Employment (Nuneaton) (Hansard, 26 February 1986)

§ Mr. Lewis Stevens (Nuneaton)

I am grateful for the opportunity to discuss the unemployment level in my constituency which could be worsened by the proposed closure of an iron foundry at Sterling Metals, with the potential loss of 700 jobs. I am grateful for the fact that my hon. Friend the Parliamentary Under-Secretary of State for Employment is here to reply. This is my first opportunity to speak with him on the Front Bench.

The proposed closure of the iron foundry with the subsequent loss of 700 jobs raises several issues. I shall deal with the origins of the closure and the effects it will have in my area. The impact of the redundancies must be taken in the context of the travel to work area of Coventry and Hinckley and not just in my constituency. I am pleased that my hon. Friend the Member for Warwickshire, North (Mr. Maude) is in the Chamber, and I know that, if his office did not prevent him, he would share my concern and support me in the debate.

The unemployment rate is 15.7 per cent., and male unemployment is about 50 per cent. higher than female unemployment. That is similar to the west midlands average of 15 to 16 per cent. All 700 redundancies would not be in my constituency, but they would have a significant impact on an already high unemployment rate. Recently the general position has to some extent improved. In my constituency we had a 12 per cent. improvement between December 1984 and December 1985 which amounts to about 600 jobs. They will be virtually wiped out by the closure, if it occurs.

The foundry industry has obvious peculiarities. It is an old industry and mainly male dominated. Therefore, most of the redundancies would he among male workers with a skill which is not easily translated to other industries. Certainly, the retraining facilities available would help people to find new jobs, but as there will be so many of them, their needs must be considered specifically.

As the foundry industry has declined, those people cannot expect to find jobs within the industry either locally or further afield. That puts them in a special position. The magnitude of the disaster locally would be more than one might initially imagine. There are only a few companies of that size in the immediate area, and the company would be reduced to 400 people.

The foundry industry faces fierce competition from abroad. A few months ago we expected an investment of £5 million in the foundry which would have been welcome and given it a future. The bombshell out of the blue was to find that, instead of that substantial investment, we were to face closure. It has been put down to the fierce competition from abroad, including so-called subsidised competition from Spain, Brazil and elsewhere. My hon. Friend the Minister has agreed to investigate the matter again. It is not a new problem because it was raised with the Government in May 1983 by the Association of Major Casting Manufacturers, but no action appeared to come from that.

The company makes the decision on its commercial viability. The foundry lost £500,000 last year, and because of price difficulties it is not thought to be viable in future. That is extremely worrying. It bears out the association's 1042 point that many automotive foundries have been closed, but continuing contraction will result, not in the rationalisation of duplicated facilities, but in the elimination of specialised plants. The plant is largely concerned with the tractor industry. It is the last independent casting unit for selling blocks in the United Kingdom. There will inevitably be a transfer of more work abroad, which will raise our imports. The penetration of imports is considerable.

In answer to a parliamentary question recently my hon. Friend the Minister for Trade gave me figures which showed that between 1978 and 1984 the imports from Spain increased 5.5 times, and from West Germany 2.5 times. There are now imports from Brazil and that means another competitor.

The foundry faces fierce competition, but it is a high quality foundry and its customers are prepared to continue taking supplies from the company, admittedly at the correct price—a price that they think they can afford. As a consequence, we are not talking about a lack of work, skill or facilities. Although investment is needed we are dealing with the viability of the foundry.

I ask my hon. Friend to pass on to his colleagues and Ministers in the Department of Trade and Industry the hope that they will make every effort, and perhaps a special effort, to help the company to consider possible restructuring of the facilities. That could save, if not all, at least a lot of the jobs. It is also reported that there is a possibility of interest in a takeover for the foundry, and I ask the Ministers at the Department of Trade and Industry to give serious and careful consideration to the possibility of help by way of advice and financial support to anyone who keep the foundry open.

