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Valve Industry

Volume 892: debated on Friday 23 May 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

12.58 p.m.

I am grateful for the opportunity of raising this afternoon the subject of Eurovalve and the future of the valve-making industry in Britain, with special reference to the firm of Glenfield and Kennedy of Kilmarnock, one of the major employers of labour in that town. Although Glen-field and Kennedy is a Kilmarnock firm in the constituency of my right hon. Friend the Secretary of State for Scotland, whom I am glad to see here this afternoon, a large number of the work force are constituents of mine in Central Ayrshire. My right hon. Friend has been in touch with the Department of Industry and the Minister of State, Lord Beswick, on this matter. He has seen the union mainly concerned, the AUEW, and has had three meetings with the shop stewards of Glenfield and Kennedy.

Following these meetings my right hon. Friend conveyed to his hon. Friend the Minister of State the fears of the work force at Kilmarnock and helped to arrange a meeting between the shop stewards along with two representatives of the Scottish Trades Union Congress, including Mr. James Milne, the general secretary, and Lord Beswick. After this meeting the shop stewards met my right hon. Friend and the delegation reported that is appeared that the decision to set up Eurovalve had been made and that the Government could not reverse it.

Although this was accepted by the shop stewards it was agreed that an attempt would be made to get an assurance that the project would be held to the original development and that I would be approached to raise the matter in the House by way of an Adjournment debate. I do so now.

On 20th Febraury 1975 the Financial Times printed an article headed:
"Valve makers fail to stop BSC factory project."
This was a report to the effect that the British Steel Corporation had set up a management team to run a company known as Eurovalve, to manufacture valves mainly for use in water pipelines. This was to be a joint venture between the British Steel Corporation and a French company known as Pont-à-Mousson on a five-acre site between Nottingham and Derby. The initial investment of £500,000 was to be spent by the two partners and production was due to begin at the end of this year.

The five-acre site was planned to expand eventually to nearly 40 acres and to employ up to 150 people. The project was designed by the BSC to provide new job opportunities for redundant steel workers in the area. Although this article was the first time the shop stewards at Glenfield and Kennedy and other valve manufacturing works in the United Kingdom became aware of Eurovalve, the British Steel Corporations plans to set up the joint venture were first made known in April 1974, when a Labour Government, immediately on taking office, had agreed to it on the grounds that it would provide much-needed employment in the Stanton area, where the BSC blast furnace works had closed.

This closure was already under way when the Labour Government set up their review of the British Steel Corporation's closures. As it could not be reversed, both the Government and the BSC attached high priority to replacing the lost jobs as far as that was possible. Most of the negotiations between the BSC and PaM had been conducted during 1973, during the period of the previous Conservative Government. Upon the Government announcement in April 1974 the British Valve Manufacturers' Association protested to the Government and held meetings with representatives of the Department of Industry, and with the Under-Secretary last August. The main objections of the valve manufacturers were, first, that the British valve industry was not afforded an opportunity of collaboration before the BSC resorted to linking with a foreign manufacturer; secondly, the principle of the BSC manufacturing valves in collaboration with a major foreign manufacturer and in competition with existing United Kingdom industry on, presumably, a shared profit royalty basis; thirdly, the possibility that Eurovalve would receive favoured treatment from BSC in respect of raw materials, particularly in the molten state, to the detriment of other customers in the valve industry; and fourthly, that there was a likelihood that PaM would use the advantageous base to extend the range of valves manufactured far beyond that envisaged in the initial case. The choice of the name Eurovalve gave credence to this belief.

The association hoped that approval would be withheld. There had been no consultations—I stress this—between the British Valve Manufacturers' Association and the trade unions concerned, or between the management of Glenfield and Kennedy and the shop stewards. This lack of consultation on the management side must be regretted, in view of subsequent events concerning this matter, which vitally affected not only their own future but the future of those working at Glenfield and Kennedy.

It was only after the Financial Times article of 20th February 1975 that the shop stewards at Glenfield and Kennedy were told of the concern of the valve manufacturers. By that time it was a case of shutting the stable door after the horse had bolted. The vital decisions had been taken. During the discussions and correspondence between the shop stewards and the Department some contradictions have appeared. I would like the Minister to clear them up.

