House of Commons Hansard Debates for 22 Oct 1991

Mr. Speaker : I thought that the hon. Gentleman said that the incident had taken place on 10 August ; he can check the record. He should have tabled a private notice question today. I am not a mind reader, but, if the hon. Gentleman had done that, I should have been able to consider the matter.

Column 807

Companies (Miscellaneous Provisions)

4.3 pm

Mr. Ian Taylor (Esher) : I beg to move,

That leave be given to bring in a Bill to give a company's directors standing authority to allot equity share capital to lending bankers to discharge indebtedness ; to protect a lender in such circumstances from the shadow director provisions of company law and insolvency law ; and for connected purposes.

There has been considerable controversy in recent months about the alleged behaviour of the banks in respect of the method of interest charging, and account charging, for individual and corporate borrowers. Indeed, I raised the matter myself in the House in a debate on the Finance Bill on 30 April 1991. Subsequently, the Government carried out an inquiry, and no direct allegations against the banks were upheld ; nevertheless, there was considerable disquiet among many private and corporate borrowers.

It is true that many companies have been highly geared. It is justifiable to make criticisms of directors who have allowed their companies to borrow more than they should have done, in commercial terms. However, bankers were often not prudent in what they encouraged companies to borrow, often on terms that left the companies exposed when the recession came upon them.

Many directors of companies into which receivers have gone, at the instigation of the bank as secured creditor, have complained to me that by acting precipitately the bank lost any opportunity to enable the company to recover and therefore to provide the bank with the opportunity to recover the full value of its loans. In many cases, banks, having put in receivers, recovered less than they had originally expected to do through this secured charge.

Under this government, record numbers of new companies have been created in a climate attractive to entrepreneurs over the last 12 years as a whole. Net creation, as opposed to collapse, of companies is still positive. There are still more companies being created than there are going under. Yet, bearing in mind this background, total business failures, including receiverships, were up 71 per cent. to 33,532 in the first nine months of 1991, the largest increase in 11 years. The percentage of collapses to active companies as a ratio could rise to 2 per cent.

It is widely accepted that receiverships increase in number when a recession is ending, as banks begin to see hope that they can recover their loans against improving asset prices, rather than assuming that, if the company itself recovers its position, will also improve--which is the stance I should prefer them to take. Dun and Bradstreet has been quoted as saying :

"business failures continued to rise sharply for two years after the first signs of a recovery in 1981."

In those circumstances, the Opposition cannot say this time that this recession is continuing if the number of receiverships now paradoxically goes up.

To quote the late Sir Kenneth Cork on banks acting too quickly, he said not long ago that the banks should

"try to support their customers, to many of whom they lent too much money anyhow, through difficult times in the hope of saving the business. I get the impression they are not doing that and are pulling up the carpet much too quickly."

Banks seem still to prefer putting in a receiver to the more constructive procedure provided by the Insolvency Act

Column 808

1986, which is to put in administrators. I am sad that the banks have not taken up the administration route, which is a much more constructive route, enabling there to be a package of measures that could rescue the core of the business.

The figures on administration are not very encouraging. Between January and March of this year, the last figures available to me, there were 64 administrative appointees in Great Britain. If we take the 12 months to March 1991, there were only 237 for the whole country. I am delighted that the Minister for Corporate Affairs is on the Treasury Bench. I know that he takes a particular interest in encouraging this modest version of what the Americans have in chapter 11, which enables the reconstruction of a company to take place in a protected atmosphere against creditors.

The Bill's proposals, which I believe are important, are several. They would provide directors with standing authority to allot equity for debt. Far-sighted boards have already obtained the permission of their shareholders to do that, but often it is not those companies that are in difficulties and under pressure, if times have become difficult. Any reconstruction will need subsequent shareholder approval because of the second company law directive, which has been on the statute book for a very long time. Yet at least in those circumstances shareholders can be offered some hope, whereas if they are merely told that the receiver has gone in, it implies that there will be little left for them, as ordinary shareholders. That is an important point. If banks consider, when they are completing their investigation of a company, that substituting that company's debt for equity is appropriate, there is a chance of rescuing the company and, in the long run, of benefiting the overall position of the bank. By making the process more transparent, pressure could be brought on banks to consider equity swaps more favourably. That could be a particular factor during a period of administration. Banks should be encouraged to use the procedure for putting in an administrator rather than a receiver. That would enable a much more organised discussion to take place on the reorganisation of the company's balance sheet and prospects.

