Examination of Witnesses (Questions 449
WEDNESDAY 31 JANUARY 2001
449. I welcome you to the committee. For the
purposes of the record, perhaps you will introduce yourselves.
(Mr McFall) I am John McFall, Member
of Parliament for Dumbarton.
(Mr Robertson) I am Ken Robertson, Public Affairs
Director of United Distillers and Vintners.
450. At this stage of our proceedings would
either or both of youparticularly Mr McFall, who requested
this meetinglike to make a statement, but not a lengthy
one which might pre-empt the structured agenda before us?
(Mr McFall) Thank you, Mr Marshall. You have the report
commissioned from Fraser of Allander
into the closure of the J&B whisky plant in my constituency
in June 1998 with the loss of 470 jobs. From day one, Ken Robertson
and I met. The atmosphere at that time was not good because I
felt that the plant, which had been in my constituency for 30
years, should be kept open. However, rather than adopt a traditional
hands-off approach I decided that it was important to establish
a task force whose work you see outlined in the report. Of the
470 jobs which were made redundant presently, only 80 who worked
in the plant do not have a job. Most people have received training
and had the opportunity to be re-employed elsewhere. Obviously,
that was achieved by a partnership. We have not remained at that
level, because we established a company called the Strathleven
Regeneration Company which we envisaged would act as the economic
development arm for the wider community. As a Member of Parliament
for 14 years I had been rather dissatisfied by the traditional
response to such closures. If one approached a Minister, a council
or enterprise company one would be bounced from one to the other.
I thought that we should get together on this matter, given that
Diageo was a multinational company which owed a debt to the community
and had in my opinion, to live up to its social responsibilities.
If we all got togetherour partners, the council and the
enterprise companywe could have a model for future economic
development, and any surplus profits from redevelopment of the
site would be used for the benefit of the wider community. From
day one of the closure Ken and I met, and we are still here two-and-a-half
(Mr Robertson) The closure of any plant
is always very difficult for the employees and the community.
In United Distillers and Vintners and Diageo we take these matters
extremely seriously. We usually work to a fairly lengthy timescale,
which in the case of Strathleven was two years from the announcement
to closure, to allow employees to work with us and help them into
either new jobs inside the business or outside it and equip them
with all the other skills that they may need; and we also work
with the local community. Each case is different. The Strathleven
experience had unique characteristics. Hopefully, we have ended
up with something which, if not exactly a blueprint for other
communities, will give us some learning that may well help other
communities in that situation. From a business perspective, it
is critical to point out that over the two-year period the Strathleven
plant not only met its international orders but broke all its
own records in the final few months before closure. That speaks
volumes about our experience there.
451. Perhaps I may begin by touching on the
local impact. The evidence that we have received during our inquiry
demonstrates the significant contribution of the whisky industry
to Scottish manufacturing employment. The industry is particularly
important in supporting fragile areas where there are few alternative
job opportunities. The closure of the J&B plant in Dumbarton
must have been a major blow to the area. What exactly was the
impact of the closure on the town, and did it have any wider effects
in addition to the loss of jobs?
(Mr McFall) In my constituency unemployment is the
third highest in Scotland, despite the general drop in unemployment,
which we welcome; presently it is the lowest for 20 years. However,
in Dumbarton unemployment has been relatively high. With the presence
of Allied, J&B and a number of other small distilleries, Dumbarton
has been regarded as a whisky town. Well over 2,500 people are
employed in the industry. J&B had been established in the
early 1960s and was very much part of the community. Therefore,
the closure was a blow to the whole community as reports in the
local papers illustrated. It was a disaster for Dumbarton and
everyone felt the loss. The community suffered a loss of self-confidence,
and that was why I decided to become associated with it. The question
to be asked from the political point of view was: what could we
do here? We could criticise the company for leaving but could
we get something better out of it? We have all stuck together.
One of the revealing elements is that the workforce and the trade
unions in particular have remained faithful to the idea. The trade
union representatives took it in the neck, as we all did. It was
said, "There's not much future here. This big company has
sold us down the river and we just have to live with the consequences."
We said that the company could work with us, be faithful to its
social responsibility and there was something better for us. The
results achieved to date show that. The fact is that two months
before the closure the plant still achieved record production
levels. That is an example of people having trust in each other
that a better future can be delivered.
452. You referred to the fact that local people
regarded Dumbarton as a whisky town. Was there any special local
significance in the fact that a whisky plant was to close, or
was it not an element?
(Mr McFall) I think that it meant much more. Had it
been a manufacturing plant which was to close there would have
been headlines and adverse comment, but this was a stake in the
heart of the community because it was the whisky industry which
was to close. In the past we had had issues with Allied Distillers.
Allied had been there for many yearsI believe since the
1930sas Hisam Walkers, but there were question marks over
the future of Allied. At the time of the change from a manufacturing
to marketing plant the trade unions and myself became involved
with Allied in ensuring changes of working practice. One of Allied's
commitments was that if the unions worked with the management
to ensure a change of working practices it would invest £18
to £20 million in new facilities at Kilmalid. However, that
was three or four years down the line. People said, "Are
we going to make changes here and then get nothing out of it at
the end of the day?" We were engaged in an exercise in faith-building;
we said that we had to change because the drinks industry was
a global market and there was a change from a manufacturing to
marketing concept. If we did not change we would be left behind,
and the trade unions saw that. We worked faithfully on the Allied
situation and delivered on that. In many ways we had had that
controversy three or four years before the closure of the J&B
plant, so people felt very vulnerable.
453. What were the reasons behind the decision
to close the plant?