In a letter dated 6th March 1975 from the Minister of State's Office to the Scottish Office a comparison is made between the 25,000 people employed in the United Kingdom valve-making industry with the Eurovalve projected work force of 150 people. In a letter from the Department to Mr. Thomas Clayton, the secretary of the joint shop stewards' committee at Glenfield and Kennedy, dated 21st March, there appears the following statement:
"It has been stated that the initial proposition for the joint venture would employ 150 people."
Will the project be limited to 150 people and to one type of valve? The point has been made that this industry has an annual turnover of £130 million and therefore the joint venture is of no Scottish significance, because it accounts for only 1 per cent. of that sum. This is irrelevant for us at Kilmarnock, since Eurovalve will make waterworks valves. The annual value of the present production of such valves is between about £4 million and £5 million.

Therefore, Eurovalve's turnover becomes about 20 per cent. to 25 per cent. of all the waterworks valves produced by British manufacturers. This vitally concerns the workers at Glenfield and Kennedy, since over 30 per cent. of its production is of waterworks valves. Will the Under-Secretary give the assurance that in future developments of this kind there will be consultations with the industries concerned and others whose plans are likely to be affected, including trade unions?

This project could be only the tip of the iceberg. The British Steel Corporation has a statutory duty—I have been pressing it about this, supported by the Government and the TUC—to try to provide alternative jobs in areas affected by redundancies and closures in the steel industry by the encouragement of new developments. It will not help the redundant steel workers in places like Cambuslang and Motherwell if they are provided with alternative jobs at the expense of workers in Kilmarnock and Irvine.

In a booming economy there would be no problem, because the expanding market would take up any increased production. But in today's industrial climate with unemployment rising, especially in certain areas of Scotland, that is just not on for us. I ask the Under-Secretary to tell us what steps have been take and what help has been given by his Department to extend the range of products and to increase the competitiveness of Glenfield and Kennedy, and other value manufacturers in development areas such as Scotland, to safeguard jobs. I hope that the Minister can give me and my right hon. Friend and the workers of Glenfield and Kennedy answers to these questions.

1.8 p.m.

I am well aware of the anxiety felt by my hon. Friend the Member for Central Ayrshire (Mr. Lambie) and by my right hon. Friend the Secretary of State for Scotland, particularly about the employment provided by Glenfield and Kennedy in the constituency of my right hon. Friend. I appreciate their fears about the adverse effects on employment prospects in their constituencies which it is felt may occur as a result of the setting up of the Eurovalve joint venture.

My hon. Friend has rightly raised several of the points about which there has been some discussion. I welcome the opportunity today to put the matter into full and proper perspective. As my hon. Friend had said, the first approach by the British Steel Corporation on this subject was in December 1973, to the previous Conservative administration. I cannot of course speak about that, and anyway the project was overtaken by the February 1974 General Election. The Government were asked to consider this matter in their first few days in office.

The proposal involved the establishment of a new company which was to be known as Eurovalve Ltd. to be jointly owned by the British Steel Corporation and by the French engineering company Pont-à-Mousson S.A. to manufacture rubber-coated gate valves of a type not available in the United Kingdom—I know that that point is at issue and I shall return to it—and which were then being imported into this country through a German subsidiary of Pont-à-Mousson. The Eurovalve factory was to be located at the BSC's Stanton works near Nottingham.

The BSC had several reasons for wanting to embark on this joint venture. Not only has the BSC's Tubes Division for long had it in mind to enter into the industrial valve market as a natural part of the development of its pipeline product business, but this particular type of valve which, I emphasise, uses ductile iron castings, would be specially suitable for production at the BSC's Stanton works and would make a particularly valuable addition to the castings order book there.

The cost to the BSC of £400,000 would be relatively small and would not be a direct call on public funds. Without the joint venture, the BSC would probably develop valve manufacture at Stanton by direct investment at no special saving in capital expenditure. The project therefore had considerable benefits in the eyes of the BSC. Furthermore, the forecast growth of 7 per cent. a year in the United Kingdom market for industrial valves suggested that there were good prospects for an additional manufacturer in this sector.

