of Government investment has been deployed in partnership with Rolls-Royce. It has been a major force in shaping our industrial strategy. Precisely for the reasons the right hon. Lady mentions, the industries in which it is engaged—aerospace, defence and the power sector—are some of the industries in which Britain leads the world, and we will do everything we can to drive that expansion forward.
Dame Cheryl Gillan (Chesham and Amersham) (Con)
I thank the Secretary of State for what he said about Rolls-Royce, but is it not true that it announced its restructuring programme in January and that that was followed by very good year-end results in March? Is it not absolutely necessary that as Rolls-Royce has growing revenues, it must now restructure itself so that it is simplified and has the agility and pace of production to remain one of the world’s leading industrial technology companies?
Greg Clark
My right hon. Friend is right to stress that it is important for any British company in an internationally competitive market to be efficient. The company has been very clear about its intentions as a growing company in a growing market. But having made a number of profit warnings over recent years, the management have been on a programme to make it more efficient. It is in all of our interests that this company, which is so important to the UK, continues to be successful around the world and to be at the leading edge of innovation, as it has been and as we are determined to see it be in future.
Chris Williamson (Derby North) (Lab)
When I left school in Derby in 1972, Rolls-Royce employed around 35,000 people. Today, it employs just under 12,000. If these job losses go ahead, the workforce will be reduced to around 8,000. That is a huge reduction. The company made a £4.5 billion profit last year, and when the Prime Minister hosted a meeting with the aerospace industry in March, she talked about a successful collaboration with the industry. Indeed, the Secretary of State has talked this morning about the close relationship with the industry and with Rolls-Royce. But talk is cheap. Is it not time for the Government to legislate to have workers on the boards of companies so that there is somebody there to represent the interests of the workforce? At the moment, we are seeing expanding order books while the workforce is diminishing. Is not this a failure of shareholder capitalism, which basically sacrifices jobs on the altar of higher shareholder dividends?
Greg Clark
I understand why a Member with a strong constituency interest in the workforce there would be anxious and combative in defending their interests. I will ensure, as will the trade unions, that the interests of the workforce are strongly represented. It is not true that all the redundancies will be at Derby, although the hon. Gentleman is right to say that a proportion of them will be. It is important that the company should adhere to its agreement with the trade unions, and I will of course make sure that it does that. In terms of the hon. Gentleman’s overall statement about the efficiency of companies, I think he should just reflect that his desire to overthrow capitalism would make it very hard for anyone to find work in any private company at any time.
Rachel Maclean (Redditch) (Con)
Does my right hon. Friend agree that the aerospace industry has gone from strength to strength under successive Conservative Governments? Looking more closely at Redditch, many of my constituents work for another engineering giant, GKN, and they want to know what the Government are doing through the industrial strategy to support and encourage the skills for the next generation of young people in engineering subjects, so that these companies can flourish in the future. Will he update the House on those plans?
Greg Clark
My hon. Friend is absolutely right to say that aerospace is one of the sectors in which our already strong reputation is growing. Through the industrial strategy, we are making a big investment in research and development and also in training, including retraining, so that an expanding industry can have access to the skills that it needs in the future. This will benefit her constituents and those of many others around the country.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
I also thank my right hon. Friend the Member for Derby South (Margaret Beckett) for securing this important urgent question. This is deeply disturbing news, not just for the city of Derby, which relies heavily on Rolls-Royce for local employment, but for the sector as a whole. Despite Rolls-Royce making a substantial profit of £4.9 billion last year, this recent restructuring means that more than 4,000 workers will lose their jobs. This is on top of 5,000 job cuts already announced by the company after a series of rationalisation programmes. What discussions has the Secretary of State had with the company to ensure that it will honour previous commitments that there will be no compulsory redundancies?
Will the Secretary of State also outline what assessment the Government have made of the economic impact on local communities that are reliant on Rolls-Royce jobs? There is a real risk that redundancies of this scale will have a detrimental effect on the future of skills in a sector with a substantial skills gap. What action will he take to ensure that these vital skills are not lost? What measures will the Government take to directly support a reinvigorated local industrial strategy? Finally, will the Secretary of State tell us whether he has made any assessment of the causes and of the potential knock-on effect on jobs in the supply chain, and what steps he is taking to support the automotive and aerospace sector more generally?
