Examination of Witnesses (Questions 100-119)
CLLR DAVID
BRYSON, MS
MAUREEN CAMPBELL,
MS CHARLENE
O'CONNOR AND
MR LIAM
FENNELL
17 NOVEMBER 2004
Q100 David Hamilton: Firstly, I would
suggest that the dialogue that you have should have a wider base
and should include the workforce because the workforce does not
just represent Falkirk and Falkirk Council; they come from a much
wider area, and it really is quite important that that happens.
In July we took evidence from trade unions,[4]
and I will come back to Charlene on this because you said earlier
that you had been having a dialogue with the site operators and
owners in relation to the changes that have taken place, but in
July we were informed by the trade unions that no dialogue had
taken place up to that point. Have you been in dialogue with the
company at all during that period, prior to July?
Mr Fennell: Not on the changes
that were going to be but we knew that some changes were going
to be happening. We did not know in advance of the trade unions
but we were informed pretty close afterwards, I would suggest.
Q101 Mr Weir: Just for clarification
on figures for the jobs, Charlene I think you said locals 2,500
and Scotland 4,000.
Ms O'Connor: Yes.
Q102 Mr Weir: Are most of these additional
1,500 in the immediate vicinity of Grangemouth, or do they go
further afield?
Ms O'Connor: It is actually in
a pretty tight travel area. I do not have the figures but we do
know the home areas, the post codes of individuals that work there,
but it is fairly local.
Q103 Mr Weir: So you are talking about
the Forth Valley area basically?
Ms O'Connor: Yes. To be fair it
is probably generally the higher grades that will travel further,
that is the general pattern, so yes, it is the Forth Valley, but
you do have impact coming out of Edinburgh as well, so it is a
circle.
Q104 Mr Weir: So it is fair to say you
are talking about 4,000 jobs, most of which are in the Forth Valley
area?
Ms O'Connor: Yes, probably about
80-90%.
Q105 Mr Duncan: Teasing further on this
jobs figure, you identified correctly it is a very significant
number of jobs in the immediate area. What, though, is the potential?
You identified correctly I think that there could be significant
positives in this announcement with additional investment coming
in. What kind of assessment have you made of the potential for
additional jobs creation were that investment now to come forward?
Ms O'Connor: We have not looked
at the BP site as a whole separately but if you look at the projections
for the investment on My Future's in Falkirk which is a
range of projects through from the port right through the Grangemouth
zone up into Westfield/Middlefield, we are talking in excess of
4,000 jobs planned and we are looking for diversification, but
we are seeing some success already and more manufacturing companies
locating in that area. That is really where I want to see that
central part of Scotland back driving growth at the Scottish level,
high value add manufacturing, and that is where we are going to
be looking to grow jobs and develop supply chain links. We have
Avecia who are looking to bring on suppliers, or companies that
have synergy or scale or whatever, but also people like Alexander
Dennis. We are doing work with them at the moment to look at the
location of Falkirk on the manufacturing side. The Westfield/Middlefield
area would be mixed service based jobs as well as industrial space,
so diversification and a strong manufacturing base going forward,
and about 4,000 jobs.
The Committee suspended from 3.30 pm until
3.45 pm for a division in the House
Q106 Ann McKechin: Just going back to
this question of diversification of the chemical industry in the
Forth Valley, have you analysed the procurement policy of BP at
the site itself, because it would appear that in the last 12 months
they spend $600 million at the site but only 17% was spent in
Scotland, so do you have any strategy about trying to improve
the procurement level spent within Scotland, and have you had
any discussions with BP about that? My colleague asked you about
when you actually knew about the negotiations that were going
on in the plant, but I understand that the group head of BP's
procurement department is also the chair of My Future's in
Falkirk. Do you not think there is a bit of a conflict of
interest there?