It is important that banks are seen to play a constructive part in any reorganisation, because many potential new equity investors would be reluctant to put new equity money into a company if it were used merely to bail out the banks' existing lending. Therefore, it is not credible to believe that new equity investors would invest in a company that would then repay its existing borrowing.

Equity injection, as an alternative, has other merits. Insolvency procedures are expensive and often badly reduce the value of the charge that the company has on fixed assets. As we all appreciate, insolvency proceedings are also expensive in human costs. If a receiver goes into a company, that has a dramatic impact on the employees and the owners.

My Bill would tighten the shadow director provisions, so that banks would have a clearer understanding of the risks that they take during a reorganisation. That is important, because in many cases banks have said to me that they perceive that the risks of becoming involved in a debt equity swap are too great because of the risk of being deemed to be shadow directors. It is theoretically possible in law for a bank to be regarded as a shadow director. If

Column 809

it is involved in the potential of taking equity in a company, it is much more concerned that that might actually happen.

Under section 251 of the Insolvency Act 1986, a shadow director is defined as

"a person in accordance with whose directions or instructions the directors of the company are accustomed to act".

In normal circumstances, a bank providing advice to a company would merely be regarded as providing advice on a professional basis. In the event of a reconstruction, where the bank is intimately involved in the running of the company as well as the reorganisation of its affairs, it is possible for it to be thought that the bank is actually running the company. If that were to be the case, the bank would feel extremely exposed unless the laws on shadow directorships were clarified in respect of bankers. That is what I want. I want greater clarity in the laws as they would apply if a bank were actively to consider taking what would inevitably be a substantial equity stake in a company as an alternative to putting that company into receivership.

It must be realised that the shadow director provisions under the Companies Acts and the Insolvency Acts are severe. Although I do not in any way wish to give banks permission to indulge in wrongful trading--to use a definition in the 1986 Act--I want further clarification to limit the liabilities that would be faced by banks in the event that a reconstruction properly entered into nevertheless ultimately failed.

Although an equity for debt swap would affect a bank's capital ratios, the Bank of England must already be taking a close interest in the provisions that banks now have on the loans outstanding to companies. The National Westminster bank made recent provisions of £902 million for bad debts to United Kingdom private and corporate

Column 810

customers. Therefore, receiverships can be a double blow for banks--not only do they lose value in terms of their loans to companies, but they lose value if the owner-shareholders are put into personal financial difficulty.

Although the banks should not emulate the German banks, serious considerations are involved. The object of the Bill is to put pressure on the banks to consider debt equity swaps, to encourage directors to negotiate these with banks, to promote the use of administration, and to give reasonable comfort to bankers that they will not automatically run foul of the tough shadow director provisions.

We have a climate that is favourable to companies and we want to avoid the direction and regulation that another Labour Government would introduce. We all have an interest in ensuring that banks fulfil their responsibilities to companies.

Question put and agreed to .

Bill ordered to be brought in by Mr. Ian Taylor, Mr. Tim Smith, Mr. John Watts, Mr. Colin Shepherd, Mr. Charles Wardle, Mr. James Paice, Mr. Keith Mans, Mr. Simon Burns, Mr. Barry Fields, Mr. Robert G. Hughes, Mr. John Bowis and Mr. Terry Dicks.

Companies (Miscellaneous Provisions)

Mr. Ian Taylor accordingly presented a Bill to give a company's directors standing authority to allot equity share capital to lending bankers to discharge indebtedness ; to protect a lender in such circumstances from the shadow director provisions of company law and insolvency law ; and for connected purposes : And the same was read the First time ; and ordered to be read a Second time upon Friday 25 October and to be printed. [Bill 220.]

