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Ross Foods Limited (Grimsby Factory)

Volume 983: debated on Tuesday 29 April 1980

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Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Newton.]

12.10 am

I rise to draw attention to the proposed closure of the Ross Group's No. I factory, which is one of three factories of the group in Grimsby. It employs just over 500 people on primary processing—filleting and blocking of fish—and has a production of about 10,500 tonnes a year. The fish then goes to factories 2 and 3 to be made into fish fingers, or whatever.

I wish to highlight the dangers of this closure, partly because it is part of a nationwide process, shedding 500 jobs here, 400 jobs there and 600 jobs in other places. It is a process which is taking place in many industries at an accelerating pace throughout the United Kingdom, usually for what appear to be—and often are—insufficient reasons when considered from the isolated view of the firm. However, in total they amount to a loss of industries, a weakness in our ability to compete, and loss of jobs, many of which will never be replaced and which will bring unemployment to over 2 million people.

It is a process that is bad for the nation and in this case it is a process that is bad for Grimsby. Grimsby already has a higher than average level of unemployment. It now stands at 9·2 per cent. for men, as against 7·8 per cent. last year. Grimsby cannot afford job losses on this scale particularly as it is possible that this is the first of other redundancies, not so much in the Ross Group, but in other groups.

Yesterday I met the union action committe against the closures, which included a cross-section of Grimsby workers. Their main reaction, apart from the inevitable fear which this sort of situation produces, was a feeling of betrayal, because they have been flexible and co-operative, and have frequently been praised by the company for their efforts, output, productivity and success. Some of those people are now working overtime. They have suddenly been slapped in the face by this threatened closure. Not unnaturally, they do not understand the justification for the closure, and they do not understand why it has to be done now—suddenly out of the blue.

Ross took over this factory from Associated Fisheries less than three years ago. The group improved it, and made it more competitive, and yet suddenly it is to be closed. One of the most curious reasons that have been offered by the company for the closure is that:
"The current state of the common fisheries policy negotiations and the rapid rundown of the United Kingdom distant water fleet were not foreseen."
That is a curious reason, because the takeover took place in November 1977, when our distant water effort was already being substantially cut, and when the prevailing factors in fishing were much the same as they are today.

Local landings in Grimsby have risen over the period, partly because Icelandic landings from Icelandic vessels have now returned. Last year Grimsby landed wet fish worth £3,800,000. Hull landed about £2 million more than that. So the supply overall from foreign, as well as British, vessels is increasing. Yet the figures of the supply of fish which were cited as reasons for the closure were of exclusively British landings. These are down, but they are being compensated for.

The real reason for the closure is twofold. The Government can and should help. The factory is modern, and it was built at a time when Grimsby landed 16,000 kits of fish a day. Today we land perhaps one-quarter of that. Instead of regular landing or predictable species, it has become necessary, because of the decline in local landings since 1973–74, to store. That is expensive, and it is particularly expensive in a situation where cold stores are bursting with Common Market intervention produce. Fish often has to be shipped away from local cold stores which are full, to stores well outside Grimsby. Therefore, there is a case for saying that the Government should help the processing side of the industry which is a vital part of fishing. Thanks to Government policies and the rundown of the industry, which has been produced by political decisions, the processing side of the industry now has a substantial burden of storage which it did not have before.

There is a case for helping the catching side through its difficulties and a case for helping the processing side. Indeed, two years ago the fish processing industry asked for Government aid for restructuring. It put up a strong case which centred on the expense of new sources of fish, the need for development and marketing—and marketing is particularly expensive—to win back the consumer, and the need to see the industry through a period of low returns when it could not re-equip or reorganise. That case was not answered by the Labour Government. I wish that it had been. But the need which produced that case is still there and the problems of the fish processing industry, which produced the argument, still exist.

