HC Deb 02 December 1969 vol 792 cc1304-9
The Minister of Technology (Mr. Anthony Wedgwood Benn)

With permission, I will make a statement about Beagle, and apologise in advance for its length.

When the Government decided in 1966 to take over the Beagle Company, there was a reasonable possibility of the company becoming self-sufficient within a few years. These views were in line with those of the Plowden Committee on the Aircraft Industry, which had recommended that the Government should give assistance to the building of light aircraft, but should review progress from time to time if the light aircraft business were not approaching the objective of self-sufficiency within a few years.

As was explained to the House during the passage of the Industrial Expansion Bill, the company then expected to break even in 1972—

Mr. Speaker

Order. It is difficult for the Minister to make a statement against a background of conversation.

Mr. Benn

The company's board has recently reassessed the position and put revised proposals before my Department. Despite considerable achievements during the intervening period, the board has represented strongly to me that a commercially viable future would require the development and introduction of a wider product range, including new designs of twin-engined aircraft.

Production would be needed on a large scale, demanding larger sales, including significant penetration of the American market. Such a programme would require additional working capital of £6 million over the next few years, and probably more later to build on the foundation which the board would by then have laid. This reassessment puts the break-even point three years further on.

After giving the most careful consideration to these proposals, the Government have regretfully concluded that, having regard to the need to contain Government expenditure, there is not sufficient priority to justify the investment of further public funds in this enterprise in the face of the many competing demands on national resources.

In the circumstances, the board of Beagle Aircraft Ltd. has had no alternative but to ask its bankers and the Government to appoint Mr. Kenneth Cork as receiver and manager as the appropriate step for the preservation of the undertaking and the assets of the company. This the bank and the Government have agreed to do. I am not sorry that we made this effort to bring the industry back on its feet. In this, we have been excellently supported by the managers and workers of the company, who have made the most valiant efforts. I hope that those parties who have recently expressed interest in the acquisition of the company will come forward with firm proposals, which will secure the employment and the long-term prospects inherent in the aircraft already developed.

Mr. Corfield

This is a very serious statement. My hon. and right hon. Friends naturally share the right hon. Gentleman's hope that a company will be found to come forward to rescue the continued production of these two aircraft. Will the right lion. Gentleman tell us what public funds are involved, and will he cast his mind back to the serious misgivings expressed by my hon. Friends during the passage of the Industrial Expansion Bill, when he assured the Committee that he was quite confident of the commercial soundness of this investment?

Mr. Benn

The amounts involved are £3.3 million before acquisition to Pressed Steel, the purchase of £1.1 million and £1.6 million in loans since which have to be set off against the realisable assets which will depend upon the work done by the receiver. I would simply say to the hon. Gentleman that there is a commercial risk in all aircraft projects, many of them conducted by private companies as well, and this is inherent in the business involved.

Mr. Howarth

Does my right hon. Friend agree that this is a most disappointing report, and does he realise that if the company disappears completely the market will be left open almost solely to the American manufacturers? Secondly, what about the outstanding orders amounting to many hundreds for the Beagle Pup? Is there no way in which these can be met?

Mr. Benn

Like my hon. Friend, I greatly regret the statement which I have had to make today, because, with many other hon. Members, I very much hoped that this company would be viable. Various tentative offers have been made in the last few months. I very much hope that the offers will now come forward, and that the matter will be able to be handled by the receiver and the manager, who will have in mind the point made by my hon. Friend.

Mr. Lubbock

In view of the adverse publicity which the bringing in of the receiver will have on the Pup and the Bulldog, will the right hon. Gentleman explain why the board of the company could not negotiate its sale to any potential purchaser?

Mr. Benn

I can assure the hon. Gentleman that I would not have made my statement had we not attempted, in the intervening period from the time that the prospects for the company altered, to achieve exactly what the hon. Gentleman has in mind, but I think that, in the circumstances, we have taken the right decision, and I am not unhopeful that the long-term propects of this aircraft may be secured.

Mr. Maxwell

I appreciate that the Minister was entirely right in providing public funds for this attempt to gain a foothold for the Beagle in an advanced market, but will he say what steps he is taking, in consultation with his European colleagues, about the possibility of their joining in saving Beagle as a European company? Furthermore, in the light of Beagle's future, what steps is he taking to prevent other advanced industies which the Government have helped from similar trouble.

Mr. Benn

I do not think that there is a parallel between the case of Beagle and other advanced industries to which my hon. Friend has referred. As to the possibility of establishing a new format in which this aircraft might be maintained, this is a matter which has received attention, and will continue to receive attention.

Mr. Monro

Is the right hon. Gentleman aware that his statement, while not unexpected, will cause great disappointment among those interested in the light aviation industry in this country? Will he make clear that the failure was not because the Pup is inefficient, since it is a very good aircraft, but must be due to the financial background of the company?

Mr. Benn

I am very glad to make that clear. This is neither a criticism of management nor the workers, who have an excellent record of industrial relations, nor of the design of the aircraft. But to make the company viable in future it was felt necessary to bring forward proposals involving substantial further investment which, after deferment of profitability and increased cash flow, we did not feel it right to support.

Mr. Snow

Is my right hon. Friend aware that this decision, although understandable, is much to be regretted? Is he aware that the market for light aircraft is growing and sales of this company's products might be enhanced if certain long-distance flyers, female and otherwise, had not interested themselves in the American aircraft?

Mr. Benn

It would not be right to blame private pilots for failure of the Beagle. It was a popular aircraft and secured orders abroad, but, as I have said in connection with the aircraft industry and other industries, the object of investment by Government is to make money by making the project viable. It is not sufficient to get orders for aircraft which are not covered by that expenditure. This was the basic problem.

Mr. Peyton

Is the right hon. Gentleman not aware that this regrettable outcome was not only foreseeable but foreseen? Is he further aware that he is to be congratulated on the self-restraint which has led him to stop pouring further public funds into a losing project and that this should discourage him from such future ventures.

Mr. Benn

The hon. Member puts a sharp point very courteously, but the fact is that there is a possibility of failure in a number of projects which Government supports. If I were to carry his argument further there would be a very strong case for withdrawing support from a number of private companies. It would be wrong for me to suggest that there is any difference between the Government backing their judgment in respect of a public company or a private company. The hon. Member was right in saying that when it is clear that success cannot be achieved the right thing to do is to cut our losses, as in this case.

Mr. Brooks

In his initial statement my right hon. Friend made reference to the possibility of penetrating the American market. What detailed market evaluation has been carried out in the United States? Can he say whether there was any indication that penetration of the American market might have been hindered by non-commercial factors?

Mr. Benn

I do not think that there is a problem of non-commercial factors of the type my hon. Friend probably has in mind, but the problem in the light aircraft business, where marketing skill now approaches that of the motor car industry, is that one faces a rather different problem than simply designing a good and popular light aircraft.

I am encouraged in this because some of the companies which are now expressing interest in the Beagle are, in fact, American companies and might have better marketing arrangements for making use of such design.

Mr. Ridley

While agreeing with the right hon. Gentleman in the decision he has taken, does he accept that it might he better, when advanced technology in this and other fields is concerned, rather than owning the company to do what the Americans do by making grants for development without nationalising the organisation?

Mr. Benn

The overwhelming majority of the money involved was the grants to the company to keep it going, but Pressed Steel had decided to pull out entirely at a time when the Plowden Committee had recommended some limited support for the light aircraft industry. Therefore, we had no option in this case but to take over Beagle. Looking back, although, in the end, this has not worked out as we hoped it might, I cannot think that it would have been right for the Government to be so conservative as never to take a risk even though some of these risks might not be justified.

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