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Associated Weavers (International) Limited, Bradford

Volume 976: debated on Friday 21 December 1979

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1.22 pm

Today I want to raise the question of a very important carpet factory in my constituency which is probably the largest manufacturer of tufted carpets in Europe. To the ordinary man in the street, tufted carpets mean nylon carpets. Printed tufted carpets are very widely in use now on the floors of the people of our nation.

The factory employs about 1,600 people. It is a modern, very efficient and well run factory. It is certainly not in the list of "lame ducks". Over the years it has produced many thousands of yards of carpets for the homes of British people. It has also exported carpets.

The factory was taken over by the Americans a few years ago, and the only reason why it is to close is that the Americans have decided that they want their money out. They want to liquidate. They believe that they can do far better by selling the land, the buildings and the machinery than by carrying on the business.

I qualify my statement about the viability of this firm by making clear that the whole of the British carpet industry is going through an extremely bad patch at this very moment. I do not agree with a letter that has been sent by the Secretary of State for Industry to my hon. and learned Friend the Member for Bradford, West (Mr. Lyons) in which he talks of minimising the effect of unfair foreign competition in the carpet industry as a whole and in Associated Weavers in particular, because it is an established fact that the Americans are exporting carpet to Britain at a far cheaper rate than that at which we can produce it, either at Associated Weavers or at any other carpet factory in Britain. I most emphatically contradict any suggestion that this has only a minimal effect on the viability not only of Associated Weavers but of the rest of our carpet industry.

It is a well-known fact—I think that it is admitted by the Government—that American oil is supplied to the American tufted carpet industry at a special price, whereas our own carpet industry has to seek its oil at the full market price that we all pay for oil in this country.

It may sound strange, but oil plays a vital part in the manufacture of tufted or nylon carpets, and the price of it effects the price that we are able to charge. It also affects how competitive we are with foreign countries exporting carpets to this country.

That is the major reason why Associated Weavers has gone through a bad patch in the last year or two, but I reiterate most strongly that Associated Weavers is not a lame duck. It is a viable part—possibly the most viable part—of the carpet industry in this country, and some action ought to be taken to save this factory.

Incidentally, it has had pretty good industrial relations over the years with the trade union concerned. The National Union of Dyers, Bleachers and Textile Workers is renowned throughout the hard-pressed textile industry of West Yorkshire as a very responsible organisation, both in its wage negotiations and in its lack of desire to create industrial unrest or to strike. That is another reason why the Government should not desert this very important section of the textile and carpet industry.

Why am I here today? I have sought over the past three or four weeks to secure an interview with the Secretary of State for Industry. After some weeks of discussion with his private office the Secretary of State, in his wisdom, refused to see me. He wished to pass me on to the Under-Secretary of State, who is on the Government Front Bench for the purpose of replying to this Adjournment debate. I say without any disrespect to the Under-Secretary of State that he would not have any power to do what I want to be done about Associated Weavers. Only the Secretary of State could take the action that I believe needs to be taken to save this very viable factory in my constituency—and, moreover, to save the jobs of 1,600 people who are either my constituents or the constituents of my two hon. Friends.

I know that the Under-Secretary of State will make sympathetic noises, but he does not have the authority to do what needs to be done. That is why I refused an interview with him when I was refused one by the Secretary of State.

The Americans who own this establishment have no other carpet interest in America. They have a completely different interest. They want to get out of the carpet industry and they want their money. They argue that they can secure more capital back by going into liquidation and selling the buildings, the land, the machinery and so on than by selling the factory as a going concern.

I suggest to the Government and the Secretary of State, through the Under-Secretary of State, that £15 million is not a great sum of money, but that is the sum being talked about to save Associated Weavers. That is the sum that the Americans expect to get from the sale that they are contemplating.

Inquiries have been made in the private enterprise market, but £15 million cannot be raised by selling the factory as a going concern. I should like the Government, as financiers, to take over this establishment and in turn to allow British private enterprise management, under its able Bradford an chairman, to carry on the business on a rental basis with the State owning the buildings, machinery and so on. I make that suggestion to save this large, important section of the carpet industry and to save the jobs of 1,600 workers who will be thrown on the labour market in a city where unemployment is already above the national average.

