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Lyndale Group Ltd

1.30 pm

John McDonnell (Hayes and Harlington) (Lab): With your permission, Mr Pope, there will be a slightly different format to this debate. Normally, the Member initiating the debate will speak at length and the Minister will respond at some length, but because this incident has been a shock to many of us, I shall outline the case and allow other hon. Members with a constituency interest to intervene. I accept that there is a limited amount that the Minister can say today, other than to offer us a meeting next week before the recess. It is interesting that this debate has followed one on fishing, because this matter is a fishy episode in the industrial history of this country.

Let me explain the background to the debate. A number of Members of Parliament have been approached by the Bakers, Food and Allied Workers Union because it is concerned about the treatment of its members by Lyndale Foods Ltd. At this stage, I pay tribute to the union for its vigilance and the active support that it has provided to its members who were formerly employed by Lyndale within that company group. The union has been assiduous in its work at a national level through its general secretary Joe Marino, the regional officer Ian Hodson and its local representatives. The union has a long tradition and history of representing its workers effectively and has displayed that tradition during this particular episode.

I decided to call this debate because the events at Lyndale Foods Ltd have had such an impact on so many workers and their families. Many people, including Members of Parliament, feel angry about how those workers have been treated. I wish to highlight the need for new legislation to prevent such events ever happening again and to protect workers from that sort of exploitation.

Let me talk about the history of the matter. Lyndale Foods Ltd was placed into administration on 9 June. It operated bakeries across the north-west under a range of brand names: Hampsons in Bolton, Peter Hunt’s in Bolton—a savoury products supplier—Sayers the Bakers in Liverpool, and Wimpy in Runcorn. Included in that list are two production facilities—in effect, factories: Hampsons bakery in Bolton and Sayers bakery in Liverpool. The Lyndale Group itself was based in Sale. The chief executive of Lyndale was a Mr. Michael Quinlan and the chairman was Mr. Sandy Birnie. On 1 May 2008, Sayers the Bakers Ltd was registered as a company. On 9 June, just a month later, Lyndale Foods Ltd was placed into administration and 40 shops were closed. At that stage, 450 jobs were lost at the Liverpool Norris Green factory. The profitable parts of Lyndale Foods Ltd were bought by Sayers the Bakers Ltd, which is registered to Mr. Michael Quinlan and Mr. Sandy Birnie—the former chief executive and chairman of Lyndale.

The company did not consult with the recognised union—the Bakers, Food and Allied Workers Union—despite it being clear from leaked documents from the Lyndale Group board meeting on 28 July 2005 that the directors had been considering and discussing such changes for nearly three years. I shall talk about the presentation given to the board of Lyndale on 28 July 2005, which looked at the strategic options for the future of the company. It looked at the current production
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facilities at Hampsons and Sayers and described both sites as landlocked. The presentation also said there was some duplication of the product, that vehicle movement was difficult and that there was limited parking. It went on to consider the individual sites in turn. In relation to the Liverpool site, which is located in the constituency of my hon. Friend the Member for Liverpool, West Derby (Mr. Wareing), it looked at the overall area and discussed the potential for planning permission for either retail or residential development, subject to access to Broad lane. The residential value of the site was thought to be £2 million. That value was conditional on staying within Liverpool itself. Although the company has clearly been planning major changes within the organisation and possible major closures and sell-offs, it has had no consultation with the union since then.

Dr. Brian Iddon (Bolton, South-East) (Lab): Does my hon. Friend know if any Member of Parliament with constituents affected by the closures has been consulted by Mr. Quinlan and Mr. Birnie?

John McDonnell: Since the company’s proposals came to light with the announcement of liquidation, we and the union have thoroughly circulated information to MPs. We have also circulated information through the House and have tabled an early-day motion on the subject. Since then, it has come to light that not a single Member of Parliament with a constituency interest—constituents working where these factories are located—has been consulted. There has been no word, no offer of a meeting and no correspondence. The only information that has emerged has come from the union and individual workers making their representations.

Tony Lloyd (Manchester, Central) (Lab): Does my hon. Friend agree that although it is bad that Members of Parliament have not been consulted, it is much worse that the employees were effectively given no foresight of what was going on? Some of them literally walked into work in the morning and were escorted off site. In particular—I think my hon. Friend is moving towards this—there is a real suspicion that the company planned to move into administration. If that is the case, there is a real question about whether the company was trading while it was insolvent. That is a very serious question that the company has to answer.

John McDonnell: My hon. Friend has raised a number of deep concerns and suspicions about the likelihood that the company has acted in bad faith in all its dealings. Members of Parliament are suspicious because in the normal run of things, if there is a planned or even rumoured closure in a constituency, we would expect the company to involve the relevant MP in some discussions. I agree with my hon. Friend: the first port of call would have been to consult the union that represents the work force. That did not occur, which confirms our suspicions that this was a planned event, as demonstrated by the options paper in 2005.