Column 811

Orders of the Day

Export and Investment Guarantees Bill

Lords amendments considered.

Clause 11

Reinsurance of ECGD risks

Lords amendment : No. 1, in page 7, line 14, at endinsert-- ("(1A) The Secretary of State shall from time to time determine, in relation to such classes of risk determined by him as might be insured by him under section 1 of this Act, whether it is expedient in the national interest for him to exercise his powers under that section to make arrangements for reinsuring persons providing insurance for risks of that class.")

Read a Second time.

4.15 pm

Ms. Joyce Quin (Gateshead, East) : I beg to move amendment (c) to the Lords amendment, in line 7, at end add--

In the exercise of this power the Secretary of State shall be guided by the duty imposed on him under the old law of encouraging British exports'.

Amendment (c) is important because at issue is the extent to which the Government will be obliged to take into account the need to promote and encourage British exports when considering whether to provide reinsurance facilities. The 1978 law used the expression "encouraging British exports". The Opposition believe that that commitment should be at the forefront of the Secretary of State's mind when he decides to what extent reinsurance should be provided. Amendment (c) would strengthen the hand of a future Secretary of State, especially if other Departments, such as the Treasury, which has a reputation for cost-cutting in export promotion, take a negative view of the reinsurance facility. The amendment would allow the Secretary of State to tell the rest of the Government and the Treasury that he is obliged to encourage British exports. It repeats an obligation under the old law, which operated satisfactorily until the Government decided to repeal it with this ill-thought-out Bill. The encouragement of exports is vital. Unfortunately, under the Bill, the service to British exporters--a service that is inferior to that enjoyed by our competitors--is likely to suffer. The Government's purpose is simply to cut costs and to reduce the extent of services that are available to exporters.

I imagine that the Minister will say that we should be well aware from previous debates, especially the debate on clause 1, that the word "encouraging" was felt to be more restrictive than facilitative. However, I do not believe that that argument applies to this amendment.

This part of the Bill deals with the reinsurance facility. We say that, whenever the Government decide to provide top-up or national interest reinsurance, they should be motivated by the consideration of encouraging exports. We therefore believe that the Minister's objection to the word "exports" does not hold good.

Amendment (c) would retain the spirit of the old law, which exporters believe served them well, and by accepting it the Government would send exporters a welcome signal

Column 812

at a particularly difficult time for them. We have been made aware today of the extent of the Confederation of British Industry's criticisms of the Government's industrial and manufacturing policy, and it is true that manufacturing industry relies particularly on the services of the Export Credits Guarantee Department. If the Government accept our modest amendment, it would at least give some reassurance to industry that some of their difficulties are being taken into account.

This month's trade statistics, which were issued today, show that there is an alarming manufacturing deficit. The manufacturing companies that use the ECGD's services see the ECGD as an important weapon to reduce that trade deficit, but they are worried that, under present proposals, it will not be available to the same extent as it was in the past.

Amendment (c) would give exporters the impression that we will be active in some of the new markets in which we need to be involved, especially those of eastern Europe and the Soviet Union. Exporters have repeatedly given me the impression that British industry is falling behind because it is not getting the Government support that is available to many of our competitors. They have been worried about the lack of ECGD cover for the Soviet Union and the countries of eastern Europe. If amendment (c) is accepted, exporters will be encouraged by the thought that some of the difficulties under which they have been labouring in trying to export to those new markets will perhaps be overcome.

Amendment (c) would send out the right message to those many exporters who fear that, if the Bill is passed in its present form, we will be at a disadvantage compared with our major competitors, especially in the European Community. Widespread concern was expressed in the other place about the lack of a level playing field in terms of export support and promotion.

When the Government introduced the Bill in the other place, only the Minister spoke in favour--all other speakers on the Government and Opposition sides expressed either reservations or outright hostility. They included various captains of industry, two former Cabinet Ministers and two former Trade Ministers who had had specific responsibility for export credit, including the previous Minister for Trade, Lord Trefgarne, the predecessor of the hon. Member for Hove (Mr. Sainsbury). That shows the extent of the concern.