The second part of the reason for the closure is more sinister. If this factory closes, the Ross factories in Grimsby and elsewhere will still need the fish and they will get it from two sources. They will gest it from smaller, more flexible primary processing units at the ports, and they will get up to half their supplies from imports of frozen, semi-processed fish in blocks. In other words, they will no longer get it from wet fish, but from imported, semi-processed fish. This is a classic case of de-industrialistation where the high value of the pound—which is estimated to be about 38 per cent. above its valuation in 1976 against other currencies—means that it does not pay to do processing here; it pays to import the goods in this semi-processed form. These are imports with the jobs taken out, because the catching, marketing, filleting, and block-making have all gone. If the closure goes through, it will create an extra demand for these semi-processed fish imports at a time when, because of their threat to the British industry, we should be controlling them, or indeed penalising them to allow the British industry to compete effectively

That is only the beginning. Once we become dependent upon these block frozen imports—and we will become more dependent on them if this factory closes—we lose the capacity to deal with the fish; we lose a block of demand on the Grimsby fish market, which makes that market a little less attractive to local catches; and we become that bit less effective as a fishing nation. Our suppliers of frozen blocks have more of an incentive to move back yet another stage. Instead of sending us a semi-processed fish, they will take more jobs by sending us fish fingers as well. They are industrialising in their country and de-industrialising in ours.

The pound is over-valued and must be brought down to allow fishing to compete effectively. High interest rates have imposed a heavy burden on the cost of storage at the Ross factory. It is important that the factory is kept going. The jobs should be saved. We are witnessing part of the whittling away process which is undermining our whole fishing industry. Eventually we shall be able to concede in the common fisheries negotiations because the industry will be so decimated that there will be not much left to protect. The closure of the factory is part of the decline.

I turn to the state of the food processing industry generally. Grimsby has made a vigorous effect to diversify. Now, it is not so much dependant on fishing as on the state of the national economy. Food processing is a classic example. The demand for the products of the food processing industry mirrors consumer expectations and the state of the economy.

Food processing is a three-legged stool involving meat, vegetables and fish. Fish processing has not been doing too well, largely because of consumer resistance to high prices. Fish is a more price-sensitive product than other protein products. The weakness could be carried if the other two legs of the stool—the meat and the veg—were doing well. They have been doing well, but there are difficulties. That is why it is proposed to close the factory. It is part of the battening down of hatches against the hard times ahead. Ross and other groups will have to do that because of the deflationary policy which the Government are imposing on the economy by high interest rates and by not increasing public spending to keep up demand as a counter-cyclical measure.

The South-East might be able to weather that, but in Grimsby such economic deflation has a disproportionate and disastrous effect on a port, which has struggled to improve itself. The threatened closure is just one example to be followed by others, of how that works. The only way to stop the process is to reflate and expand the economy.

I received an ominous reply to a question. I asked the Secretary of State for industry if he would take steps to increase employment possibilities in the Grimsby area to mitigate the effect of redundancies at Ross foods, and he said that the Government's policies were designed to encourage long-term industrial expansion and employment.

If this is how they are doing it, heaven help us. Perhaps the Chancellor of the Exchequer should be here to answer the argument rather than a potential dissident, or whatever The Sunday Times, called the Minister.

The nub of the problem is the general economic situation. However, there is a marginal argument for the closure of the factory. The argument is far from clear-cut. The argument is so marginal that it will be affected by a slight variation in the calculations on overheads and in the price of fish, which is the main cost. Only slight changes will turn a marginal argument for closure into a marginal argument for staying open.

The factory continued through the tough years of 1978–79. The calculations do not show the cost of the closure itself. They do not show the cost of redundancies, nor that the gains from the sale of machinery will be small. Given the fact that it is a marginal calculation, the onus should be on staying open. Staying open would provide the jobs and benefit from the improvement which must come not only from the eventual expansion of the economy but from the revival of the fishing industry and local catches when that comes. I am sure that the Minister will give us a confident prediction of the future of the industry.

I do not take this opportunity to criticise Ross, despite the plaque in the entrance to Ross House at Grimsby to Sir Keith Joseph, who opened the building. That was rather like inviting Dracula to open a blood bank in a sense, but even though the Secretary of State for Industry is the patron saint I still do not criticise Ross. It has done well by Grimsby. It has research staff, management and white collar staff there, and it will continue, even if this closure goes ahead, to provide many jobs—1,700 in Grimsby.