A considerable amount of restructuring may be necessary and that may involve help over an interim period to restructure and try to make the foundry viable again. I am not asking for unlimited and indefinite resources for the industry, because it is largely for commercial interests to take a decision, but help from Government sources could avert the closure and give an opportunity for the foundry to be reorganised or restructured financially. That would save some of those jobs and leave a viable iron foundry in the area. It is a worthwhile cause because our foundry industry has gradually been eroded by foreign competition, and more and more of our foundry work goes overseas. The jobs lost are never replaced, although the work is still needed.

My request is for any possible help that the Government can give, especially from the Department of Trade and Industry, to save the foundry or at least to provide an opportunity to discuss the possibility of saving the jobs of the people at the foundry. If that does not happen, 700 jobs will go and in many cases it will be difficult for people to transfer to other work. That will put a serious load on the budgets for unemployment and possibly on the budgets for social security as well. That must be balanced against the money which could be used to support the foundry for a short time.

It is necessary in this case for the Department of Employment to consider giving some special attention to the needs of people affected by this sort of redundancy. The people who may be made redundant have good skills and are retrainable, but many of them have been in that type of manual industry for many years and there are few comparable industries in my area, in neighbouring areas or elsewhere in the west midlands. The benefits we have 1043 had in recent years have come from small companies setting up and taking advantage of Government schemes and local help. We have had some considerable success, but those are largely small companies who employ a few people and only gradually get bigger. The substantial effect of such numbers as these wipes out that advantage.

People need advice on what is available to them by way of retraining and new careers. It will be helpful if my hon. Friend can say that some special help will be available. Certainly my local department could not cope easily with that number of people coming to it so quickly.

We have an iron foundry which produces for the tractor industry. It is successful in the quality of its production and the satisfaction that it gives to customers. It has competed successfully in the market, particularly in West Germany, and so it must have some future, either by takeover or in some other way, perhaps restructured and losing some jobs.

I hope that my right hon. and learned Friends at the Department of Trade and Industry will do everything that they possibly can to explore the possibilities that exist and to give the foundry any support that they can. If the foundry cannot be saved I ask that every effort will be made to give the best help and advice to those who would suffer from redundancy.

§ The Parliamentary Under-Secretary of State for Employment (Mr. Ian Lang)

My hon. Friend the Member for Nuneaton (Mr. Stevens) has described in great detail the problems which his constituency faces and how they will be exacerbated if Sterling Metals, one of Nuneaton's major employers, closes its iron foundry. I fully accept the seriousness of Nuneaton's unemployment problem and I sympathise with my hon. Friend's genuine concern. I have listened carefully to the points that he has made and I shall try to answer as many of them as possible. I, too, welcome the presence of my hon. Friend the Member for Warwickshire, North (Mr. Maude) in view of the close interest that he also has been taking in this matter.

My hon. Friends' concern about Sterling Metals is entirely understandable. The Sterling Metals iron foundry employs 700 of their constituents and near neighbours and is the only independent United Kingdom foundry producing cylinder blocks for high-speed diesel engines. I understand that Birmid Qualcast has re-appraised its operations and has decided that the market outlook does not justify the investment needed to enable the foundry to survive and meet the requirements of new diesel engine designs.

Demand for castings has fallen sharply over recent years and the diesel engine sector has been particularly hard hit. The downturn in demand for castings reflects the general downturn in the principal customers, especially automobiles and construction, and is being felt by other component producers such as the drop forging companies. I understand that Birmid Qualcast expects demand for the Sterling foundry's cylinder blocks to fall by 5,000 tonnes to 30,000 tonnes a year by the end of 1986.

My hon. Friend the Member for Nunneaton mentioned competition from Spain and Brazil. I do not dispute that imports from countries such as Spain and Brazil have had a detrimental effect on Sterling Metals, but they are not solely to blame. My hon. Friend will doubtless be aware 1044 that we cannot prevent the Brazilian Government from subsidising their foundry industry as they wish. However, foundries, like any other industrial sector, have recourse to the anti-dumping procedures, where imports from non-EC countries are concerned. My right hon. Friend the Secretary of State for Trade and Industry can provide guidance on how complaints might be made to the Commission. My hon. Friend might like to raise that with him.