Last week, Lord Trefgarne said in the other place that he was worried that our exporters using the services of the preferred purchaser, the Dutch company NCM, would be at a disadvantage compared with Dutch exporters using the same service. Lord Trefgarne was perturbed at the fact that, throughout the discussions last week and this week in the other place, he did not obtain a satisfactory answer from the Government spokesman. That shows how worried people are about whether this part of the Bill will provide for comparable services for exporters throughout the European Community. The Opposition will continue to monitor events closely in the coming months, because we want to ensure that our exporters who use the services of the new purchaser of the ECGD will have available to them the same services as are available to Dutch competitors and exporters in other parts of the European Community.

If amendment (c) is accepted, exporters will be reassured about the way in which the Government will operate this reinsurance facility. That facility has two

Column 813

parts, one of which is the top-up facility. The Government hope--they have not yet provided any proof--that within three years that facility can be taken over entirely by the private sector. Although there is no time scale in the Bill, I understand that the Government are sticking to their foolish belief that somehow, by magic, the private sector can absorb the reinsurance facility within three years. There is much concern that the Government are proposing to apply arbitrary limits to the amount of reinsurance under the top-up scheme over the next three years, and that is also something to which I should like the Minister to respond.

Exporters are worried that the Government's policy will effectively cap the amount of top-up support provided in the next three years, and that the amount of support will progressively be reduced. The Government still insist that, at the end of three years, they expect that facility to be taken over by the private sector, no matter what the economic circumstances, the trade deficit and the position of our major exporters may be at that time. I should like the Minister to comment on that.

We are also worried about the Government's intention about the national interest reinsurance facility to which the clause refers. We want to know how the Government propose to define that facility--how widely or how narrowly.

Many exporters are rightly worried that there are many markets for which they will be unable to obtain such support in future. That fear was expressed well in another place and has also been expressed to me only this week by many exporters and exporting associations. The Minister has a duty to them and to us to say how he proposes to operate the national interest reinsurance facility in the future. Will it be operated in a way that encourages British exporters or will cost be the only consideration?

The Bill contains no timetable for either the top-up scheme or for the national interest reinsurance provision. Therefore, there is no guarantee that they may not cease after the three years, which, I understand, is still the Government's policy on the top-up facility. I hope that I have outlined some of our main concerns and those of the exporting community. Our point of view has been widely supported in industry, and if the Minister cannot give us the necessary reassurance and is unwilling to accept the amendments, industry's concerns about the legislation will continue in the weeks and months ahead. The amendment would partially rectify our worries about the measure, and would go some way to allaying exporters' fears. We hope that the Government are willing to accept it.

The Minister for Trade (Mr. Tim Sainsbury) : I fear that the hon. Member for Gateshead, East (Ms. Quin) will be disappointed, because I cannot recommend the amendment to the House. Indeed, I shall go further and say that it would be unhelpful, not only in terms of this excellent Bill but to Britain's exporters.

One reason for opposing the amendment is factual. There is no duty in the Bill--nor was there in the Act that the Bill replaces--for the Secretary of State to encourage trade. There is no duty--I stress that word, which is the word used in the amendment.

In the Bill and in the Act, the Secretary of State is given permissive powers to encourage trade and to facilitate supplies. There would be serious doubts about how to determine in legal terms whether a duty to encourage had

Column 814

been discharged, and I foresee great problems in the courts if that issue were to be brought before them. So, the first but substantial reason for rejecting the amendment is that, under both pieces of legislation, the Secretary of State is given only permissive powers. The hon. Lady reminded us that we debated the issue at some length not only in Committee, but on Report. The matter also came up in another place. On each occasion, we pointed out that the word "encourage" was open to some challenge and threw doubt on what the total powers were. It seems logical to say that one cannot encourage something that has already happened. One can make it easier for it to take place. One can facilitate an export by providing all sorts of things, such as transport and insurance, but one can scarcely encourage it if it has already taken place.

