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Newport Wafer Fab

Volume 723: debated on Monday 21 November 2022

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy to make a statement on the sale of Newport Wafer Fab.

On 25 May, the then Secretary of State for Business, Energy and Industrial Strategy called in Nexperia’s acquisition of Newport Wafer Fab for a national security assessment under the National Security and Investment Act 2021. Following further detailed and thorough consideration, on 16 November, I exercised my powers under the Act to make a final order requiring Nexperia to divest of at least 86% of its shareholding in Nexperia Newport, formerly Newport Wafer Fab.

My decision follows a quasi-judicial process that ensures that all relevant matters are taken into account and that the decision is made fairly. I am sure that the House will understand that I am unable to go into further detail about the national security assessments and implications that informed the decision, nor can I go into further detail about the final order.

What I can say is that the final order requires Nexperia to follow a set process leading to divestment within a specified period. This order has been shared with Nexperia and I published a notice summarising it as well. My officials, with the support of other Departments, will actively monitor compliance with the requirements set out in the final order and ensure that the national security risks continue to be mitigated effectively.

The National Security and Investment Act enables us to continue to champion open investment while protecting national security. Hon. Members can be assured that although we are unashamedly pro-business, the Government will not hesitate to act where there is a risk to UK national security. The UK has a number of strengths in the semiconductor sector, including in south Wales, and the Government aim to set out our semiconductor strategy soon to enable this technology to further support the global economy and national security.

Like many people in Newport West, I am deeply concerned by the decision made by the Secretary of State to order Nexperia to sell Newport Wafer Fab at this time and in this way. Nearly 600 people, with just one month to Christmas, have had the most unacceptable shock and worry heaped on them by this Government. We have heard so much about a commitment to levelling up, but this decision made by Tory Ministers is a disgraceful exercise in levelling down Newport West and south Wales.

Ministers have raised concerns about national security, despite the acquisition being cleared by two previous security reviews, including that by Sir Stephen Lovegrove, the former National Security Adviser. Nexperia, with the interests of its employees driving it, has proactively sought to deliver a range of far-reaching remedies that, if accepted, would fully address the Government’s concerns, but Tory Ministers have chosen not to enter into a meaningful dialogue with Nexperia or even to take the time to visit the site in Newport West.

I have been informed that Nexperia will now challenge the order, and will do everything possible to keep the factory operating and protect its employees in south Wales. They have my support. I am concerned that Ministers have chosen not to listen to my constituents, and have instead taken a decision that now puts their livelihoods and their families, as well as more than £100 million of taxpayers’ money, completely and unnecessarily at risk.

Nexperia has operated in the United Kingdom for nearly 100 years, and it has been at its Manchester site since 1970. Since April 2021, Nexperia has invested £160 million across the Stockport and Newport sites to expand their capacity and introduce new equipment. This is a long-term, well-established relationship, and the Secretary of State has ripped it to shreds. So I would like the Secretary of State to tell us: what discussions has he had with the Welsh Government and Newport City Council about the support Whitehall will provide to mitigate the impact of this decision on our local economy; what assessment has been made about the impact of this decision on my constituents; what specific discussions have Ministers had with the management at Nexperia; and will the Secretary of State publish the security assessment that prompted this decision?

Lastly, I want to pay tribute to the Nexperia Newport staff association, which wrote to the Secretary of State last Thursday. It has made clear its anger and sense of betrayal. Will the Minister agree to meet me and members of the staff association at the earliest opportunity? This decision does not just affect the people of Newport West; its effects will reach all corners of the United Kingdom for years to come.

The hon. Lady is quite right to be a doughty defender of her constituents, and I acknowledge that it will be a concerning time for 500 or so employees. She is not privy to the information that I have had to weigh up to come to this national security decision, which I have done with the utmost diligence and taking all of the factors into account; nor, I am afraid, can I accede to her request to publish that information. I would point her to the fact that the then shadow Business Secretary, the right hon. Member for Doncaster North (Edward Miliband), at the time of this takeover did actually call on the Government to use powers under the National Security and Investment Act to scrutinise the takeover, which I have done. In answer to her question about what the Government are doing, we had last week the £1.6 billion confirmation from the Chancellor for the nine Catapults, of which the Compound Semiconductor Applications Catapult in Wales is a part.

I welcome the measures that the Government have already taken in the National Security and Investment Act to protect critical national infrastructure companies from overseas control, but does the Secretary of State agree that it is important we do not just shut the stable door, and that where we become aware that companies may have already come under the control of hostile overseas states, we act against those as well?