Ms O'Connor: No, I do not think
there is directly conflict of interest. Yes, we are aware of their
procurement policy and are trying to work in partnership with
BP and other partners to try and have a much more secure Scottish
supply base. Now, like the decisions they have taken about the
overall chemicals business or the refining we cannot control global
policy from BP, but what we can do is work with the supply base
to do two things: look for opportunity to attract suppliers to
the area so it makes more sense to have local companies, and use
local companies, but also work with the supply base to make them
less dependent on one company like BP, because what you tend to
find is a lot of small companies spring up and they are 89-100%
dependent and that is critical for the Scottish economy. So we
are doing a number of things and I do not believe there is a conflict.
The company themselves understand and are very sympathetic towards
the local supply chain and have put in people resources, senior
management time in developing the supply chain project with us.
We have a secondee in from BP who runs that project on our behalf,
and we are looking to expand that.
Q107 Mr Sarwar: BP is a large employer
in Grangemouth and Falkirk Council, and obviously any impact on
jobs can have serious potential implications for the local economy.
What assurances have you had from BP on future capital funding
and job security?
Ms O'Connor: I am pretty sure
the Committee will have had the same assurances, to be honest,
around the terms and conditions going forward, the duration of
which I think is the one area that we will all have concern about,
but we do know they are looking to continue to employ at the same
level of apprentices and provide the same level of training going
forward—I think really that is the key aspect. I have no
additional information than what the Committee will have heard
from the company themselves. I do not think we can expect more
at this point. What we can do is make sure that the right infrastructure,
the right training infrastructure, is there to support 20 or 30
apprentices going into the new company and that none of that dissipates
in the fallout of the decision.
Q108 Mr Sarwar: But do you not think
that assurances for a year or two are not long-term assurances?
Ms O'Connor: I would dearly love
to have assurances for 10 or twenty years but the world is not
like that. I do not think, when we saw the closure of Motorola
and NEC in West Lothian, that that was expected. There was a sense
that this was a much longer term relationship with Scotland, so
even if we had assurances beyond two or five years, how robust
would they be as the economic cycle changes? I think the key for
us is not to rail against that in itself or alone, but to look
to make a more diverse economy so that we are not over-relying
on one sector, and make sure that the companies that we do have
in Scotland, within the chemical sectors and others, are less
easy to remove from the playing field when the cycle becomes tight,
as has happened in the Motorolas and NECs. What we are seeing
in places like Avecia and we are hopeful to try and achieve in
the case of BP or the New Company is more research and development,
more headquarter facilities, more leading edge global projects
located in Grangemouth with an integrated supply base that makes
it an awful lot harder to lose than just a volume of jobs that
are operating to the formula of a parent somewhere else.
Q109 Mr Sarwar: Do you believe that NewCo
will retain the existing contracts with local businesses, or do
you think that they will seek to re-negotiate such contracts?
Ms O'Connor: The information I
have at this point is not detailed but I believe they will look
to continue.
Q110 Mr Sarwar: Have you had any indication
from BP about what they see as the future for the oil refinery
at Grangemouth?
Ms O'Connor: Not any more than
we heard from Mr Conn earlier. Exactly the same position has been
relayed to me by the site director. Positive but within our difficult
global market place, I would say.
Q111 John Robertson: The submission from
Scottish Enterprise Forth Valley makes quite interesting reading.
It says, "The past seven years have seen a poor petrochemicals
environment at Grangemouth". [5]
Could you explain what is meant by that?
Mr Fennell: I think that was linked
to what Mr Conn said earlier where they were looking to rationalise
the plant to achieve more efficiencies in the plant. It was our
understanding that the plant itself was in the bottom performance
quartiles of BP, and the restructure of the past few years and
the introduction of new processes has improved the productivity
and profitability of Grangemouth.
Q112 John Robertson: You must have taken
more than just feelings from the company on this?
Mr Fennell: We have been having
discussions with the company about the performance. They have
been providing some details on the return of the various parts
of the plant and what we are seeing is a very competitive environment.
When we have also looked at the gross value added within the chemical
sector within Falkirk it is probably a little bit lower than other
comparable plants in Scotland, so we see that the chemicals industry
within Falkirk has been a little bit disadvantaged and we are
hoping that new efficiencies will increase across value added
per worker to make it more competitive.