The old words of "encouraging exports" were less helpful to British exporters than the new formula that we have used, which refers to "facilitating the supply". The new formula allows the ECGD to give assistance where it is currently statutorily debarred from doing so. 4.30 pm

The same objection, which we went through in Committee and in another place, holds in the context of reinsurance. Reinsurance is not there as an end in itself ; it is there to facilitate exports. One may try to encourage exports, but how does one encourage something that has already happened? It is clear that the word "facilitating", which we have used, is a far better word. Unlike the hon. Lady, we do not want to restrict the help that the ECGD can give British exporters. It would be extremely difficult to determine whether it was practical to have a duty to "encourage".

I want to confirm that the competitive position of British exporters is one of many aspects that the Government will take into account when determining the national interest case for providing reinsurance. Trade and diplomatic aspects need to be considered as well. ECGD's primary objective will remain helping British exporters by giving export credit and investment insurance. I hope that that is apparent from everything that we have said about this excellent Bill throughout the proceedings.

Mr. Peter Thurnham (Bolton, North-East) : Is my hon. Friend aware of a major exporter in my constituency, Beloit Walmsley, which has a large inquiry from Iran and is interested in having ECGD cover for Iran? Can he say anything that would be helpful at this stage? The inquiry is at an advanced point commercially. The firm has been told by the Iranians that it is the best bidder, subject to clearing up the question of ECGD cover.

Mr. Sainsbury : I am well aware of the case to which my hon. Friend refers and of the energetic steps that he has taken to help his constituency company to obtain what would be a valuable order. I am sure that he is also aware of the particular difficulties associated with that market. I remind him that ECGD cover for short-term credit is available for exports to Iran. Medium-term cover is under review. The review is taking account of significant export opportunities such as the one to which my hon. Friend referred. The review also needs to take account of political developments, some of which have been helpful recently.

I cannot tell my hon. Friend when the review will be completed or what the outcome will be, but I can tell him that I am reasonably optimistic that we shall reach a

Column 815

conclusion in the very near future. I will bear in mind what my hon. Friend has said about the export opportunity for the company in his constituency.

I am sure that the House will recall that lengthy debates took place in Committee and on Report about the provision of reinsurance support by the Government for the new company after privatisation. On Report, the House decided not to agree to certain amendments, partly on the ground that they gave rise to significant legal and technical difficulties.

The debate continued in another place, and the issues arose again. In response to the further debate and to the suggestions put forward, parliamentary draftsmen were able to draw up new amendments which meet the concerns expressed in both Houses while avoiding the legal and technical difficulties inherent in the previous amendments that we rejected and which were tabled in another place.

Lords amendment No. 1 imposes a permanent--I stress

"permanent"--obligation on the Secretary of State to determine from time to time whether a national interest case exists for him to use his general enabling powers under clause 1 to provide reinsurance to insurers who provide direct insurance for the same classes of risk as those in respect of which the Secretary of State himself might otherwise directly provide under the provisions of clause 1. The new obligation that the amendment would introduce into the Bill is widely drawn and therefore relates to all types of reinsurance, including reinsurance of the kind to be provided under the so-called transitional top-up national interest facilities to which the hon. Member for Gateshead referred and which the Government are committed to providing to the privatised insurance services group. The amendment imposes no restriction on who may be the recipient of the reinsurance.

The amendment reflects the desire expressed in both Houses for the ministerial assurances given at various stages to be reflected in the Bill, while at the same time avoiding the pitfall that had arisen in the context of other similar amendments considered in both Houses.

Ms. Quin : Will the Minister confirm that he intends to phase out the top-up facility after three years, and will he respond to my question whether there will be a reducing element in the amount of support in the top-up facility over the three-year period?

Mr. Sainsbury : I had intended to come to that point later, but perhaps I may do so now.

The hon. Lady refers to the top-up facility, which, as she knows, has been debated at some considerable length. Since the announcement in 1989 of the decision to privatise the insurance services part of ECGD, there has been continual work on the issue of reinsurance, because we recognise that it is an important part of the total package. The Government have recognised throughout that, at the outset, there might be a small shortfall--I emphasise "small"--between the company's full requirements for reinsurance and what the market could provide.