Dogma will not help. It is no use saying "We will not interfere in private enterprise and private industry." We must face the facts and try to save these jobs. The carpet industry in Bradford is only part of the wider textile industry. Brad ford's main industry is textiles. Therefore, if the Secretary of State does not take some effective action, he may as well lose his job as Secretary of State for Industry and perhaps become the Secretary of State for unemployment. I see Bradford drifting, like the Shottons and the Corbys. I appeal to the Under-Secretary of State to try to impress upon his right hon. Friend the need to take action of the kind that I have suggested to save this vital factory.

1.34 pm

I should like to express my gratitude and that of all Bradford people to my hon. Friend the Member for Bradford, South (Mr. Torney) for obtaining a debate on this vital subject and I appreciate his allowing me some of his time to address the House.

This is a sad day, because we are witnessing the demise of the finest and most efficient tufted carpet manufacturing plant in Britain. If someone in Whitehall had the power to decide that certain firms should close because of over-capacity in the industry, Associated Weavers would be the last in Britain to be closed by that supremo.

For a little over a year Associated Weavers has had a printing machine—unique in Europe—that cost £3 million. That machine has only recently begun to work at top efficiency. Associated Weavers' Belgian carpet subsidiary has good machines, but those machines produce only 17 linear metres of tufted printed carpet a minute compared with this machine which produces 25 to 27 linear metres a minute. That machine has been the subject of no offer from anyone since the announcement that Associated Weavers was to be closed. So the finest printer in Britain will be of no further use. It is going out of production because the American company, Champion, has decided to leave the carpet industry.

Champion bought Associated Weavers in 1973 for £40 million. It borrowed £30 million on the market. In 1976, when Associated Weavers made a profit of £5 million, the balance sheet showed a loss of £8 million. That was because the company was servicing the £30 million loan shown in the balance sheet. It is a dollar-based loan so, when there are currency fluctuations between sterling and the dollar, there are further losses.

The closing of the factory has nothing to do with the company not being viable. It is true that losses are shown for last year and this year. But the real losses, as opposed to the money for servicing the loan which was raised to purchase the company in the first place, are caused by the streamlining and modernisation that has gone on and by making redundancy payments.

Michael Abrahams, the chairman and chief executive, was the darling of the Stock Exchange. Champion bought Asso- ciated Weavers because of his proven record as a brilliant industrialist, which he then was and still is. That man and his fellow directors are being thrown out of the carpet industry. The most successful carpet manufacturing entrepreneur in Britain is out of a job and a trained and efficient labour force is being decimated by this move. That cannot be right.

It is false to suggest that this company is not viable. The Government say "We must stand to one side and watch how things go, because that is free enterprise". But it is nonsense in this instance, because we are to lose our best carpet manufacturing company. Some of the other companies are in a poor way. As a result of the closure of the tufted carpet department of Associated Weavers, those companies will be able to stagger on rather longer, but they will go down just the same. The difference is that Associated Weavers could survive. The factory is being closed, not because it is not viable, but because Champion can get £9 million for the factory buildings for use as warehousing and another £6 million by selling off the plant and machinery and the Axminster section as a going concern. That is the tragedy.

The Belgian subsidiary has made £1·8 million profit this year. We are closing down a major asset for Britain. The royal part of the tufted carpet industry, as it were, is being closed down because an American company has decided that it does not want to be bothered with carpets and can use the money better in other directions. That should not be of paramount consideration for the Government. A fully effective National Enterprise Board would have done something about this matter.

I repeat that I am grateful to my hon. Friend for allowing me to make these remarks. What is happening is a disaster not only for Bradford, but for Britain, and it is a terrifying lack of perception on the part of the Government to allow our best factory in this industry to be closed.

1.40 pm

I congratulate the hon. Member for Bradford, South (Mr. Torney) on securing the opportunity in the Adjournment debate to draw attention to a serious matter affecting Bradford and his constituents. I am well aware of the personal problems and difficulties that will be caused to those who lose their jobs because of this closure.