My right hon. Friend is absolutely right about this. The interesting thing is that the National Security and Investment Act did not exist when this original takeover took place, which puts this in an unusual category of being a retrospective piece of work. I believe, on the basis of the information that now comes to us and the ability to use the Act, that we would always take these decisions up front. The difference here is that we have had to look at it through a retrospective process. However, I can assure my right hon. Friend and Members across the House that we take these decisions very carefully and cautiously. We have now looked at nearly 100 such decisions, and it is unusual for us to take action to this extent overall.

I welcome the new Business Secretary to his responsibilities in the House, and I congratulate my hon. Friend the Member for Newport West (Ruth Jones) on securing this urgent question and on her tireless advocacy for her constituents on this matter. I welcome the fact that a decision has finally been made on Newport Wafer Fab, but the chaotic process and the lack of strategy from the Government have left workers and businesses facing a great deal of uncertainty that the Government are now honour-bound to rectify.

Nexperia first announced a takeover of Newport Wafer Fab in July last year. It has taken 16 months for the Government to make this decision. In April, the Foreign Affairs Committee was forced to conclude that the review had

“not, in fact, been started.”

Finally, the Government have decided to block the transaction. Meanwhile, jobs have been left hanging in the balance, and the costs of unwinding the deal have risen over that time. We also have to question why we are in this situation in the first place. The south Wales compound semiconductor cluster employs thousands of workers in one of the world’s most strategic sectors, but we are still yet to see the long-awaited semiconductor strategy, which has been 22 months in the making.

Of course, the Government scrapped their entire industrial strategy altogether when the current Prime Minister replaced it with the hastily cooked-up plan for growth. That has already been replaced, because it may have been the sixth plan in 12 years but it was the first to cause a financial crisis. Meanwhile, firm after firm in the semiconductor sector has been sold off to foreign businesses. It genuinely has not been easy even to understand what Government policy in this area is, so may I ask the Secretary of State these questions? First, why has this decision taken so long, when the Government have known everything about the transaction for at least 16 months? Secondly, what is he specifically going to do to secure the future of the jobs in Newport Wafer Fab and ensure we retain this capacity in the UK? Finally, when will the Government come forward with a proper plan for growth, including for key industrial sectors? Decisions such as this, while at times necessary, must form part of a coherent and consistent policy and must be made promptly. All businesses get from this Government is chaos and crisis, and it is not good enough.

I think that is a rather unfair assessment of what has happened for this reason: the National Security and Investment Act 2021 only came into existence this January, so to say that there have been 16 months during which we have not made any decisions is simply untrue. Secondly, nobody would expect us, particularly with 500 jobs at stake, to rush to a decision over something this important. That is what Labour seems to be suggesting it wants to do.

I want to make sure that jobs are protected. We will be working with Nexperia on this sale to ensure that plans are, I hope, put in place that do that. I have already referred to the wider investment in semiconductors, of which a large proportion is coming to Wales, so the Government already have a strategy in this exact area. It is one of the reasons why we have 100 companies carrying out work in semiconductors.

More than five years ago, I visited this business as a Minister. It is an excellent business, with cutting-edge technologies. It employs local people, but also international people in high-quality graduate and PhD jobs. While I agree that national security should come first, I urge the Secretary of State to work across every single Department to ensure that we retain those skills that are so needed in the United Kingdom and in particular in this area represented by the hon. Member for Newport West (Ruth Jones).

My hon. Friend will be interested to hear that I think I read a report of his visit to the site. I have taken every opportunity to understand what is happening in Newport, and his experience was helpful. It is also worth the House knowing that, unlike prior to the takeover—I hear some Members still referring to “Newport Wafer Fab”—it no longer does “fab”. What it now does are wafers, and it manufactures purely for Nexperia, and most of that does not end up in this country, unless it happens to be re-imported. The jobs and skills are something we are keen to preserve, and we will be working very closely to ensure that there is a future.

Certainly from the outside looking in, it is very much a case of the legislation doing exactly what the legislation was meant to do when it received support right across this House. Understandably, there will be local concerns in respect of that, and I understand where they come from—indeed, the Secretary of State has appeared to acknowledge them up until now. I guess what it shows in wider terms is the UK’s lack of domestic self-sufficiency in semiconductors. I suppose it is for the Government to outline why we are in the present situation. It is perhaps not just in relation to the actions that the Government have not taken: we also need to look at the consequences of the action that they have taken in respect of the likes of Brexit. Intel, one of the biggest players when it comes to semiconductors, has outlined that it is not looking to invest in the UK because of Brexit.

