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Birds Eye (Grimsby)

11 am

Mr. Austin Mitchell (Great Grimsby) (Lab): I rise to draw attention to the closure of the Unilever-Birds Eye factory on Ladysmith road in Grimsby, which will mean the loss of 620 jobs. In its last year, the factory has had sales of £56 million and it brings about £10 million a year into the Grimsby economy. It produces frozen prepared meals and boil-in-the-bag meals, both of which are profitable.

I do not want to begin this major complaint about Unilever's behaviour without paying some tribute to the company. Unilever-Birds Eye has done well by Grimsby and the town has done well out of the company. It has been a model employer, and I pay tribute to its sense of social responsibility, which it has demonstrated through cultural sponsorship and in many other ways. However, it has blotted that copybook with what amounts to a betrayal of its work force, its management and the town of Grimsby, which has always worked closely with it.

Unilever is a big corporation, but it is gripped by a corporate panic. That is what led to those betrayals, which have made a mockery of the partnership that has existed between Birds Eye and its workers over the years. Birds Eye has invested in training, and its staff at the plant are active and enthusiastic. It has upgraded standards all round and invested well in health and all the other things that a co-operative work force need. That partnership is now to be rewarded with a P45 for the employees. That is an appalling way to behave.

I understand the problems of big corporations, which cannot behave with the youthful enthusiasm of small, thrusting, dynamic companies or achieve the same rates of return. That would be like a mature person such as me desperately stuffing himself with ginseng and going to the gym to make himself as virile and active as a superstud of 20. Of course, I have high hopes in that direction, but I do not think I will achieve it. In the same way, a big corporation will not achieve the rates of return that Unilever has been seeking.

In 1999, Unilever produced a report called "Path to Growth" to inject a new dynamism into the company and increase profitability and returns on assets. The company, which is, in effect, an amalgam of brands, reduced its 1,600 brands to about 400. It also shed workers, and there was a major reduction in the work force at Grimsby. The plan produced greater profits in 2002–03 and bonuses were paid to the Grimsby work force. Then, all of a sudden, there was a reversal. In October this year, Unilever issued a profit warning.

The plan was a failure because big companies cannot produce the same rates of return as smaller companies, nor should they try to. That is especially true when markets move against them. In Birds Eye's case, supermarket cost-cutting moved against it, there was growth in the chilled food market, rather than the frozen food market for which the Grimsby plant produced, and boil-in-the-bag became less fashionable. However, all those lines were profitable and sold well. In that situation, the correct response of any capitalist organisation that is attempting to revivify itself and cope with market difficulties is to compete and fight back, not to submit to trends. Birds Eye should invest and re-equip. Much of the Grimsby plant is 20 years old,
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and some was brought from Kirkby. The company can fight back by involving the workers, who want to keep their jobs and keep production going, and by investing in the plant.

Birds Eye can also fight back through promotion. Companies of this scale have enormous power, particularly when it comes to advertising their brands. Advertising was cut back, however, and we have not seen Captain Birds Eye on the television as much. I love Captain Birds Eye. Why do we not see him like we used to? Birds Eye has cut back on advertising, which brand sales depend on, but the correct response is to fight back with new products.

Birds Eye introduced some new products, but, as far as I can see, enjoy! was one of the biggest disasters in food marketing, as it was designed for a yuppie market that did not exist. The employees in Grimsby told the company that enjoy!, which was produced in Germany as far as I can gather, would not sell and did not appeal to the company's basic market. They warned that enjoy! was headed for failure, and so it failed, losing the company some £25 million.

If a company with a strong marketing department, strong brand loyalty and strong advertising cannot devise successful new products, the correct response is to fire the marketing department, not close the plant and fire the workers who produce the products. That would have been one response. Birds Eye should also have looked at new value-added lines, own-label production for supermarkets—anything to use the surplus space in the factory and spread the overheads through bigger production. However, Birds Eye decided that it could do that only by getting somebody else to take over the factory.

A further response could have been to produce for Europe. We are talking about a huge multinational with marketing power all over the place. The pound is coming down and the euro is becoming stronger, increasing the prospects for production and sales from this country, but there was no attempt to produce for a wider market, as a successful and competitive company would have done.