(Mr Robertson) Just prior to this event there had
been a merger of Guinness with Grand Metropolitan. That brought
together two spirits companies: United Distillers and International
Distillers and Vintners. That provided the opportunity to look
at a different model to manage the main part of production which
was the packaging side of the business. Obviously, that is where
we employ most people and capital. One of the background facts
to have in mind is that traditionally the whisky industry has
had low asset utilisation in its packaging plants, and we have
always had to work to improve that. With the merger, the company
wanted to consolidate all its UK production in Scotland, which
meant the closure of two plants. A white spirits production centre
in Essex was also closed at the same time. We took the decision
to make an investment of £50 million to provide the company
with a different production model. That was one of the factors
that drove the closure. It was also driven by the fact that competition
in scotch whisky is much fiercer now than 30 or 40 years ago.
We face increased competition, and our marketing budgets are very
substantial. We need to be as efficient and economic producers
as possible. The merger offered us an opportunity to do that and
also to consolidate the whole UK spirits production in Scotland.
454. You have talked about consolidation of
plants and competitiveness. Does that mean it is inevitable that
other whisky plants will close in the next few years?
(Mr Robertson) It is difficult to sit here and use
the proverbial crystal ball. I think the view shared by the industry
is that there is still over-capacity. However, in part it is created
by very low asset utilisation, which is probably unique in the
scotch whisky industry. No shifts were worked and people did not
work at the weekend and so the assets were heavily under-utilised.
It is difficult to say what may happen. If we have a massive upturn
in overseas volumes over the next few years it may produce a different
picture. However, when we took the decision to close these two
plants inside UDV we envisaged that the remaining plants would
be reconfigured, with massive investment and doing things differently
from before so that they would be able to meet our needs for the
455. Therefore, production did not drop but
moved elsewhere when you closed the plant?
(Mr Robertson) That is correct. We were able to take
certain kinds of products and put them in specific places. For
example, at Shieldhall in Glasgow we created probably the most
modern plant of its kind in the industry. We have doubled the
volume from something like 10 million to well over 20 million
cases a year. But the products there are basically all of one
kind; they are brands which come in a certain shape and size of
bottle and will go down the lines very quickly. Kilmarnock is
at the other end of the scale, in that there we do a lot of hand-finished
work with a very complex product range. At Leven in Fife we consolidated
mainly round white spirits. That gave us the opportunity to tidy
up or rationalise the methods of production and to be much more
efficient, which is essential in keeping down costs. Therefore,
it allows us to pour more money into marketing.
456. Is there room for even more efficiencies?
(Mr Robertson) I can speak only for my company. It
is difficult to give a finite answer. However, as of now we hope
that we have the configuration we need for the long term. We now
have the right number of plants. Obviously, we can make a drive
for further efficiencies, but now it is more about adjustment
rather than any radical, major change.
457. You say that production targets were met
and the workforce worked right throughout the two years before
closure. Two years is a long time for the closure of a plant.
Was that period chosen by design or because of the existence of
the task force? Without the two years could it have been the success
that it is?
(Mr Robertson) We always want to allow a long time
frame. Apart from anything else, we believe that to give people
the bare minimum of three months is not fair; it does not give
them the time to readjust or the company the opportunity to work
with the local community. Arguably, in a short, sharp closure
there is a shock and suddenly it happens; over a longer period,
emotions move up and down and it is very difficult for everyone
involved. I stand by our decision, in that it gives time for people
to think of future options, to work with local agencies and for
retraining. We consider that to be the right model for us. Whether
that is right for other companies I cannot say.
458. In the event of a closure in future you
would like to see as long a lead time as possible to give the
community the opportunity to adjust?
(Mr Robertson) That is our preferred course. We have
never done it in anything less than, say, one-and-a-half years;
that is probably the least time that we would allow. The average
period is perhaps two years.
(Mr McFall) It was crucial to the success of the task
force. I do not speak for Diageo. However, I believe it realised
that its announcement in Dumbarton would have a significant impact
and, therefore, the need to be close to the community was very
important. But that two-year period has been crucial, in that
Diageo has significant resources and has provided anything for
which we have asked. You see from the report that it gave £200,000
to the bursary fund. Though what I will now describe is tangential
to the work of the Task Force, it is still important to the local
community in Dumbarton. Dumbarton Football Club has been threatening
to go out of business for the past two years. The directors approached
me a year ago and said that the club needed around £250,000;
otherwise, the club would go out of business. There are two ways
to look at it: if it is at the bottom of the Third Division to
go out of business is perhaps no great loss but, given that it
is one of the oldest clubs in Scotlandit dates from the
1870sit is important to keep it. I scratched around to
get that £250,000. The Football Trust through Tom Wharton
and others provided £100,000. We were left with £150,000
to find and then Diageo came in as a major contributor to the
club. Therefore, Diageo has contributed to the wider community
and, through the development of the football club, is helping
the economic regeneration of the area. Therefore, significant
resources have been provided. However, the main focus of our work
was with the workforce. A lot of personal counselling was undertaken.
The Department of Employment and Clydebank College were involved,
and that resulted in 190 workers obtaining SVQs. Given that traditionally
it had been a workforce with low skill, and a lot of people did
not know what skills they had, to obtain those SVQs was a booster
for them; they realised just what skills they had, but time was
required. Time was also needed to form the alliance at local level.
All of us had different agendas. The work undertaken by West Dunbartonshire
Council, Scottish Enterprise Dunbartonshire, voluntary groups
and trade unions has been tremendous. That could not have been
achieved if the plant had been given six months' or a year's notice.
Sir Robert Smith
459. You referred to the under-utilisation of
assets in the industry. Was that true throughout the whole production
process from the grain to the end product?
(Mr Robertson) By and large, that arises in packaging
1 The Closure of the J&B Whisky Bottling Plant,
Dumbarton (June 1998-December 2000), Summary of Fraser of
Allander Institute Interim Report, January 2001. Back