The hon. and learned Member for Bradford, West (Mr. Lyons) has once more come into the debate, as he did during the week when we were debating the problems of the textile industry. It has been known since 1977 that Champion International wished to dispose of Associated Weavers in Bradford. Its desire to do so is scarcely surprising, as it purchased the company in 1973, at the cost of about £40 million, when trading conditions in the carpet industry were very favourable with a long period of growth. A few years later this favourable trading position had changed very dramatically.

We are all too familiar with the events of 1974 and 1975, which led to a recession, for me to describe them here today. The carpet industry came through the period surprisingly well and there was some growth through to 1976.

The hon. Member for Bradford, South said that the only reason why the United States owners of this company wanted to close it was that they "wanted to get their money out". I have to tell the hon. Member that the fortunes of Associated Weavers have, unfortunately, declined, and in 1978 that company had a loss of no less than £372,000, with even worse prospects for 1979. I do not think that it would be fair to disregard that.

During the year 1978 demand in the United Kingdom markets for carpets was buoyant, with sales up by about 6 per cent. Imports, however, which had been traditionally low, rose to more than 10 per cent. of the home market. At the same time exporting was becoming more difficult, and exports in 1978 were down in volume by about 20 per cent. During 1978 it became clear that imports of carpets from the United States, which had been less than 0·1 per cent. of the United Kingdom market, had started to increase and it is likely that by the end of 1979 imports from the United States will have taken 4 per cent. of the United Kingdom market and imports as a whole about 14 per cent.

There is excess capacity in the carpet industry, and there has been since the first recession of 1974–75. This is the result of the substantial investment in the early 1970s, leading to a rapid growth of installed capacity for tufted carpets followed by a fall in demand and increased market penetration. To a company such as Champion International the outlook must seem uncertain, and the generally low level of profitability in carpet manufacturing can serve only to confirm its decision to withdraw.

I would have preferred to see the company sold as a going concern. In that I share the view of the hon. Member for Bradford, South. But I understand that it is the intention to dispose of the plant and buildings of the tufted carpet plant as soon as possible and to keep the weaving plant operating for about a year, and it may be possible for the company to sell that part of the plant as a going concern. If the company has reached the conclusion that this is the best way to safeguard its financial position after making losses over a number of years. I am in no position to challenge its commercial and financial judgment.

I do not see that there is anything that the Government can now do to protect the jobs that may be lost, although I join with the hon. Member in my considerable concern about the problem facing those who will lose their jobs. The number is likely to be about 900, but as Bradford remains an intermediate area, assistance under the Industry Act, within the revised guidelines, will be available to any purchaser.

Although imports of carpets from the United States are less than 5 per cent. of the market, I recognise that the United States manufacturers benefit from the low cost of oil and gas. That was referred to by the hon. Member for Bradford, South, and, indeed, by the hon. and learned Member for Bradford, West, during the debate on Tuesday night. American manufacturers benefit from artificially low-priced oil and gas, and the Government have been pressing, within the Community, for a solution to be found to the problem of imports of American synthetic fibres. My hon. Friend the Minister for Trade emphasised—

Will the Minister deal with the points that I made about the possibility of a State takeover, even if it were on a lease-lend basis to the existing and efficient management, to which my hon. and learned Friend the Member for Bradford, West (Mr. Lyons) referred? Will he also take into account that the loss that that company had for one year is not such a huge loss, when consideration is given to the viability of this factory and the excellent ability of its chairman, Michael Abrahams? Can the Minister give us any hope that he will be able to talk to his right hon. Friend with a view to consideration being given to the viability of this factory? If the Government can achieve some improvement on imports from America through the EEC, this factory could become profitable within a short time.

The hon. Gentleman has anticipated the point that I was about to make, but I shall deal with it immediately. What he is asking for is £15 million of taxpayers' money to be put into this factory, in an industry that has been losing money. What the Government are being asked to do is to spend taxpayers' money to keep additional capacity in production, at a time when there is excess capacity within the industry. I shall come back to that.

If someone comes forward who wants to take over the running of the plant, I hope that he will approach our regional office with the proposition. However, no such approach has been made to us so far. It may well be that some of those with whom the hon. Member is in touch will wish to make such an approach, in which case I am sure that he will inform us.