That was foreshadowed in the statement made on 18 December 1989 by my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), then Secretary of State for Trade and Industry. My right hon. Friend announced the Government's decision on privatisation

Column 816

and referred to the need for a continuing reinsurance link between the ECGD and the privatised insurance services. We said that that top-up reinsurance facility would exist for three years, and it would be looked at in the light of requirements and in the light of the take-up in the market.

We have discussed the issue on a number of occasions, and I have been able to assure the House and the hon. Member for Gateshead that the market's response to the request for reinsurance has been positive. That is a tribute not only to the capacity of the market but to the ability of the ECGD and its advisers to obtain reinsurance.

The second type of reinsurance--

Ms. Quin : Before the Minister deals with the second type of reinsurance, will he say clearly what I think he was saying--that the top- up facility can continue beyond three years?

Mr. Sainsbury : I was saying that the top-up facility was due to continue for up to three years, in the light of the requirements--in the light of the gap between what the market provides and what the company needs. As I have just said, the market has shown a great willingness to take the reinsurance requirement, and that is why we are confident that, within that period, there will no longer be a need.

The second type of reinsurance relates to the high-risk

Mr. Michael Morris (Northampton, South) : I understand the market to be helpful at the moment, but none of us can forecast what the market will be in a year or 18 months. Will my hon. Friend therefore clarify two points --first, that the sum is not a capped sum, and, secondly, whether the requirement is that it "shall" be phased out within three years or that it "may" be phased out within three years?

Mr. Sainsbury : I have given a commitment several times that the requirement would be met for up to three years. At the moment, the expectation is that it will not even be needed for all that time, because of the market's response. While I appreciate what my hon. Friend the Member for Northampton, South (Mr. Morris) says about not being entirely certain about markets, there is a fair predictability about the behaviour of markets and reinsurance markets to a portfolio risk which does not differ greatly in its overall make-up or size. The reaction of many experts confirms that, as the market becomes more familiar with the quality of portfolio risks presented to it, the spread of risks and the quality of management of the insurance services group, so it will be more ready to absorb the cover that is required.

Even before the company exists--and given that element of uncertainty--it is remarkable that the market has shown itself willing to undertake to provide so much reinsurance that there is only a very small gap between what the market is prepared to take and the total requirement.

There is no time limit on the other form of reinsurance, which is now called the national interest reinsurance facility. There may be some confusion here. When I refer to the ECGD in this context, I mean the continuing ECGD--that part of the ECGD that exists at the moment and which will continue in existence as part of the

Column 817

Government. The ECGD will provide 100 per cent. reinsurance to the new company on the small handful of higher risk countries. That facility will not be time-limited.

In order to meet concerns expressed by hon. Members that the facility might be withdrawn prematurely, I assured the House that the requirement for the facility would be kept under close review, and that it was the Government's intention that, subject to it performing satisfactorily as an ECGD trading facility, it would continue for as long as the Government considered it essential to meet the reasonable needs of exporters. Lords amendment No. 1 deals with that point. Lords amendment No. 1 also imposes a permanent obligation on the Secretary of State to determine from time to time whether a national interest case exists for him to use his general enabling powers under clause 1 to provide reinsurance to insurers. As that is permanent, the reinsurance arrangements that we have announced will ensure that, in the aftermath of privatisation, there is no sudden or sharp reduction in the level of facilities available to our exporters. Lords amendment No. 1 will ensure that the need for that kind of reinsurance will be kept under permanent review. The amendment makes even better what was already an excellent Bill. It will ensure that our exporters, as the first beneficiaries of the privatisation, will receive a service from the new company and from the continuing ECGD which will be better matched to their immediate and future needs and better placed to meet the challenges and opportunities of exporting in the single European market and throughout the 1990s. I commend the Lords amendment to the House and urge it to reject the imperfectly drafted, but I believe well intentioned, amendment to it, tabled by the hon. Member for Gateshead, East.