In among all that, can I ask the Secretary of State to provide a little more detail on when he expects to come forward with his plan for semiconductors and to put a little more meat on the bones for those living in the local area as to how those jobs will be protected?

The Department for Digital, Culture, Media and Sport holds the plan itself. It is worth the House and the hon. Gentleman knowing that the UK has several strengths in semiconductors. The sector already includes the design of compound semiconductors and academic research, and south Wales is a very important cluster within that. I have already referred to the additional money that the Chancellor announced from the Dispatch Box as recently as last Thursday, and we know that some of that money will head to Wales. It is also important for the House to know that in this context Newport Wafer was only a very small proportion of output to UK companies directly, and it is important that we make sure that capacity is maintained. It is also important to understand what that business was doing and how it was involved in our supply chain.

Nexperia has operated a manufacturing site in my constituency for more than 50 years, and is a major employer in the Cheadle area, with some 1,000 people working at the Pepper Road site. They are understandably concerned by the Government’s decision. Could the Secretary of State please set out what measures he is taking to ensure that we safeguard Cheadle jobs and maintain the UK’s role in the vital semiconductor industry?

We welcome inward investment into this country. We have one of the most open provisions for inward investment of any country in the world, and one of the most open economies, so there is no reason beyond this decision for people to over-interpret what has happened here. This is a specific set of circumstances under a specific final order. There should not be a read-across. I can perhaps reassure my hon. Friend’s constituents, through her, that this decision does not form any kind of change in their relationship.

Is the Secretary of State concerned that the highly skilled employees at Nexperia Newport have threatened to walk out if the previous owner or an investment fund takes over ownership?

I have seen the reports that the hon. Member refers to. I do not want to get ahead of ourselves. In the next few weeks, Nexperia will provide its plan for the business, which we will come back to. I hear what she says, it is on the record and I am very conscious of her comments. In the end, it is of course a private business. The Government’s involvement is to look at the national security aspects of it, but as a Government we want to see good employers everywhere. In fact, we have backed five separate private Members’ Bills in this Session to improve the welfare of workers, and it is something that we take very seriously.

I congratulate the Secretary of State on making this decision. As he knows, I have been closely involved and tried to make sure that the correct decision was taken. There are many spin-offs from our universities and UK companies that are very interested in taking semiconductors to the next stage. Can I have his assurance that the Government will look widely at who may take the business forward and keep semiconductor build business going in the UK?

Although we have not met up, I pay tribute to my hon. Friend’s work in this area. As I have said, we are of course very keen to ensure that we have semiconductor manufacturing in this country. That south Wales cluster is enormously important, but there are other areas that share many of the skills. We will say more about this soon, not least because £1.6 billion has gone into the UK’s nine Catapults. That is an increase of 35% on the funding cycle, and semiconductors are a very important part of more than one of the Catapults.

During a recent session of the BEIS Committee’s inquiry into the UK semiconductor industry, a representative from Nexperia indicated that there is space at Newport Wafer Fab for expansion and diversification, and we all know that we are becoming ever more reliant on semiconductors. Will the Secretary of State therefore commit not only to saving the 500 jobs currently at Newport but to bringing forward the investment necessary to transform the Newport site into a semiconductor hub that can help sustain supply chains across the UK and, in turn, sustain national security?

It is worth saying for the House’s benefit —I am sure the right hon. Lady knows this —that this got going in south Wales partly through £1 billion of Government investment. Of course, it is important that we keep the investment flowing. This is principally a private business and I understand that Nexperia has indicated that it would like to expand it further. For reasons of national security, that will now happen, I hope, under the auspices of another private business. However, the Government stand four-square behind the principle that we should have high-tech industries and high-tech, well-paid jobs. That is something that we will pursue.

Mr Deputy Speaker, it gives me no pleasure whatsoever to say that you will be aware that Mr Speaker granted me an urgent question on 16 July last year begging the Government to use their powers under the Enterprise Act 2002 and the upcoming security Act not to allow the sale to the Chinese-dominated Nexperia company. While there was a different Minister and that was a different time, I welcome my right hon. Friend to the Ministry, in his important job as Secretary of State, and welcome his decision to use the National Security and Investment Act 2021 to block the sale and to force the company to sell off its 86% share in it. Can he give the House any indication: in what way will the sale take place and how are the jobs— as others have said, it is just before Christmas—likely to be protected?

I thank my hon. Friend, who was key in persuading the Government to take forward the national security and investment legislation. That has been important in this case—definitive, in fact. Although he may have been right at the time, I understand we did not have any powers to block the sale at that time. I therefore congratulate him on his foresight. I do not think we could have done anything other than wait for the powers afforded to us in January and the action that I took very recently.