The factory was profitable, as I say: the gross margin was 27 per cent., although Unilever wanted 35, whereas the profit was 13 per cent. and Unilever wanted 16. Those are marginal differences, yet on the basis of them Unilever decided to sell the plant and get rid of it. Those difficulties could have been overcome with the co-operation of the work force and investment in the plant.

Unilever, in the grip of financial panic, decided on a review, which was largely dedicated to trying to get somebody else to take over the factory. Various people were sounded out and came to visit. The effort to sell went on for a whole year, preventing any further action to deal with the problem. That attempt came to an end in September this year. The betrayal—that is, the decision to close—came immediately thereafter, in early October, which was far too quick to allow the consideration of investment and alternatives that should have been used.

James Hill, the managing director, told me that a report on investment would be submitted to the board and that it would be well considered and well put together. I dreamt that I saw James Hill last night, but unfortunately it turned out to be Joe Hill, who
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represented another tradition. However, the company cannot have considered investment in the way I have described.

An investment plan was developed by the GMB in co-operation with local management, who think that the plant could and should be kept open. The cost in that investment plan was £10 million. The plan would have been eligible for grants for new investment and new production, so the cost would have come down after making inquiries with the Department of Trade and Industry and Yorkshire Forward, but they were never made. The cost of investment would therefore have been less than £10 million, whereas the cost of closure is £21.4   million, so why is Birds Eye opting to close and waste its money like that? The accusation is that Birds Eye never seriously considered the investment in the plan. Was the plan pushed before the board? Why was closure rushed through in that fashion?

The closure betrayed the work force and the local management. I pay tribute to Roger Norrington, the local manager, who has kept us in close dialogue—I hope that does not imperil his job—and has been helpful in dealing with the situation. The closure betrayed Grimsby as well.

Instead of considering the alternatives, it has been decided to outsource the bulk of production to Rye Valley in Ireland and escape the responsibilities of an employer to the work force, in the same way that Nike has pioneered outsourcing production to south-east Asia. I have a wry view of Rye Valley, because the plant was built with £30 million of European aid to take jobs from this country. It benefits from 15 per cent. corporation tax, as all Irish plants do. The race to the bottom is beginning, and it will get worse, because Estonia is considering corporation tax of 0 per cent. to attract businesses.

In effect, through Europe, the British taxpayer is paying money to Ireland to invest in production that will take jobs from this country because the Irish Government are imposing such a low corporation tax rate to make it attractive to invest in Ireland. Mr. Sarkozy, France's Minister for the Economy, Finance and Industry, argued that

It is unusual for me to agree with a French Minister, but I agree wholeheartedly with that. It is iniquitous that we should be paying both to lose jobs and in aid to Ireland, which benefits from various tax concessions, to establish a plant that takes those jobs.

A United States Government report indicates that in four years, US multinationals have boosted their profits from £13.4 billion to £26.8 billion by establishing in Ireland. They have absolved themselves of all responsibility, they have an easier life and they do not have to get involved in the messy business of production as it has been transferred to Ireland. That restores the gross margins to the 35 per cent. they want, plus 7 per cent. for marketing, even though the goods are produced by another company.
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We have the spectacle of a Labour Government—a Labour Government, to use Neil Kinnock's intonation—using taxpayers' money to clear up the mess and pay the unemployment benefit of the workers in Grimsby who will be out of a job, and allowing the company to transfer jobs to Ireland, without penalties. I draw that to the Minister's attention: something must be done about that outsourcing. We cannot just sit there and say it is inevitable. It is a loss of British jobs.

Under the Companies Act 1985, the directors have a responsibility to have regard to the interests of their employees. In other words, they have a duty of care to them. Is that exercised by closing the factory? I wrote to all the directors of the parent companies, who have that duty of care, pointing out what they were doing and saying that a brand holder divorced from production and relying only on advertising is doomed to failure.

The supermarkets have their own labels, but they have a base in the market and a marketing ability, while brand masters who just produce brands and demand a high rate of return on them have no strength in production or marketing. Effectively, they are doomed to exploitation and they put themselves at the mercy of whoever produces the goods. The have no control over quality. All they are doing is advertising the product, hoping that the returns roll in to finance their comfortable existence without the messy business of production and having to co-operate with the workers, who have given them so much in the case of the Grimsby plant.

Production is power; there cannot be brands without companies having the power to produce them. This is a squalid end to what was a good relationship. There was 40 years of co-operation between Birds Eye and Grimsby, but that co-operation has been rewarded by betrayal.