The company has communicated badly with the workers, and this is a marginal decision. That being so, the company should have placed more weight on the case for staying open, to benefit both from the concentration of the fishing industry in Grimsby and the eventual revival of that industry, and to benefit also from the eventual revival of consumer demand. In any case, staying open is better than relying on semi-processed imports geared to a strong pound, which may well be a fragile feature. It is certainly better than the massive investment in America which the parent company, Imperial Foods, is reported to be undertaking.

Therefore, I am not satisfied that Ross has given enough consideration to the alternatives to closure. The company has not sufficiently considered streamlining and perhaps applying for a short-time working subsidy to ease the problem of having people standing around when there is a transition from species and also to trying to get longer credit from the local market equivalent to the kind of credit terms that it has been able to get from continental wet fish suppliers. Frankly, I do not think that the company has talked it over with its workers to see what can be done with their good will and co-operation to keep in operation a unit that is important to the workers and to Grimsby.

It seems to me that management can get fixated on a decision, marginal as it is, and build up the importance of that decision out of all proportion and begin to view it almost as a sine qua non for survival. In that state of mind the company imposes that decision as a management prerogative without ever talking seriously, intensely and personally to those most deeply involved about what alternatives there are to that course of action and about what those involved can do to turn a situation round and improve the position of a factory about which the arguments for closure were always marginal.

I hope, therefore, that the management at Ross will think again about this decision. I hope also that the Minister will encourage Ross in that direction.

12.28 am

The Minister of State, Ministry of Agriculture, Fisheries and Food
(Mr. Alick Buchanan-Smith)

First, I sincerely congratulate the hon. Member for Grimsby (Mr. Mitchell) on taking the opportunity of this Adjournment debate to raise what I understand and appreciate is a real problem in his constituency. I also know of his personal interest in what has taken place. I appreciate what this means, not only in terms of his constituency, but in terms of the industry in which he takes a considerable interest. I appreciate the situation, too, in terms of the human factors involved.

In my constituency I have experienced a couple of similar cases recently—though not quite on this scale—and I know what this means in local terms. I sympathise with everything that lies behind the problem and motivates the hon. Gentleman in debating the subject tonight.

I also know what this means in a community such as Grimsby, which I visited in the course of the past year because so much of Grimsby is, of course, bound up with the fishing industry, whether on the catching side, the processing side or on the side of supplies and servicing.

When one examines a community such as this, which is basically dependent on one form of industry, one realises that many other activities are involved. None the less, in my experience, when something such as this happens, or is threatened, the psychological blow to such a community is in many cases far greater than a similar blow in terms of jobs is to a community that has a more diversified industrial background. Therefore, I am sensitive to what the hon. Gentleman has said, and I appreciate what it means to a community such as Grimsby.

The hon. Gentleman criticised the Government's general economic policy and attributed some factors in relation to the proposed closure to that policy. I am conscious of two things that cause difficulty for industry. First, there are high interest rates, and for an industry such as fish processing, which in recent years has become increasingly dependent on storage charges and so on, rates of interest loom very high indeed. Secondly, imports are also a factor, certainly in the British fishing industry at present.

The strong pound is also a factor. It causes difficulties not just for the fish processing or fishing industries, but generally. That is related to the petro-pound that exists in this country at the present time, and I am conscious of the difficulties that that causes. People may find it difficult to understand that, because in their view it is something that is artificial. In fact, it is not of the Government's making. It is a fact of life for the British economy at the moment, and the Government are, of course, conscious of the difficulty that that creates.

As the hon. Gentleman realises, high interest rates do not affect only the fish processing and fishing industries. However, they are essential if our economy is to get on to a sound basis, and they are an integral part of the Chancellor's policy in managing the economy. The Chancellor, the Secretary of State for Industry and I are conscious of the problems that that creates—I hope, only in the short term—for industry. I do not believe that the previous Government were prepared to tackle the fundamental weaknesses of the British economy. It is only by tackling those fundamental weaknesses in the way in which the Government and Chancellor are endeavouring to do that we can ever hope to get our economy on to a better footing so that there are better hopes and prospects for prosperity.