With regard to the next steps, I am afraid that I am bound by the National Security and Investment Act not to go into terrific detail, other than to refer to what I have already published and made available to the House with regard to the final order. However, there is in essence a process by which the company will report back to me on its plans and, over a period—it may well take several months—the sale of the company will take place.

Nexperia is a large employer in the local authority of Stockport, so I welcome the urgent question secured by my hon. Friend the Member for Newport West (Ruth Jones). From the nuclear industry to Huawei, the Government seem to be lurching from crisis to crisis. The reality is that they do not have an industrial strategy. Will the Secretary of State come back to the House urgently with an industrial strategy that will deliver growth and certainty for the people who work in the sector? This is causing significant problems for people employed by the business in Stockport and Newport.

We do not agree with the hon. Gentleman’s characterisation. Private businesses run these operations and 100 different companies have invested in semiconductor devices. Five thousand UK companies, 90% of which are small and medium-sized enterprises, are designing and making electronic components, devices, systems and products. I know that there are still some Opposition Members who think that the Government should take the lot over, but that is not a sensible way to go about doing business. I have already explained how the Government not only invested in what happened in south Wales but are investing more, based on the autumn statement that we heard from the Dispatch Box on Thursday. Be assured that more money is coming, but, in the end, it is for the private sector to decide how to invest it.

There is no overestimating the importance of the semiconductor industry and, although the UK has only a small proportion of global turnover, it is worth £8 billion to the UK and we have leading capabilities in intellectual property, research and development, and particular leadership in compound semiconductors. That is why any acquisition or sale in the sector must be closely looked at. Does the Secretary of State agree it is important that we control access to the high-tech sector knowhow we have developed, retain that expertise in the UK and take appropriate action to protect UK interests?

My hon. Friend is absolutely right—it is about protecting UK interests. I know he has great expertise on the issue from the Business, Energy and Industrial Strategy Committee, so he understands what he is talking about. It is very important, for example, that the critical mineral strategy is supporting throughout, including with semiconductors. In the end—I think the whole House will agree with this—if there is a trigger that requires us to take national security measures, and if we judge that the bar has been hit and we are concerned enough, not to take remedying action would clearly be a dereliction of duty. That is the reason we have stepped in and acted. All the other points are right. We want to see the continuation of semiconductor production, but we must take national security first. My hon. Friend is absolutely right about that.

Well done to my hon. Friend, and neighbour, the Member for Newport West (Ruth Jones) for securing this urgent question. Many of the 500-plus employees live in Newport East have been in touch over the weekend. I reiterate the great uncertainty that they now feel as a result of this decision. One would have thought that at least one of this year’s three Secretaries of State for Business, Energy and Industrial Strategy would have met the company to understand the impact of this decision on people’s lives. The Secretary of State has not answered the question, so I ask again: what is he going to do to protect jobs?

First, because of the process there is not quite as much freedom as the hon. Lady sets out for the Secretary of State to judge a quasi-judicial case such as this in the way she describes. I agree with her and sympathise with everybody who will be concerned about their jobs. I happen to think that their future remains bright. On the requirement for those skilled jobs, demand is very high and, through this process, as Nexperia comes back with its plan, we will be looking for a plan that helps to protect those jobs.

I commend my right hon. Friend for the careful way he has approached this sensitive issue. I know he is acutely aware of the importance of those skilled jobs for south Wales. Will he reassure the House that he will move as quickly as he is able to under the strictures of the legislation to remove the cloud of uncertainty that is hanging over the workforce, and demonstrate that he understands that one part of Britain can precious ill-afford to lose these types of high-quality jobs, and that is south Wales?

I pay tribute to my right hon. Friend, who is on the Welsh Affairs Committee as well, I think—[Hon. Members: “He’s the Chair.”] With correction. Either way, he knows a lot about this subject and is therefore an expert in it. On the timetable that he asks about, it is somewhat prescribed in the final order. I cannot go into excessive detail about it. There is a balance between trying to move too quickly and therefore putting the business and jobs at risk, and moving at the appropriate pace, which I hope will see a successful outcome. I reassure my right hon. Friend, and the whole House, that I will be working closely on this issue to ensure that we bring certainty as soon as we can, without jeopardising what needs to happen next.

Is the Secretary of State aware of the proposals that have come forward from the company directly to address the Government’s concerns? Those include the offer for the Government to oversee the reproduction process. Is he fully aware that this company and production process is of central importance not just to Newport, important as that is, but to the whole south-east Wales economy?