As far as Spain is concerned, it is now an EC member state and from 1 January 1986 became subject to new disciplines regarding state aids to industry. The state aids provisions of the Treaty of Rome give the Commission powers to investigate and, if appropriate, require the withdrawal of state aids which distort competition in intra-Community trade.

Spain has now altered her turnover tax system to remove the element of export subsidy. If there are other forms of subsidy involved the industry will need to present some evidence of them in order to give the Commission grounds to investigate. We have pressed the Commission to ensure that Spain complies with the state aid rules from the outset. If the United Kingdom foundry industry produces evidence of state aids being granted since 1 January 1986, we shall consider pursuing the question with the Commission. The loss of 700 jobs at Sterling Metals is very regrettable, but I have to say that that decision is a matter for the commercial judgment of the company based on its view of the market outlook.

As I think my hon. Friend knows from his recent meeting with my hon. Friend the Minister of State, Department of Trade and Industry, we made an offer of £600,000 assistance under the Industrial Development Act towards the modernisation of the foundry. However, Birmid Qualcast decided not to proceed with the investment.

Further discussions could be held if a way could be found of maintaining the operation—for example, by way of a buy-out. Again, this is, of course, a matter for the Department of Trade and Industry, but I understand that it would be willing to consider providing assistance for a buy-out providing a commercially viable plan were put forward.

If the management and/or the work force at Sterling Metals are considering a buy-out, I would urge them to consult the West Midlands regional office of DTI—which would be willing to help and advise—at the earliest opportunity.

I realise that in the event of redundancy, some of the work force may have difficulty in finding new jobs, and I can assure them through my hon. Friend that all the facilities of the Manpower Services Commission will be available to help them in their search for work or retraining. When I refer to work, I include self-employment.

But apart from the immediate effects on the work force, I acknowledge that the closure will represent a further reduction of job opportunities in Nuneaton, and I know the area already has high unemployment. I was in the West Midlands myself earlier this week. The problem of unemployment is one of the most serious facing not only this country, but the whole industrialised world. Unemployment in Britain has been rising for 20 years and the west midlands—our industrial heartland—has been especially hard hit by the recent recession and by market shifts. 1045 The historical reasons are well known. Our industries were overmanned, our work force was undertrained. We were slow to adapt to market changes and to new production methods. We became steadily less competitive, with the result that firms throughout the country which could not sell their goods had to close down or shed jobs. We have had to undergo a change from the old industrial pattern to new technologies and advanced manufacturing.

In the case of Nuneaton, the traditional manufacturing industries of textiles and metal bashing have declined, and the town has had to adapt to a more service-orientated economy. Nuneaton enjoys a good location at the centre of the Midlands motorway network, and its position has aready been exploited by several distribution companies. The M42 link road which has recently opened on the outskirts of Nuneaton could generate further interest.

I am not suggesting that my hon. Friend is overstating Nuneaton's problems. It is not easy to adjust to major changes in market conditions. However, we must not constantly look on the black side. Companies in Nuneaton are winning contracts and new jobs are being created there.

The Galliford group, a local construction company, won contracts worth £35 million throughout the country during the latter half of 1985. Sainsburys intends to replace its existing supermarket with a superstore next year. Creating 200 new jobs, and ASDA is also planning a superstore in Nuneaton which could bring over 300 jobs.

Despite the difficult times. People are finding work: 3,000 people have been placed in jobs through Nuneaton jobcentre alone since April last year, and many more will have found jobs by other means. Unemployment in my hon. Friend's constituency fell between January 1985 and January 1986. These are welcome and encouraging signs which go some way to offset the bad news.

Clearly, much more needs to be done, and the Government have a role in encouraging positive change. One of the ways in which we can help is by providing incentives to attract investment to areas with severe economic problems. Nuneaton is part of the Coventry travel-to-work area which received assisted area status in November 1984. Since then, companies moving into Nuneaton or expanding their existing operations have received offers of over £1 million in regional aid. This money has helped to create some 200 new jobs and safeguard 500 existing ones.

This is a sizeable amount of Government assistance, which is focused directly on job creation. The review of regional policy in 1984 led to a new system of regional aid focused on job creation rather than encouraging capital-intensive investment, and some service sector activities became eligible for regional aid for the first time. We cannot create the jobs that are needed in Nuneaton. But through regional aid we can, and do, help those areas worst affected by unemployment to attract the investment that does.