Greg Clark
I am grateful to the hon. Lady for her constructive questions. When it comes to redundancies, as I said to the right hon. Member for Derby South, there will be a statutory consultation. Rolls-Royce has confirmed to me that it will of course abide by its agreements with the trade unions and will seek to avoid compulsory redundancies wherever possible.
As for the impact on the supply chain, it is significant that this news comes in the context of a company that is continuing to expand production and manufacturing and its use of components—the principal suppliers to the business. The job losses are coming from management support, which will of course have an impact on the local economy. We will be working closely with the local enterprise partnership to ensure that the opportunities that exist in Derby and the west midlands are taken up.
The hon. Lady will know that unemployment has fallen substantially in the east midlands, so good opportunities are available. For example, she mentioned the automotive sector, and Toyota at Burnaston, which is not too far away from Derby, has invested a quarter of a billion pounds in the next generation of vehicles. We will ensure that the employees who are not continuing at Rolls-Royce will have our full support. Vacancies will be drawn to their attention, and they will have help with skills to ensure that they have everything they need to enjoy prosperous careers in the future.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
I, too, recently visited Rolls-Royce’s campus in Derby in my capacity as envoy for the Year of Engineering, and I saw all the good work and investment that is going on. That said, this is obviously unsettling news for those in the management function of the business, whose jobs are potentially at risk. What assurances has my right hon. Friend had, or what assurances can he seek, on the behalf of the management and business process apprentices employed by the business to ensure that they are not affected?
Greg Clark
My hon. Friend raises an important point. The company has a firm commitment to apprenticeships, and I will emphasise the importance of continuity in the training offered to apprentices.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Any job losses are clearly a concern, so the potential loss of 4,600 jobs is a huge worry. I have constituents who work at the Inchinnan Rolls-Royce plant, so will the Secretary of State advise us of whether the restructuring will have any impact on jobs in Scotland?
While people often talk in general terms about having too many chiefs and not enough Indians, does the Secretary of State share my worry that it seems counterintuitive that Rolls-Royce says it will employ more engineers, continue to increase investment in R&D and expand massively while it is restructuring and downsizing the management? That does not sound quite right to me. Will the Secretary of State confirm that the Government will work urgently with Rolls-Royce, the unions and staff affected by the job losses to ensure that they can find alternative employment, if required, and that they get suitable retraining to find other jobs?
Will the Secretary of State advise the House on whether Brexit will have an impact on Rolls-Royce, in terms of the customs union? The company has already said that it is thinking about relocating the jet engine design approval process to Germany from the UK, so could that have an impact on jobs? What impact will the rules of origin have on the company’s manufacturing? What discussions has the Government had about the potential impact on Rolls-Royce’s aspirations for small modular nuclear reactors?
Greg Clark
I am grateful to the hon. Gentleman for his questions. It is too early to know the distribution of the proposed redundancies across the United Kingdom. As I said to the right hon. Member for Derby South, the management headquarters is obviously in Derby, so the expectation is that most of the UK job losses will happen there, but the company and I will keep Members up to date as the consultation takes place.
As for the combination of an intention to expand the production of aerospace engines and a growing order book with the need for fewer managers, that is not uncommon across competitive industries, and most industries are becoming simpler in their internal processes. That is not to say that the skills, commitment and loyalty of those who are affected are not extremely high and that they will not be in strong demand elsewhere, and it is important that we support that. We will provide all the help and assistance we can if retraining is needed.
The hon. Gentleman asks about Brexit, and Rolls-Royce has been clear that this is about making the company more efficient. It has no relation to Brexit, although it is fair to say that the continued ability to operate a just-in-time production system once we leave the European Union will, of course, be very important to the company.
Mr Marcus Jones (Nuneaton) (Con)
I represent constituents who work at Rolls-Royce both in Coventry and in Derby. This is clearly a sad day for those affected by this decision and their families, but I am heartened that Rolls-Royce is looking to expand the number of engineers at the company and to take on more apprentices. How will the Government work with companies such as Rolls-Royce, and with other manufacturing companies, to make sure we can bring through the next generation of engineers and bring them into our economy?