Mr. Robert N. Wareing (Liverpool, West Derby) (Lab): My hon. Friend is making an eloquent presentation of the problems, but I have to say that on 8 April, Sayers did in fact write to me. However, I am afraid that the company has not kept the promises made in that letter, which states in relation to the Liverpool site that

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As far as I know, that has never happened, and I have had talks with representatives from the BFAWU. The letter also states:

I do not know whether my hon. Friend is aware, but since then, 18 shops on Merseyside have been closed. Sayers has not kept to its word on that or on conducting consultations. In fact, on 7 June—two days before the Lyndale chairman and chief executive bought Sayers the Bakers Ltd, as it became known in Bolton—it sent cheques to the staff. All those cheques bounced. I do not know whether my hon. Friend is aware of that, but it is an episode of what amounts to corruption on the part of these people.

John McDonnell: That confirms exactly the pattern of behaviour that we have experienced throughout this process: lack of consultation, lack of information, lack of dialogue with the union and a lack of proper dialogue with individual MPs. Sayers has broken its word to MPs and to its own staff.

The presentation that the board had in 2005 looked at individual options and made proposals on a single new bakery in either Bolton or Liverpool. Clearly, the rationalisation process was considered at that stage. In relation to the single new bakery, one of the issues considered was whether some of the existing terms and conditions of current employees could be overcome.

An advantages and disadvantages summary was given to the board on the potential for a single new bakery. One of the disadvantages that it sets out is that negotiating terms and conditions may be costly and protracted. It accepts the loss of a skilled work force, so it is quite clear that the company was trying to get rid of its existing work force and, I suppose, to restructure in the most ruthless way without consultation, dialogue and discussion. I fear that, as has been said, the aim was to ensure that it avoided its responsibilities, even in terms of individual payments of wages to members of staff.

Dr. Iddon: Is not the consequence that the company does not have to pay its own redundancy costs out of any assets that it has accumulated through buying up smaller companies and that the Government—the public purse—have to meet that cost?

John McDonnell: Let me come on to that. I think that the Government now need to get involved in the case because clearly the company has used a device for avoiding its responsibilities, which will eventually fall on the general taxpayer.

To continue the history, the announcement in June 2008 of administration and redundancies was interesting because the representatives from the bakers union were in conference at that point in Bridlington. All remaining sites have been rebranded as Sayers the Bakers. Let us examine the loss of jobs. The Sayers Norris Green bakery—factory—closed with a loss of 211 jobs. Of the 40 shops that closed, 19 were in Merseyside. Overall closures included 39 shops trading either as Hampsons or Sayers, and the one Wimpy shop in Runcorn.

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Sayers Ltd will now operate from a single bakery—factory—in Bolton, exactly as planned in one of the options set out for the board in 2005. That was not notified to anyone by way of consultation until the act was virtually done in April and finally done in May. Overall, Sayers will now employ 1,500 staff and operate 158 stores. That includes 60 stores in Merseyside, employing more than 500 people.

The administrator, up until yesterday, was looking for a buyer for Peter Hunt’s, the Bolton-based savoury products supplier employing 240 workers. As of yesterday, Peter Hunt’s closed and the staff were asked to leave the site. They were told that the staff costs and the liabilities of anything up to £2.7 million were a deterrent to the sale of that asset as a going operation. Clearly, that is another way in which Mr. Quinlan and Sandy Birnie will ensure that they make a profit in their new company, having avoided their responsibilities to their existing workers.

Initially, 450 workers were made redundant as a result of the insolvency of the Lyndale Group. I take it that the events at Peter Hunt’s take the figure up to nearly 700 workers. Legally, under the Employment Rights Act 1996, all employees are entitled to claim arrears of wages, holiday pay, notice pay and redundancy. Those claims are made to the redundancy payments office and are capped at £330 a week. That means that the liability falls on to the state and taxpayers.

Most of us have been in redundancy situations—for example, as trade unionists, we have negotiated redundancy settlements. In the normal redundancy process, particularly if people are making plans over a three-year period, it would be possible to negotiate some form of settlement with the company that involved natural wastage, protection of the maximum number of jobs and beneficial terms above and beyond just the simple state redundancy payments. Of course, then the liabilities would fall on the ongoing concern—that is what this company has avoided throughout.

There has been some harsh treatment of individual employees. As my hon. Friend the Member for Manchester, Central (Tony Lloyd) said, people have been walked off site by security guards. Expenses claims and wages have not been paid in some cases. In one case in which payments to a credit union through salaries have supposedly been made, they have in fact not been made since January. There are matters for investigation relating to how those staff have been treated.

BDO Stoy Hayward LLP was engaged by the Lyndale Group before administration to act as business restructuring consultant. In the normal run of things, if people are looking at future changes, they will employ consultants to advise them on how best to go about it. There is nothing wrong with that. BDO Stoy Hayward made recommendations to the board on how the Lyndale Group could be restructured. Again, there is nothing wrong with that, but when the Lyndale Group went into administration on 9 June 2008, BDO Stoy Hayward acted as its administrator, so naturally there are concerns about potential conflicts of interest. We understand that there is nothing illegal about that, but it is generally seen in business circles as bad practice, and I believe that there is a conflict of interest. A company that is advising on restructuring suddenly becomes the administrator to facilitate that restructuring at a cost to the work force.