I mentioned self-employment earlier. I hope that my hon. Friend will agree that it is important that we do all that we can to encourage people to think beyond "who will employ me?" We set up the enterprise allowance scheme to help unemployed people who wished to start their own businesses by providing a weekly allowance in the difficult initial period. The scheme has been expanded by 15,000 places nationally this year, and the qualifying period of unemployment is to be reduced from 13 to eight weeks.

1046 As a result of the expansion, the MSC will he able to provide support to nearly 1,000 people in Coventry and Warwickshire in 1985–86–8 per cent. more than last year. Some 70 people are currently receiving the allowance in Nuneaton, and ample funds are available to meet demand. One small engineering company in Nuneaton, which my hon. Friend might know, which began with help from the scheme now employs 17 people and has a £500,000 turnover. The Manpower Services Commission would welcome increased participation in the scheme throughout Coventry and Warwickshire.

We are deeply conscious of the potential of the small firms sector in creating employment opportunities, and we have done a great deal to encourage the growth of small firms by reducing the burden of form filling and simplifying planning procedures. We announced further measures to help small firms last November, including £2.5 million next year in support of local enterprise agencies. We run small firms centres, which provide the advice of experienced businessmen to potential and established small firms, and the centres have close links with local enterprise agencies and small business clubs.

I understand that Warwickshire county council is building starter units at the Hammond business centre in Nuneaton, and that some private sector firms are also building and refurbishing units for small businesses. These, and the presence of the Warwickshire enterprise agency, are encouraging signs of new initiatives in the local economy with significant job creation potential.

Enthusiasm and effort are essential if enterprise is to succeed, but advice and training are also vital. My hon. Friend was right to emphasise that. The Manpower Services Commission is funding a wide range of courses designed to meet the needs of small businesses through the training for enterprise programme.

The adult training strategy, on which we are spending £260 million this year, is intended to make training more widespread, more flexible, and more relevant to labour market needs. We are living in a time of change—indeed, another industrial revolution—and people at all levels need access to training and retraining. We are helping more than 3,000 people in Coventry and Warwickshire through our locally delivered training programmes this year, compared with under 2,000 last year.

Training is particularly important for young people. They, and the long-term unemployed, have been hard hit by the recession. Young people straight from school or college have no proven work skills or experience to help them find jobs and it is this problem which YTS—one of our most successful measures—addresses. The £835 million that we are spending on YTS this year represents a massive investment in young people's future.

The extension of YTS to two years from April is a major step towards ensuring that all young people under 18 are either in jobs, in full-time education, or receiving high-quality training. In other words, unemployment need not be an option for them. There is a good deal of enthusiasm for the two-year scheme, in Nuneaton and throughout the west midlands, and the MSC does not envisage any major difficulties in providing enough places.

Another of my Department's priorities is helping the long-term unemployed. The unemployment rate in the Coventry travel-to-work area is too high—although, as my hon. Friend knows, it is lower than the average for the 1047 west midlands region, and it will take time for it to come down. Steps need to be taken now to deal with the worrying problem of long-term unemployment, however.

The community programme, our major scheme to help the long-term unemployed, has been expanded by 100,000 places nationally this year, and the MSC is providing 3,400 places in Coventry and Warwickshire this year—over 1,000 more than last year. The Nuneaton and Bedworth borough council and North Warwickshire Projects (1985) Ltd. are only two of the managing agents providing quality places in Nuneaton and the surrounding area. My hon. Friend will recall that projects funded by the community programme benefit local communities as well as the people employed on them.

1048 Nuneaton, like many communities in the midlands and elsewhere, is indeed facing problems arising from the decline of its traditional industries. The Government have shown their concern in many practical ways, and I have talked briefly about regional aid and our employment and training measures. This all represents a significant commitment to the regeneration of this part of the country.

Adapting to change is never easy but, with the Government's support, the efforts of the people of Nuneaton are beginning to pay off. We have done a great deal to help Nuneaton, and we shall continue to do all that we can.