This brings me to the most important reason which the BSC advanced for getting the venture going, namely, the need to provide alternative local employment for the workers made redundant by the closure of the coke ovens, sinter plant and blast furnaces at Stanton. The Labour Party was faced virtually with a fait accompli when it came into office in March 1974. The BSC, as a result of this joint venture project, would be able to honour the undertaking which it had given at the time that the closure of the plant was proposed that it would do everything in its power to mitigate the effects of the closure on employment.

These seemed to the Government to be sound reasons for the proposed investment and a useful but limited extension of the activities of a public enterprise. I would not want particularly strongly to stress the extension. There was, however, the not unimportant point of which we were bound to take account that manufacture in the United Kingdom, rather than in France or Germany, as had been the case up to now, of this type of valve, would aid our balance of payments both by providing import substitution and by creating new opportunities for further exports. We hope that there will be significant increases in exports as a result of it.

Therefore the Government gave their approval to the BSC's proposal. Perhaps it would be helpful if I were to spell out explicitly the heads of agreement which were drawn up. First, a jointly-owned company would establish a factory at Stanton. The site would be purchased at market value from the BSC. Production of rubber-coated gate valves would commence in mid-1975. It was proposed that there would be a later expansion to include other types of industrial valve; I do not conceal that. The heads of agreement laid down that, until production commenced, Pont-à-Mousson would make adequate supplies of valves available from its European factories.

Secondly, ultimate control of the company would be with Pont-à-Mousson, which would hold 50·1 per cent. of the equity, although the BSC, with a 49·9 per cent. holding, would have strongly entrenched rights. Thirdly, valve designs, including research and technical assistance and knowhow, would be made available to the company by Pont-à-Mousson and any necessary licences would be granted in return for a royalty on sales. The BSC would provide other services to the company at normal commercial prices. I emphasise that. This has been a point of considerable controversy.

Fourthly, the company will eventually employ about 150 people, many of them to be drawn from among the BSC's Stanton redundant employees. Fifthly, castings from Stanton would be transferred to the company at market prices. The value of such sales should rise. It was expected to rise to about £400,000 per annum on gate valves by 1978–79.

Sixthly, valve sales to the United Kingdom by the Jansen subsidiary of Pont-à-Mousson, which currently amount to £150,000 per annum, would be transferred to the new joint venture as soon as it was set up. This is an important aspect of the import substitution argument. In addition to providing import substitution, the joint venture was expected to lead to additional exports from the United Kingdom.

I appreciate the fear that the present unemployment at Stanton will be exported to other areas and that the constituents of other hon. Members will suffer. In other words, there might be advantage to the employees made redundant at Stanton but it would be of little net advantage in employment terms in the United Kingdom if the unemployment were transferred to other areas. I appreciate the strength of that argument. Nevertheless, I believe that it is unfounded, and I should like to indicate why I believe that.

First, I have been assured by the BSC that trading with Eurovalve will be at arm's length and the BSC, like other nationalised industries, has a duty under the Iron and Steel Act not to discriminate between its customers. I have been assured that there is no question of the BSC giving the company preferential treatment in either the supply or price of castings. Nor will the BSC refuse to sell pipes without valves. That explains why the site is relatively large, because the BSC hopes to sell Stanton's pipes, couplings and valves as a package, and this requires substantial space.

Secondly, although Eurovalve may well manufacture other types of valve, there is no reason why this should cause undue concern to other valve manufacturers. My hon. Friend paid considerable attention to this point. I stress that demand in this market continues to be buoyant and the opportunities offered by the North Sea oil and gas industries should, in our view, enable enterprising companies to maintain or, indeed, expand their businesses without being unduly worried about this relatively small element of additional competition which will probably take up no more than about 1 per cent. of the market.

I appreciate the point made by my hon. Friend the Member for Central Ayrshire that the percentage share of the market for an industrial valve of this specification is substantially larger. However, manufacturers can, of course, and do, diversify into other areas of industrial valves.

I also know that some valve manufacturers claim that they have a product, equivalent to the Pont-à-Mousson design, to be manufactured by Eurovalve and that the British Steel Corporation could have sought business with them before turning to the Pont-à-Mousson valve. This is probably the other main point of controversy.