The Government would not be looking to take over and run the semiconductor business. However, the hon. Gentleman makes an important point about its place in the chain. It is worth mentioning, because some people imagine that it still does what it did when it was Newport Wafer Fab—build semiconductors designed by others and essentially be a factory for a lot of other people—that that is not what it does under Nexperia; it produces for one specific owner, and most of the products go abroad. I am keen to make sure that the entire supply chain is maintained, but the hon. Gentleman will understand, as I am sure everybody in the House does, that national security has to be the No. 1 consideration while we work through this issue.

If there is a national security issue, that must be because this is a strategically important asset for the future growth of the economy. That being said, if we do not have a strategy for semiconductors in place, which the Secretary of State does not, the Government are surely duty-bound to invest immediately—to secure current jobs and build future jobs, perhaps through an equity share, and to ensure that the taxpayer can benefit from future income streams from this growing market—rather than to destroy people’s jobs. The Secretary of State’s idea of protecting national security is to destroy the foundations of our economy, which is ridiculous.

I am not sure whether the hon. Gentleman is calling for the Government to run the semiconductor factory. If he is, on the other hand, asking for a plan, he will need to be patient and to wait for the Nexperia process to complete. I very much hope that he and I will be able to stand here in due course and agree that the process has ended in a good place.

I just want to say to the House—because I think this has been slightly missed—that I do not take these decisions easily. Nearly 100 cases have been looked at under the National Security and Investment Act 2021. There have been only 10 final orders, of which this is one. Two acquisitions have been blocked. Only one has been unwound—in other words, there has been a retrospective decision—and that is this one. That is how carefully we take these decisions. I do have confidence that what happens next will be in the best interests of the people who work in south Wales and of semiconducting in this country.

I understand that BEIS is expecting up to 1,830 voluntary notifications per year. In the first three months of the implementation of the Act, there were perhaps 222. Is the Secretary of State learning lessons from the implementation of the Act to ensure that the net is fine enough to block acquisitions that are of national security concern but not so tight as to squeeze the brakes on inward investment?

The hon. Gentleman is absolutely right: this is a new Act, so we are seeing how it works. As I mentioned a moment ago, final orders are extremely rare. An awful lot of the notifications—particularly the voluntary notifications—are looked at and then passed through very efficiently and very quickly, and I look at them most days of the week in my role. That is not causing any undue bureaucracy; we are looking at the notifications very quickly. The case before us is exceptional, inasmuch as it is retrospective, with the Act having come in only in January. In the end, we have to take a decision, and this House decided that it wanted to look after national security and investment in a sound and sensible way. The Act is performing very well in that regard, and those who criticise have perhaps not looked at—or are perhaps unable to be familiar with—the reasons why we are acting in just a small number of cases.

I thank the Secretary of State for taking decisive action to block the sale of Newport Wafer Fab to state-backed Chinese Nexperia on national security grounds. Will he assure the House that he will take all necessary and proportionate action to mitigate the risks to the UK’s economic security now and in the future and to protect the UK from all geopolitical leverage on the part of the Chinese, who are hellbent on taking over vital security companies in the United Kingdom of Great Britain and Northern Ireland?

I should point out that we are very keen to see inward investment—a point that also ties in with the question that the hon. Member for Tiverton and Honiton (Richard Foord) asked. We are one of the most open countries in the world, as I mentioned, and we are unashamedly pro-business, but we want to make sure that, where necessary, national security is considered. There was a point at which that was not part of the process; I am pleased that it is now. I think that the National Security and Investment Act 2021 is performing well in that regard and that we are getting the right balance between encouraging investment, particularly in non-sensitive areas, and applying the Act where required. The Act is not about China; it looks at every acquisition in its own right.

I thank the Secretary of State for coming to the House and responding to questions for more than half an hour.

Bill Presented

Northern Ireland (Executive Formation Etc) Bill

Presentation and First Reading (Standing Order No. 57)

Secretary Chris Heaton-Harris, supported by the Prime Minister, Oliver Dowden, Secretary Michael Gove, Secretary Alister Jack, Secretary David T. C. Davies and Mr Steve Baker, presented a Bill to make provision to extend the period following the Northern Ireland Assembly election of 5 May 2022 during which Ministers may be appointed and after which the Secretary of State must propose a date for another election; about the exercise of functions in the absence of Northern Ireland Ministers; to confer powers on the Secretary of State to determine salaries and other benefits for Members of the Assembly in respect of periods in which the Assembly is not functioning; and to confer powers on the Secretary of State to set the regional rate in Northern Ireland.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 195) with explanatory notes (Bill 195-EN).