4.45 pm

Mr. George Howarth (Knowsley, North) : I support the amendment to the Lords amendment and I want to participate in the debate because a company called Cross Europe in my constituency has a problem. Cross Europe is part of an American-based multinational company called Cross and Trecker. Having seen what has happened at Cross Europe and having listened to the Minister today, I believe that the Government stand accused of stunning complacency. When exporters around the country face terrific difficulties with the schemes, to claim that everything in the garden is rosy and is getting better does not reflect the experience of Cross Europe. I have seen press reports which confirm that that company's experiences are not unique. I will give the facts about Cross Europe because I am sure that that will prove the case for the amendment to the Lords amendment tabled by my hon. Friend the Member for Gateshead, East (Ms. Quin). Cross Europe won an order in the summer of 1990 to supply equipment for differential case and axle tubes--in effect, machine tools--for the new Moskawitch engine programme to be supplied by a company called Ishevsk. Cross Europe won that contract in the face of extremely effective competition from Germany and Italy and it obtained a very successful £5 million order.

There was subsequently some discussion about the method of payment for the scheme. Between August and

Column 818

December, the contract was negotiated and submitted to Midland Montagu and ECGD for inclusion under line of credit and approval respectively.

Therefore, the method of payment had been agreed in December. The company planned the order into its work programme, and the negotiated contract was signed on 19 December 1990. In January 1991, after the company had geared up for the order, it was told that there was to be a review of the ECGD coverage with the USSR in general and that special contracts, Cross Europe's included, were to be pulled out for special treatment.

Between January and February, there were frequent contacts between Midland Montagu and ECGD, and Cross Europe and ECGD. The company was told that the issue would be resolved by March 1991, but it was not. In May 1991, Cross Europe contacted me. The company was anxious not to create any publicity. It simply wanted to unsnarl the red tape and get on with the order which, by that time, it was manufacturing. I wrote to the Secretary of State for Trade and Industry on 31 May 1991. I will not quote the whole of that letter, but two paragraphs are important. In one, I wrote :

"As I understand it, Ricardo, based in Brighton and Lamb, based in Mildenhall, have subsequently taken steps to fulfil their contracts through sister companies in Canada and Germany, since they were able to get the necessary export guarantee schemes there. However, Cross Europe have actually already started work on the project within the UK and, therefore, are seriously exposed if they are not allowed the necessary export guarantee cover in the very near future." In the other paragraph, I wrote :

"Since all of the original five companies"--

the companies that were caught up in the review--

"have taken their business elsewhere and I have no knowledge of the other two, it is quite possible that Cross Europe are the only company remaining with this difficulty. In any event, even if the other two are still in the same situation, allowing for both of them having contracts to the value of say £10 million each, the amount of risk to which ECGD will be exposed would in terms of its total operations be very small indeed."

On 28 June, the Minister for Trade was kind enough to reply to my letter. The final paragraph of his letter reveals all about the Government's attitude to these problems. He wrote :

"I regret"--

we have all heard those words before--

"that I cannot say how long the review will take or pre-judge its outcome. I can assure you, however, that we will complete it as soon as we reasonably can. I shall ensure that you are informed of the decision. In the meantime, I would suggest that the company contact David Wyatt (Head of ECGD's East European Projects Branch"-- it gives the telephone number--

"in order to keep abreast of developments."

I have heard no more. Cross Europe is certainly in weekly contact and sometimes more than weekly contact with ECGD, as was suggested by the Minister, but the Minister appears to have washed his hands of the matter-- so much so that, in September of this year, Mr. Normal J. Ryker, the vice- chairman and chief executive officer of Cross and Trecker Corporation, wrote to the Prime Minister. As far as I know, there has been no response to the letter.

If I may read just one paragraph of Mr. Ryker's letter to the Prime Minister, it will even further illuminate the House in respect of the inactivity of that Government Department in its dealings with exports. Mr. Ryker says :

"The machine tool industry in general and our UK Subsidiary has suffered through a depression for an extended period of time and the financial position of the UK branch

Next Section

Home Page