I am no expert in this and I am reliant on advice, but I have been assured by the British Steel Corporation that only the Pont-à-Mousson product design meets its requirements, one of which is that the valve should be of ductile iron. I would stress that the Eurovalve product will be in ductile iron as opposed to cast iron and that the seating arrangement is rather different. However, I am sure that the British Steel Corporation will be only too pleased to be made aware of a competitive product—it is possible that Government aid under the Industry Act 1972 might be available to assist for this purpose—which the British Steel Corporation could then consider alongside the Eurovalve product, provided that my hon. Friend accepts that the British Steel Corporation must, in the last analysis, be left free to exercise its commercial and technical judgment in the same way as any other company.

I do not think that this is a matter of strategic decision on which intervention by the Government would be proper or desirable. I will deal in a moment with the question of general treatment of issues of this kind involving nationalised industries.

I hope, therefore, that my hon. Friend the Member for Central Ayrshire will accept that the Government's decision to allow the British Steel Corporation to proceed with its plans was certainly not ill considered, and I hope that even if he cannot accept that it was entirely right, he will appreciate that very strong arguments were involved.

I maintain that the decision was right in all the circumstances. Equally, I hope that the British valve industry will concentrate its efforts on seeking to exploit the opportunities, which are very much open to it, for new and expanded business as a result of the exploitation of the North Sea.

I am also conscious of the strength of feeling about the principles underlying this case, and although I by no means depart from the view that the decision, taking all the circumstances into account, was right, I am glad to assure my hon. Friend that we are reviewing the operating procedures of nationalised industries as they relate to ventures of this kind. I recognise the force of the argument that nationalised industries might be expected to use the services and the products of British industry provided they are competitive. I fully appreciate the strength of that argument. That is the reason for the present review. Because we have not yet completed this review, unfortunately I cannot give my hon. Friend the result of it. I should not wish to prejudge its outcome, but I can certainly assure him that it is taking place and I hope that he will not press me further on it. However, I am certainly conscious of the strength of his feeling on this point.

As I have indicated, the United Kingdom valve industry has a very bright future if it seizes all the opportunities that are now open to it. It already exports about 40 per cent. of its output, and the opportunities for growth in both the developed and developing countries should be considerable once world trade generally begins to pick up again, as it certainly will.

The chairman of the British Valve Manufacturers' Association in his report for 1974 portrayed last year as a record in terms of fuller order books, material shortages and labour scarcity. Despite these factors and the three-day week in the early part of 1974, deliveries of valves both home and overseas last year achieved record levels. Home demand, he added, was now falling off slightly, which should enable companies to meet delivery times for existing and future orders. As to the longer term, the chairman's report emphasised the adverse effects if material shortages were to continue unabated and the difficulty in assessing a changing market situation. However, providing these factors diminish, the report expected a continuing, steady home demand and growing opportunities in connection with North Sea oil and its associated down-stream requirements.

This is a generally buoyant assessment of future prospects and it is endorsed by the draft April report of the Short-Term Trends Working Party of the Mechanical Engineering EDC. This notes the poor demand prospects for valves for use in the home market in central heating and other areas, following the down-turn in investment by many sectors of private manufacturing industry, for reasons that are understood. It also emphasises the expectation of high demand from such sectors as the North Sea oil and gas industries, as well as the chemical industry. Although the report does not mention the Middle East and other OPEC markets, it is to be expected that demand will develop quite strongly in these export areas as well, perhaps, as in many industrialised countries concerned with energy saving requirements.

This is a generally buoyant prospect for the industry, as is indicated by several reports. The constraints on production mentioned in the British Valve Manufacturers' Association's annual report for 1974—namely, the shortages of materials, components and skilled labour—should all be helped in the medium-term by the measures announced by the Chancellor in his Budget Statement, whereby funds will be made available to assist the modernisation of the ferrous foundry industries and additional funds will be made available to increase training and retraining facilities. With these aids and with its own efforts I am convinced that the valve industry's future is assured and that it will continue to make a valuable contribution to the British economy.

This afternoon I have tried to give some assurance to my hon. Friend the Member for Central Ayrshire on the points that he has raised. We are very well aware of the considerable concern that has been expressed, particularly in the constituency of my right hon. Friend the Secretary of State for Scotland, where Glenfield and Kennedy are located. I hope that the hon. Member will accept our considered view that there will not be an export of unemployment to these areas. We believe that there will be a substantial advantage to other constituents in Stanton and that the general future of the British valve manufacturing industry, despite this, is altogether bright.