Greg Clark
My hon. Friend makes an important point. In fact, the demand for engineering skills is increasing right across the country, including in both the east midlands and the west midlands. Rolls-Royce itself plays an important role in training engineers. I met some of the young engineers in Derby, and they can look forward to a wonderful career in engineering.
Through the industrial strategy, as my hon. Friend is aware, we are placing greater emphasis on science, technology, engineering and maths skills in schools and colleges, and we are creating institutes of technology. With the aerospace and automotive sectors in the east midlands and west midlands, we are now creating more places for apprentices through those joint initiatives so that we can supply the growing order books, based on the skills that are needed.
Mr Jim Cunningham (Coventry South) (Lab)
I worked at Rolls-Royce when the company collapsed in 1971, and I can tell the Secretary of State that a lot of people at Rolls-Royce will be very worried indeed about their future. We have a plant just outside Coventry, as the hon. Member for Nuneaton (Mr Jones) mentioned. What will be the impact on, for example, the Ansty plant in Coventry and the Bristol plant, and on other plants across the country? Equally, this will have an impact on the supply chain, because I do not believe Rolls-Royce has 4,000 managers.
Greg Clark
The announcement was made at 7 o’clock this morning that there is a proposal to reduce the headcount. Rolls-Royce has specified that the reduction will be in the management and support functions, rather than in the engineering and operational aspect. When further information is made available, I will make sure the hon. Gentleman, as the Member for a constituency with a great interest in the matter, shares in that information.
It is important to emphasise that the aerospace sector is characterised by growth. The proposed redundancies at Rolls-Royce—I make no bones about it—are clearly devastating news for those who may be affected but, overall, aerospace, including Rolls-Royce in this country, is enjoying higher order books. We will work together to make sure that, including in the test beds we have established together, we are at the forefront of the latest technologies in the future, as we have been to date.
Bob Blackman (Harrow East) (Con)
Rolls-Royce is a worldwide brand of which our competitors are clearly jealous. What extra assistance can my right hon. Friend or the Department for International Trade provide, as we leave the European Union, to increase the opportunities for Rolls-Royce worldwide?
Greg Clark
Rolls-Royce is already one of our most successful exporters. All around the world, my Department and the Department for International Trade work closely to support the company’s export push. The industry is very competitive, and there is a requirement to be at the cutting edge of technology, so our investment in research and development is an important boost to that future international competitiveness. When it comes to trade promotional support, there is already a close relationship between the company and the Government.
Diana Johnson (Kingston upon Hull North) (Lab)
The Secretary of State has talked about the aerospace industry in this country doing well and growing, but he will be aware that BAE Systems is making people redundant at Brough. Will he say a little more about what he is doing to protect the home of the Hawk by encouraging orders for it from around the world?
Greg Clark
The hon. Lady knows—we have had previous exchanges on this across this Dispatch Boxes—that the future of the employees there depends on defence export orders. I think she would acknowledge that there is no one more vigorous than our colleagues in the Ministry of Defence, the Department for International Trade and my Department when it comes to meeting businesses and those who are in defence procurement to emphasise the good quality and importance of our aerospace industry right across the country.
Tom Pursglove (Corby) (Con)
As my right hon. Friend knows, I am a big supporter of the value of the industrial strategy for midlands manufacturing, so what specific role does he see for Rolls-Royce within it?
Greg Clark
Rolls-Royce has a huge role nationally, but of course it also has a particular role in the east midlands. We see that in the number of people who acquire their skills, and in many cases their inspiration to go into careers in engineering and advanced manufacturing, from the experience of having Rolls-Royce in their midst. That is one reason why we have such a close partnership with it, as I said to the right hon. Member for Derby South. We have made £150 million of joint investment with it since 2015, which shows the depth of that commitment. The reason for that is not just the importance of the company succeeding, but its galvanising effect on the rest of the UK economy.
Martin Whitfield (East Lothian) (Lab)
Today’s devastating news will affect a lot of families, and the promise of jam tomorrow may not satisfy them. There are also reports that Rolls-Royce intends to move some operations into Europe. Will the Minister confirm what discussions he has had with Rolls-Royce to prevent these moves as a result of our departure from Europe?