I am not in the least unsympathetic or insensitive to the problems that that creates in the short term. The hon. Gentleman is not unfair in saying that to some extent that may well have been a factor in the decision taken by the Ross Group with regard to the proposed closure at Grimsby. None the less, I must emphasise that it is essential that our general economic strategy is followed through, because if it is not, I believe that in the longer term we shall see a greater and much more dangerous decline not only in industry but in employment and everything that goes with it. To that extent, whatever difficulties there may be in the short term, I am sure that our long term strategy is the correct one.

I now turn to the decision of the Ross Group with regard to the proposed closure at Grimsby. I must emphasise, as the hon. Gentleman acknowledged, that that is a decision of the Ross Group itself. I must also emphasise that the Ross Group has not made any application to the Government for aid of any kind. This is to some extent understandable, and I shall return in a moment to the basic structural change that has taken place. The Ross Group has been careful to make it clear—and here I am simply reporting what the group has said—that it has made its commercial decision because of changes in the industry which it believes are of a long-term structural nature.

The Ross Group hopes—and I trust that it is correct in this—that by going through this reorganisation and rationalisation it will strengthen the structure of the group. Indeed, it claims that if it does not do this—and this was stated in the press release and elsewhere, and I am sure that it was said to the hon. Gentleman—it could weaken the group as a whole and put at risk jobs elsewhere in the group. I accept that that is of no comfort to the constituency of Grimsby and to the hon. Gentleman, but the group says that this is necessary to protect the jobs and activities of people in other ports and centres where it has processing interests. Even within Grimsby, the group hopes that by taking this action it will safeguard its other activities because, as the hon. Gentleman said, this action is affecting the primary stage of processing and not the secondary one. It is in the primary stage that the group sees the reorganisation and rationalisation as being necessary.

One trusts that the Ross Group is genuine in what it is saying, and I hope that if this change has to go through, what is said about strengthening the group as a whole and safeguarding other jobs will prove to be the case. The group employs thousands of people throughout the food processing industry—not only fish, but other products. Uncomfortable though what is happening may be, I hope that the group is correct in saying that this action will strengthen the group as a whole.

The last thing that I want to say about the group's decision is that although it is fairly firm about it—and one would deceive oneself if one thought otherwise—it is still conducting discussions with the action committee and will be having a further meeting after it has considered the various points put to it. I hope that these discussions will be conducted in a constructive manner and in a way that will make the work force and the action committee feel that their point of view has been fully taken into account.

I have emphasised that this is a commercial decision of the Ross Group, but what I have to acknowledge, as the hon. Gentleman did, is that this decision has been taken against the background of a changing structure within the fishing industry itself. Although this change is taking place on the catching side of the industry—the primary end of the industry—it has had its effect on the processing side.

We are right to set this decision against the background of an integrated industry. Although we have been able to announce aid for the catching side of the industry, I assure the hon. Gentleman that I am equally anxious about what happens on the processing side, because unles we have a strong and healthy processing industry there will not be the markets and the outlets for the catching industry. We must consider the industry as a whole, right through from the catching end to the consumer. I think that the hon. Gentleman will acknowledge that what my Ministry is doing shows that we are anxious not only about the fishing industry, but about the agriculture sector, too. We try to maintain a proper chain through all stages of the food industry.

What has happened here, as the hon. Gentleman acknowledged, is that at Grimsby we have seen a decline in landings of wet fish, for a whole host of reasons. The most important of these is the loss of deepsea fishing opportunities. It is this basic reason that underlines the decision of the Ross Group. It is faced with the difficulty of not having a continuous and regular source of wet fish to maintain the kind of primary processing in which this factory was engaged. To maintain continuity of employment in what I understand is an extremely sophisticated factory, with modern equipment and everything else, the group has had to rely increasingly on imports. With storage problems and so on, that has created difficulties, and that is why the group has had to diversify some of its activities to other ports.

The underlying factor on which the group's decision is based is the result of what has been happening in the fishing industry generally. I assure the hon. Gentleman that we are conscious of this. In the renegotiation of the common fisheries policy we are aware of the effect that this will have, as we are of the effect that the deepsea losses have already had and of the effect that any future negotiations may have on the structure of the industry. I assure the hon. Gentleman that we shall watch this very carefully.

The Question having been proposed after Ten o'clock on Tuesday evening, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty minutes to One o'clock.