Q113 John Robertson: So you are telling
me that Scottish Enterprise's submission was just based on everything
the company told them?
Ms O'Connor: No, but what I would
say is the best place to get detailed output and various figures
is from the company. What we do is look at trends beyond that
within the industry and do comparisons, but that is the base source
of the up-to-date data on output efficiency for the plant. We
do not go and do an independent assessment of a company's production.
Q114 John Robertson: It does not say
you make any assessment; you just take what the company says and
you take it verbatim?
Mr Fennell: Can I just say that
the figures we have on the production of the gross value added
come from the Scottish Executive and they produced those figures
in 2003. They are looking at the Scottish chemical sector so we
rely on their statistical department for those figures.
Q115 Mr Weir: You mention in your submission
that BP joined with the Council and Scottish Enterprise in the
Falkirk action plan, and you talk about delivering tangible improvements
in the local economy through new developments and new job opportunities.
How do you think BP's plans might affect the work of the successor
initiative My Future's in Falkirk, given that by any stretch
of the imagination it must be a major, if not the major employer,
in the whole area?
Ms O'Connor: I think there are
two aspects to that. One we have had assurances from BP, from
Robin Mcgill, that the My Future's in Falkirk, as it is
now known, funding and support in terms of staff resources will
be ring-fenced and continued until the end of the project so there
is no threat. I also do have to say this: I have worked on a number
of regeneration initiatives across Scotland in my time within
the enterprise network, and BP is by far and away the most proactive
partner from the private sector that we have ever worked with,
not just in terms of hard cash coming in—and that is something
which we very rarely see—but in terms of people, and explicit
management time there, so I think it is worth noting that. The
other side, though, is the less fixed and less tangible aspect
of what will the future be in five years' time of the decisions
that we are seeing in BP today. As I have tried to outline, we
see this as a potential positive step. Yes, there are risks and
threats but I think it is a more positive basis to go forward
than if the company stayed within BP where it was going to be
starved of investment. I think it would have been a much more
difficult position there. Now I at the moment do not have enough
detail or enough understanding of how each of these new developments
are going to pan out but, as I say, we will be keeping close to
it so until we know exactly the duration of any employment impacts
it is going to be difficult to know that side effect immediately,
but we will be staying close to it.
Q116 Mr Weir: That is what we were discussing
with Mr Conn earlier, the fact that there is a lack of detail.
He talked about the definition of what long term is, and obviously
something like My Future's in Falkirk is presumably a fairly
long term project for the whole area. BP will be moving out in
the relatively near future, however good they have been in the
past. Have you any indication how supportive the new management
of NewCo are going to be in the future?
Ms O'Connor: We have those assurances
at the moment that they will continue with the level of resource
financially and in people terms go forward for the life of the
project.
Q117 Mr Weir: And have they given any
indication of the term they are prepared to put these resources
in for?
Ms O'Connor: The duration of the
project is 10 years, so when they say the duration of the programme
we are taking that to be the end of the project.
Q118 David Hamilton: Can we go back because
I accept the points that are being made and it is difficult to
talk to the workforce and so on about what is happening because
there are so many employers and we have a finite amount of time,
but it is a rarity nowadays to have such a big workforce which
is well represented, and I accept there is a good dialogue between
the company and yourselves and the Council, but I do think in
this site it was such a big workforce in such a vibrant area that
it would be very helpful if we were able to draw that information.
Just one point, as far as they are concerned, I would suspect
the Scottish Executive will have exactly the same information
for the same resources that you are getting information for, so
again in this particular industry the workforce could help you
come to a conclusion on your figures. It is just a suggestion.
Ms O'Connor: It is a good one.
Cllr Bryson: On Falkirk Council's
involvement we have had a big concession from the management locally
and BP and also big concessions from the trade unions which has
been extremely helpful. I and the director have met with the management
twice and also the trade unions on two occasions as well, and
they have been very helpful.
Q119 David Hamilton: Does that also include
the MPs?
Cllr Bryson: We have not met with
the MPs but we are hoping to meet with the MSPs.
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