Greg Clark
As I said to the hon. Member for Kilmarnock and Loudoun (Alan Brown), Warren East has been clear that the proposals that have been made today have nothing to do with any Brexit discussions; they are about the efficiency of the operation. When we talk to those in the aerospace sector, as I do, we find that Rolls-Royce is prominent among them in emphasising the absolute importance of ensuring our ability to export free of tariffs and with a minimum of frictions, and that that is fundamental to the sector’s ability to be as prosperous in the future as it has been to date.
Ian Murray (Edinburgh South) (Lab)
The aerospace industry is one of the jewels in the British industrial crown, so will the Secretary of State tell the House what reassurances he has given the industry with regard to Britain’s exit from the European Union?
Greg Clark
I have extensive consultations with all players in the industry. I listen to them, and make clear in our discussions in government and in our negotiations that what they require in precision terms to be able to operate the efficient system that they do at the moment must continue. As the hon. Gentleman says, this is a jewel in the crown of British industry. It is an industry where demand is expanding around the world. We have a wonderful opportunity to continue that success, and it is vital that we should be able to continue to trade with our European partners without any interruption to that.
Mr Philip Hollobone (Kettering) (Con)
Normally when the House is told of big job losses at a company it is because that business is in financial trouble, but Rolls-Royce is profitable and has a growing order book. It would seem that it is making these job losses in order to become more efficient. It would also seem from what the Secretary of State is saying that a lot of those who are, sadly, going to lose their jobs have very highly transferable skills. Will he ensure that the local enterprise partnership and neighbouring LEPs have the resources they need to place those highly skilled people in alternative employment?
Greg Clark
I will certainly do that. My hon. Friend characterises the situation well; this company has issued profit warnings in the past and has committed to take action to be efficient. These are the decisions of the management, but I think every Member of the House would acknowledge that it is important that our companies are competitive. He is right to say that the skills of the people employed in Derby, whether in management or in other supporting roles, are in great demand in the expanding economy there; unemployment has halved since 2010 in the east midlands. I will work with the neighbouring LEPs to make sure they have every support and that businesses that want to employ those people have every support in identifying what could be talented and welcome additions to their workforce.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
Rolls-Royce is an iconic industrial asset for Britain, and its relationship with Glasgow goes back as far as the second world war. Even to this day it drives huge innovation in the city, from the Advanced Forming Research Centre to supply-chain companies such as Castle Precision and East Kilbride Engineering Services, all of which benefit from the huge industrial presence of Rolls-Royce. One difficulty that the company has had in recent years is the development of new products, particularly for the small airliner market, which is restricted because of this country’s lack of capacity for long-term industrial investment through state investment banks. Will the Secretary of State consider how we can support industrial development in the longer term by developing such capacity in the UK through a state bank for new product development?
Greg Clark
Part of the reason for the development of the industrial strategy, which prominently includes the aerospace sector, is so that we can have the long-term support that is required. When I talk about support, I mean for research and development programmes, which can take many years to come to fruition. We are known as and have a reputation for being one of the best places in the world for that, and that is a deliberate policy objective. It is exactly the same with skills.
On what the hon. Gentleman describes as a state bank, we have various means, including the British Business Bank and UK Export Finance, which have been set up to support businesses in pursuance of our industrial strategy. Rolls-Royce is an active participant in that.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
Given Rolls-Royce’s announcement of nearly £5 billion profit for 2017, this news, or certainly the scale of it, will have come as a shock to Rolls-Royce workers throughout the UK, including those in Inchinnan in my constituency. My thoughts are very much with those workers and the affected families. In addition to what the Secretary of State said to my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), will he outline what his Department is doing to assist Rolls-Royce to ensure that no further jobs are lost?
Greg Clark
The plans that the company has set out today, as several colleagues have said, are part of a programme to improve efficiency to which it committed some years ago. I agree with the hon. Gentleman that for people who are employed there, the fact that the company has an expanding order book and is continuing to invest in research and development and production will be small comfort, because they will be losing their connection with an employer for which I am sure they have been proud to work over many years. We will do everything that we can to make sure that those employees, whose skills are in demand, are matched with other employers who I hope and intend will be able to make use of their talents and give them a flourishing future career, such as they have enjoyed with Rolls-Royce in the past.