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Tony Lloyd: I understand that BDO Stoy Hayward has refused to say how much the company now has by way of liabilities. It confirms that it is well under water. In the published accounts of September 2006, Sayers had debts of £9 million and an operating loss of some £2 million. However, I think that it is a recorded fact that the company, when Lyndale took over, disposed of an awful lot of assets. I wonder whether it is possible for us to ascertain what happened to the value of those assets. Were they simply taken out of the company as profit for the shareholders? If so, there must be a question about whether that was a deliberate raid on those assets at the expense, ultimately, of the work force and other creditors.

John McDonnell: My hon. Friend makes a very pertinent point. It relates to the fact that we need to do an investigation into the role of Stoy Hayward. If it was advising the company on the best mechanisms for restructuring and to put the company in the best financial situation, was it also advising the company that it would be better to go into administration and, as a result, did it get the contract as administrator to manage the whole process? My hon. Friend is alluding to the fact that that has been used as a device throughout. It is a complicated device and could have been used effectively, I think, only with professional advice from someone such as Stoy Hayward.

We need to open up the books. As my hon. Friend said, we need to find out what assets have been realised. What liabilities are there really and how will those liabilities be disbursed? I have some doubts about whether the people who advised the company on how to use that device can be relied on to ensure that we receive a full and accurate statement of the assets and to give advice on how those assets should be distributed fairly, because I do not believe that up until now they have acted fairly.

Let me run through the effects of what has happened so far and talk about a way through this and what we would like to see from the Government.

Mr. Wareing: We cannot go through this debate without pointing out that the work force at Sayers in Liverpool are very loyal. Many of my constituents who are employed there have been with the firm for 30 years. Indeed, one employee has been there for 45 years. They deserve to be treated with dignity. The Government should do all that they can to ensure that those workers are treated with the dignity that they deserve.

John McDonnell: I fully concur. It is not just a loyal work force; it is a good product. None of us is asking for a boycott or anything like that, because we want the company to survive, but it could have survived effectively, efficiently and profitably if it had consulted its work force. We know that we are in periods of change, and the union would have been involved in managing that change to ensure that the company continued to provide a service to our communities.

Mr. Wareing: It made my wedding cake.

John McDonnell: That is another story altogether.

Let me go through the effects of what has happened. The job losses have very severe implications for some communities. At the moment in the area represented by
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my hon. Friend, there are 2,719 people unemployed. The unemployment rate where this factory is based is 7.6 per cent., which is the 20th highest in England. That number of job losses in the Liverpool and Merseyside region will have a major impact.

In personal terms, there has been real brutality. Security guards marching people off the site at which they have worked for years is just unacceptable in the modern day and age. There are lost wages and lost overtime. I believe that the work force and the union have been treated with contempt by the management, and the taxpayer will now pick up the burden. This is not the only example. There is an example in my constituency, Varig Airlines, where exactly the same happened. A company supposedly goes bust and then the next day is operating in the same way with the same managers and has run away from its liabilities.

I believe that we are dealing with a scam. It was planned over time by the same personnel who are now benefiting from it—Mr. Quinlan and Sandy Birnie. The advisers, who are now the administrators and who are benefiting from it, helped to plan it. I believe that an inquiry should be set up into how the company entered into administration. It should consider the company directors’ liabilities. Questions should be asked. Was the company trading while insolvent? Was a device used to avoid responsibility? Was the management buy-out merely a front?

People have been hurt and have lost out—not Mr. Quinlan or Mr. Birnie, and not Stoy Hayward, but the workers themselves. The inquiry should consider all such matters. We need to consider whether a change in legislation is necessary to prevent this happening again. We need to review the law, perhaps changing it to prevent companies from evading their responsibilities.

Will the Minister meet a delegation of MPs from the area and representatives of the Bakers, Food and Allied Workers Union as a matter of urgency? The summer recess is in a fortnight’s time, and we would welcome meeting the Minister to discuss the case and to see what action can be taken before we rise.

1.51 pm

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing a debate on such an important issue. I thank my hon. Friends the Members for Bolton, South-East (Dr. Iddon), for Manchester, Central (Tony Lloyd) and for Liverpool, West Derby (Mr. Wareing) for their contributions.

My hon. Friend the Member for Hayes and Harlington referred to the basic facts. Last month, the Lyndale Group announced some 450 job losses. This week, a further 200-plus job losses were announced at the Peter Hunt division of the group. That was alongside a management takeover of a company that will now trade as Sayers the Bakers, and a series of shops remain in business. I understand that by trading under that name, it will safeguard about 1,500 jobs.

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