The workers have been loyal and supportive—I regularly awarded certificates for training and other schemes developed by the union and the company together—so no wonder they feel betrayed. In some ways, this is almost a family plant. Mothers and daughters, husbands and wives—they all work there and they all feel angry and betrayed. They are being asked to continue production until the end of February, when the factory can be handed over to someone else. I thought better of Unilever and Birds Eye than that.

I must ask the Minister whether we can intervene at an earlier stage to make the company aware of any alternative and of what investment the Government might make. Why cannot we penalise the extravagant destruction of British jobs by outsourcing? I am grateful that the Department of Trade and Industry has set up the task force that I asked for, so that employees can be helped into new jobs. I am grateful also that the Department will consider alternative uses for the factory. The closure will have consequences for the Hull and Lowestoft plants, which have so far escaped that fate.

It is essential that the Department intervene to get a better deal for the local work force, as unemployment in Grimsby is higher than the national average. Most of all, Mr. Taylor, I want to say to Unilever, "It is not too late. Nothing becomes you so badly as the leaving of Grimsby. Think again."
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11.17 am

Shona McIsaac (Cleethorpes) (Lab) rose—

David Taylor (in the Chair): Order. It is important that the Minister has adequate time to respond, as we are debating an important subject. I call the hon. Member for Cleethorpes (Shona McIsaac), but I ask her to be brief.

Shona McIsaac : Thank you, Mr. Taylor. I shall certainly be brief. The essence of what we are debating was well articulated by my hon. Friend the Member for Great Grimsby (Mr. Mitchell), who represents a neighbouring constituency.

Grimsby and Cleethorpes form one urban area, and the workers come from both towns, so the closure also affects many of my constituents. As my hon. Friend said, we are calling upon the company to think again. Even at this late stage, we want the Department and the Government to work with the company if they can—for example, by examining the grants that could be made   available to modernise the plant—to protect the 600-plus jobs. What we are asking for is not difficult, we believe.

I want the Government to consider future prospects should those jobs go. The Minister must be aware that the area of Grimsby and Cleethorpes is remote. It is a large urban area, but it is remote from other urban centres. The result is that many of the workers will have to move to other cities and towns should they lose their jobs, although we obviously want the company to think again. It is an isolated area.

We must also consider the fact that many of the workers are women, that our area has a high number of part-time workers and that, as has been said, unemployment is higher than the national average in the constituencies of Grimsby and Cleethorpes. The role of the task force is therefore crucial. We obviously hope, through my hon. Friend the Minister's intervention, that Unilever will think again about closing the Birds Eye factory in Grimsby. However, should the worst come to the worst—I honestly hope that it does not, for the well-being of so many families in our communities—the task force should do all that it can to ensure that those people secure other jobs in our community.

11.19 am

The Minister for Energy and E-Commerce (Mr. Mike O'Brien) : I congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing this debate, and on raising the important issues surrounding the closure of the Birds Eye factory. As a constituency MP, it is right that he should bring it to the attention of the House. It is also right that my hon. Friend the Member for Cleethorpes (Shona McIsaac), whose constituents are also affected, should be able to come before the Chamber and raise enormously serious issues that affect the whole area.

The Government certainly want to extend our sympathy and concern to members of the GMB, a union of which I am also a member. I am concerned that they have been put in this position. It is not a matter for the
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Government to speak for Unilever; it is big enough to speak for itself. However, we have approached Unilever and discussed the situation.

Unilever announced its intention to close the factory on 7 October. The decision, it says, was an extremely difficult one. It explored all the alternatives to closure. It tells us that it considered the possibility of selling to a third party and the viability of retraining its work force and investing in developing new opportunities and products. It explored the various financial sources that might be available. None the less, it concluded that it needed to find a far larger and more flexible plant—in its terms—to be competitive in the industry. Longer-term investment in the Grimsby plant did not match up to the scale and innovation capabilities already available from third parties.

It is remarkable, given the difficult circumstances that we have heard about today, that my hon. Friend the Member for Great Grimsby was able to pay the tribute that he did to Birds Eye as an employer that has shown a sense of responsibility until now. It is right that the company should explain to the work force why it made this decision. It is regrettable that it has taken the decision as part of its review. I understand that two other sites, in Lowestoft and Hull, are to remain unchanged for the foreseeable future.

