Conclusions and recommendations
1. MG Rover's decline between 2000 and 2004,
and its ultimate collapse, cost the taxpayer around £270
million, including £90 million to modernise and diversify
the West Midlands economy following BMW's decision to dispose
of MG Rover in 2000. Without
the efforts made by local agencies to help the local economy diversify
in the years prior to the Company's collapse, the final impact
of the collapse on the local economy would have been worse.
2. The cost to the private sector and former
employees of MG Rover's collapse may nevertheless exceed £600 million.
This figure comprises an estimated deficit
in the Company's pension scheme of £500m which may have to
be met by the business-financed Pension Protection Fund, and £109
million owed to UK-based trade creditors.
3. The Directors of Phoenix Venture Holdings
received £40 million from the Company between 2000 and 2005.
The Department has appointed company inspectors to investigate
MG Rover's affairs.
4. The Department responded effectively where
it had contingency plans, for example arranging the immediate
support for former employees following the collapse, but not on
some other aspects. There were serious
gaps in the Department's detailed planning, for example how it
might assist a going concern sale if MG Rover went into administration.
Where a major company is at risk, the Department should develop
a planned response in good time which is included in the Department's
top-level risk register and revisited regularly as events unfold.
In this case, the Department was too distant from the company.
5. The Department does not normally advise
HM Revenue and Customs on the ability of a company to meet its
tax obligations. If exceptionally it does
so, it should be careful not to risk any appearance of compromising
the impartial administration of tax by HM Revenue and Custom.
The advice and any discussion should be formally recorded.
6. The local agencies did well to respond
quickly and effectively in the immediate aftermath of the Company
collapse. The agencies paid statutory
redundancy money and benefits well within the normal target times
and increased their capacity to provide advice and services to
the 5,300 people made redundant immediately in April 2005. They
showed how local agencies can respond effectively to an impending
crisis by drawing up plans well in advance.
7. A year on from the collapse over 4,300
people who lost their job were back in work, but around 2,000
former MG Rover and supply chain employees still have to find
work. Although the Rover Task Force has
been wound up, Advantage West Midlands, and Job Centre Plus should
continue to report the number of former employees still unemployed.
Advantage West Midlands should also report on the nature of the
work obtained by former employees and the success of initiatives
to re-train people for other occupations.
8. In 2000, 161 companies in the UK had been
dependent on MG Rover for over 20% of their sales. By 2005, the
figure had dropped to 74 companies, of which 57 were in the West
Midlands. The Department should disseminate
the lessons learned from diversifying the West Midlands economy
to other regions or public bodies with a responsibility for supporting
the development of local economies.
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