I am sorry, I have given way already. The hon. and learned Member for Bradford, West had a crack of the whip on a number of occasions during the debate the other night. If I deal with the point raised by his hon. Friend I think that that will be fair.

The second point that the hon. Member for Bradford, South raised concerned the European Economic Community and dealing with unfair competition from the United States. My hon. Friend the Minister for Trade emphasised the need for urgency at the Council of Ministers' meeting in Brussels on Tuesday. The Commission will continue its discussion with the Americans under GATT and will report back to the Council on 4 February or5 February with its proposals. By that time discussions with the Americans will have been completed and the results of those discussions analysed, and the proposals should have been brought forward. What the exact proposals will be is a matter for the Commission in the light of its assessment of the position.

The hon. Member for Bradford, South has drawn attention to a problem that goes wider than the company that he mentioned. I notice that the hon. Member nods his agreement. There are pressures that affect the whole of this industry—pressures that are associated with excess capacity. There is some weakness in marketing. That is true of the tufted carpet industry in this country. It is also true that some American companies are much more sales oriented than our own.

Is not the reason for the closure of Associated Weavers nothing at all to do with excess capacity? Has it not everything to do with the fact that an owning company finds that the properties are worth more to it than running the business as a going concern or even as a profit-making concern, because I am told by the chairman that the company is back in profit again and has a full order book? Is the Minister aware that the market capitalisation of the top three British carpet manufacturing companies is only £15 million? Is it the Government's attitude that if Carpets International, the biggest British company, with a market capitalisation of only £7 million, can sell off its properties for £8 million, it should close tomorrow? Is it the policy of this Government that where one can get more money from buildings one should close down the factory, viable or not? This has nothing to do with over-capacity.

With great respect to the hon. and learned Member, he has made that point before. He must accept that, even if he does not like my answer, I can only repeat that we are dealing with an industry with a surplus capacity. He is seeking to add to that surplus. If such a surplus continues, someone must go out of business. Naturally, he wants to protect this company. But if we put in public and taxpayers' money to protect this company and keep it in business, thus adding to the surplus capacity, a host of hon. Members on both sides of the House will seek to protect their local firms and industries from the unfair competition that comes about from taxpayers' money being injected on the scale of £15 million for one major competitor.

That is not the whole story. Productivity in this industry in the United Kingdom is below the levels in the EEC. The point has been made about the rising level of imports from the United States. I agree that there is a distortion because of the artificial price of United States oil, and we have been pressing for action on this front. We have not had as much support as we should have liked from other EEC countries in seeking to stem this degree of unfair competition.

In the course of the debate on the Consolidated Fund Bill on Tuesday I said that the message that should go out to the EEC was that when the United States starts rolling, the first wave hits the United Kingdom. Americans come here first because of the language, which is perhaps not the same but somewhat similar. The second wave hits Europe, and if other members of the EEC think that they can sit back and wait and watch the effect on the British industry, and wash their hands of it, they will deeply regret it, because shortly afterwards they will find that the wave rolls on to hit their industry as well.

Unfair competition from the United States is not the whole story; we also suffer from a substantial increase in imports from the Continent. Whereas the United States has increased its exports by 1½ million square metres, Benelux and Denmark have increased theirs by 1 million square metres, and they do not have the advantage of artificially reduced prices for their feed stock. Therefore, one must take account of the fact that one is dealing with something that is broader than simply the United States' artificial advantage. We are seeking to tackle that, but I do not wish to persuade the hon. and learned Gentleman that it is the only factor involved in isolation. We must have higher productivity in the British industry as well.

Finally, there are grave problems in seeking to suggest that we should put taxpayers' money into sustaining a firm in the industry where that industry already has over-capacity at present. If there are those who see in this the prospect of creating a viable profit-making industry. I hope that they will come forward and seek to do what the hon. and learned Gentleman seeks to have done—take on the future running of the business. There are the financial markets of the City and there is the regional office of the Department, which is available for advice as well. Until we have an approach from those who actually believe that at a time of excess capacity in the industry it would be a viable proposition—and not a loss-making one, as has been the case in the past year in this firm—I fear that there is nothing more that we can do. I hope, as does the hon. and learned Gentleman, that there will be those who will take a confident view and will believe that they can create something where the existing company cannot.