MEMORANDUM SUBMITTED BY HORTICULTURE RESEARCH
1. Following its appearance on 10 May 2000,
HRI has been invited to appear before the Select Committee on
13 December 2000. The following information is submitted as a
"progress report" on events since May.
2. The Committee will recall HRI's difficult
financial position, as detailed in the Seventh Inquiry Report
of 11 July 2000. The Committee said at the time "We expect
the necessary cost reductions to be carefully managed to ensure
that HRI's science and staff base is not damaged irreparably".
3. HRI needs a small operational surplus
to be able to fund essential upgrading and replacement of assets.
HRI had an operational deficit of £1.64 million in 1999-2000
and is forecasting a deficit of £2.17 million for the current
financial year. This situation is the result of rising operational
costs combined with declining public sector funding for R&D.
Although HRI has successfully increased its competitive public
and commercial income by more than 60 per cent in recent years,
this has been insufficient to match the decline in public funding.
4. The restructuring options considered
by HRI's Board ranged from an even spread of the necessary 15
per cent cut, thus keeping but damaging all sites, to closing
all sites except Wellesbourne and concentrating the entire R&D
effort in one location. Each option was analysed in detail over
several months, assessing real or possible impacts (positive or
negative) on our ability to sustain income and maintain delivery
to customers as well as generating the necessary £3 million
net saving on the "bottom line". We particularly benefited
from the advice of our "industry" members on the Board.
HRI Board members, together with senior MAFF officials and Ministers,
were fully involved in these discussions, which also included
Trade Union representatives. Because of their sensitive and confidential
nature, and to minimise damaging speculation and resultant staff
anxiety, little public disclosure was possible before September.
5. On 11 September 2000 HRI's Chief Executive
announced the package of cost reduction measures which had been
agreed with, and will be financed by, MAFF through a one-off restructuring
grant of £4.533 million.
6. The restructuring programme is designed
to restore HRI's viability, to make the necessary savings in recurring
costs of £3 million per annum and to return HRI to financial
surplus within two years. The restructuring plan is on schedule
to be completed in March 2001.
7. The key decisions taken were as follows:
I. 145 posts will be lost throughout HRI
(out of a total staff complement of 637). Selection of redundant
posts, against agreed criteria, was made so as not to damage HRI's
ability to carry out its business. The number of compulsory redundancies
has been kept to the minimum (68), whilst 29 staff have been accepted
for voluntary redundancy and another 48 posts are being lost through
natural wastage (retirements, resignations, vacancies).
II. HRI Stockbridge House will close on 31
March 2001. HRI deeply regrets that this action must be taken,
but it was imperative that HRI secured the future competitiveness
and cost-effectiveness of the organisation as a whole. Stockbridge
House was selected for closure as the reduction in fixed costs
and overheads can be made without seriously compromising HRI's
overall capacity. There are no specialist facilities at Stockbridge
House that are not either portable or available elsewhere in HRI.
III. Operational changes at Kirton and Efford
are being made in order to consolidate research and development
effort, while providing a more integrated and viable future for
these smaller scale HRI sites.
IV. At the same time, HRI announced that
it would be strengthening its senior management team by recruiting
a Head of Business Development and an Operations Manager, to fill
posts vacant since October 1999 and August 2000, respectively.
8. Regrettably, despite our best efforts,
eight of the 10 key staff at Stockbridge House whom we wished
to redeploy within HRI have opted to be made redundant. HRI does,
however, continue to retain a talented, professional and customer-focused
workforce. Detailed plans for the transfer of ongoing projects
from Stockbridge House to other parts of HRI have been drawn up
and discussed with key customers. The changes in management and
their impact on future programmes and services provided by HRI
have been discussed in an extensive, recent series of meetings
with UK horticulture industry representatives.
9. HRI has naturally sought to address the
challenging task of minimising the impact of restructuring on
its staff skills-base and on effective delivery to customers.
HRI is eager to engage in constructive forward planning to secure
a more competitive and effective future for all parties. To this
end, we initiated a series of open discussion meetings with varous
interest groups representing UK horticulture: the NFU, HDC, APRC,
East Malling Trustees, Grower and Avisory Groups, and others.
Inescapably, the UK horticulture industry and the unique and extensive
R&D resources, skills, knowledge and technology transfer capabilities
of HRI are interdependent and function to mutual advantage. We
must all work constructively in developing a positive future.
10. HRI continues to pursue, particularly
following the report from the Agriculture Select Committee of
10 May 2000, effective resolution of its outstanding operational
staffing issues. Given the poor prospects of securing early time
for primary legislation, efforts are being made to seek alternative
avenues to progress matters. Discussions and consultations continue
between HRI, MAFF and BBSRC. Representatives from all three are
due to meet with Treasury on 21 December 2000, to discuss pension
11. The Agriculture Committee has already
drawn attention to the need for HRI's Commercial Sales and Marketing
Department (HortiTech) to be reconstituted with a realistic recovery
plan. HRI can now report that positive action is being taken to
address this situation. Following a thorough review of the true
profitability of each of the former Business Units, a strategic
decision was made to link all present and future commercial R&D
opportunities and private sector contracts to one of HRI's three
overarching R&D Themes (ie Crop Protection; Plants and their
Environment; Crop Improvement). This will ensure that profitable
commercial opportunities will be pursued in a co-ordinated way
and non-viable projects will be identified in a more timely fashion.
An appointment to the post of Head of Business Development will
be made as soon as possible, to accelerate the expansion of HRI's
commercial R&D and to facilitate the transfer of knowledge
to the horticulture industry.
12. Throughout this exercise, it is essential
that HRI maintains and develops its current industrial and public
sector customer base. To help achieve this, HRI has reorganised
its scientific management to develop 15 multidisciplinary teams,
which span and integrate work across all its sites. The work of
the teams is strategically planned and co-ordinated by SCICOM,
a committee of the most senior scientists throughout HRI. SCICOM
has recently completed an extensive and critical review of HRI's
overall Research and Development strategy. It will now consult
with industry and public sector stakeholders on future plans to
deliver value-added R&D. A series of internal and external
peer reviews have also taken place to assess the quantity, quality
and focus of HRI's R&D portfolio to prepare for an Institute
Assessment Exercise, conducted through BBSRC, in 2001.
13. HRI must also develop new income streams
to ensure the future stability and growth opportunities of the
organisation. The Chief Executive and other senior HRI staff are
taking a lead in these efforts, and prospects look encouraging.
Initiatives are being taken that could lead to major investments
at most of HRI's sites through the creation of new Food, Health
and Environmental Bioscience "Enterprise Hubs" in conjunction
with Regional Development Agencies, and public-private partnerships
to exploit HRI's IP portfolio.
14. HRI is conscious that it must rebuild
more efficient and formal lines of communication with the UK horticulture
industry, producers and consumers alike. As part of our new Business
Development Strategy, we will further enhance our current customer
care and account management procedures. The future of HRI will
depend on establishing successful mixed economies at each of its
5 December 2000