There has been great concern about the impact that the loss of 620 jobs will have on Grimsby. The departure of Birds Eye is a huge loss for the town. We fully recognise that. Department of Trade and Industry officials at the Government office for Yorkshire and the Humber have made contact with Unilever and early dialogue has begun. That has been assisted by a group of local and regional partners, including Yorkshire Forward, Jobcentre Plus and North East Lincolnshire council officials, to see what can be done to talk through the issue with Birds Eye and about any job losses.

One hope, I am told, is that there are significant job opportunities still in the Grimsby area. In the food industry alone, there are opportunities for 200 jobs. That falls short of the 620 jobs lost, but at such a time 200 jobs are welcome in themselves. A recent press report suggested that local food firms are struggling to fill vacancies. Bizarrely, given the circumstances, North East Lincolnshire council reported that there would be a trade mission to Latvia and Lithuania to try to recruit workers to the area. I suspect that those undertaking the journey may feel that there are opportunities to employ people in the local area, rather than going further afield. They might want to reconsider going there in these difficult circumstances.

The company tells us that it will provide assistance for retraining and skills for new avenues with an offer of between £0.5 million and £0.75 million to be made available. The regional development agency, Yorkshire Forward, has agreed to consider meeting costs to undertake an impact assessment study and has confirmed funds up to £30,000. It is not for the Government to intervene in business decisions, but they will, along with Yorkshire Forward, work closely with the local authority and the appropriate agencies in the remaining months, to secure a more co-ordinated approach to the handling of the circumstances and their immediate impact on the area.
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I know that my hon. Friend's constituents will be enormously concerned about the closure of the factory. I assure him that despite that very bad news, the Government remain firmly committed to manufacturing, which is a vital part of our economy. It accounts for one sixth of our national wealth and it is also part of our history. More importantly, it must be part of our future. We want a successful manufacturing sector, encompassing food production, which makes value-added products and involves well paid, highly skilled jobs.

My hon. Friend raised the issue of offshoring. The difficulty is that Britain benefits enormously from offshoring. I remind hon. Members of the factories from other countries that have been set up in the UK—Nissan from Japan and many companies from the USA have located here. They all offshore production into the UK. The UK, as the director general of the CBI, Digby Jones, said a few days ago, is made for globalisation. We are in a very competitive position and we benefit enormously from offshoring into this country—or inshoring, from our point of view. That is one reason why we would not want to take protective measures. The damage to our overall economy and to jobs would be enormous throughout the country.

Mr. Mitchell : There is no reason to believe that taking measures to stop the export of jobs, or to penalise it through the tax system, as Senator Kerry proposed to do during the American election campaign, would deter new companies from entering this country.

Mr. O'Brien : We need to make sure that companies choose to come here because they know that they will not be subject to vast numbers of restrictions. Otherwise, they will not come. We must get the balance right. We need to remain in our present position. We are in second place out of the whole world, behind the US,
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as a location where people are investing. We are well ahead of many other countries—certainly all our European partners—in getting jobs and investment from abroad.

Those jobs come here because of the infrastructure, the skills of the work force, the stability of our economy and the fact that our public finances are properly managed. All that my hon. Friend's party—and mine—has been so busy doing to manage the economy in the past seven years has contributed to making Britain a place that attracts inward investment.

I appreciate that it is frustrating—it makes constituents like those of my hon. Friend very angry—when jobs go to other countries, and particularly when they go to another member of the European Union that may have received financing for part of the building of the factory. I understand the view that people take in such circumstances. There are, of course, instances when British companies have benefited from EU finance. None of that mitigates the serious problems faced by members of the GMB because of Birds Eye's decision.

All I can say to my hon. Friend is that we will continue to engage with Unilever and to see if there is any way we can assist. We will provide whatever is available to encourage it to look at its decision. We will provide what assistance we can towards dealing with job losses and making retraining available. We will encourage the company to continue, even in these difficult circumstances, to adopt a socially responsible approach to skills retraining and helping workers relocate.

We will do all that we can to work with my hon. Friend. I shall be happy to meet him and I am sure that my right hon. Friend the Minister for Industry and the Regions will be pleased to do the same, if that helps, to talk through the issues and seek a way to mitigate something that is regarded as very damaging for the town of Grimsby.

Sitting suspended until Two o'clock.
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