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Manufacturing: Job Losses

Volume 708: debated on Monday 2 March 2009


Asked By

To ask Her Majesty’s Government what assessments they have made of job losses in small and medium-sized manufacturing companies in the first three months of 2009.

My Lords, data on employment in small and medium-sized manufacturing companies in the first quarter of 2009 are not yet available. However, the Government are acutely aware of the impact that the global economic downturn is having on manufacturers. That is why we have acted to stabilise the banking system and preserve the flow of credit in the economy. Where jobs have been lost, we are providing targeted support, together with regional agencies and Jobcentre Plus.

My Lords, I thank my noble friend for that reply. We have been among the largest employers in manufacturing, but the situation has now changed quite considerably and the problem is in maintaining skills at a time of rising unemployment, particularly in the engineering and motor car industries, which are particularly prominent here. There is of course the question of the depreciation of sterling. That should have been a considerable advantage to us but we do not seem to have seen it so far. We shall need to watch that carefully. What action should we now take to retain our skilled employees over the difficult time that lies ahead?

My Lords, my noble friend makes an extremely good point about skills. It is very important that we do all that we can as a Government to support manufacturing companies through this recession so that they do not, as a result of a temporary loss of demand, cut out capacity capability, be it a plant or skilled employees, as that would leave them at a disadvantage when the upturn comes. That is why we are providing the support for skills that is essential for UK manufacturing both to compete globally and, in particular, to get through the recession. This includes a significant expansion of the Train to Gain service, which will provide more than £1 billion of funding for employer-focused skills during the coming years, and other customised packages, which the Department for Innovation, Universities and Skills is discussing with the key manufacturing employers, most recently Corus and Nissan.

My Lords, instead of spending £12.5 billion cutting VAT, would the Government not have been better advised to cut national insurance—a tax on jobs—which they have increased? Is it any surprise that people are being laid off from work when the Government have made the costs of employment higher?

My Lords, I do not agree with the noble Lord on his original point. The aim of cutting VAT was to get as substantial and quick a stimulus as possible for demand into the economy. I do not believe that alternative measures, notably changes in tax, would have had the same effect and certainly not as quick an effect as the reduction in VAT, which kicked in a week later.

My Lords, does the Minister accept that I am second to none in my admiration for his efforts to get the banks lending again, let alone in my admiration for the Prime Minister in, as he would put it, saving the world? However, does he not accept that what SMEs now require is not exhortation and policy from this Government but results?

My Lords, I agree with the noble Lord, which is why I am pleased to say that the enterprise finance guarantee, which is a 75 per cent guarantee provided by the Government for lending made to small and medium-sized enterprises by banks operating the scheme, has shown considerable success since it went live on 14 January. More than 400 loans have been offered under the scheme, amounting to in the region of £40 million. At that rate, there will be no shortage of applications or offers for the £1 billion scheme as a whole.

My Lords, as someone who has, as have others on these Benches, worked in manufacturing in the steel industry, I can tell my noble friend, who mentioned Corus, that there is great concern among trade union representatives in that company because the redundancy figures are increasing week on week. From the 2,500 originally mentioned, as I understand it, the figure has risen by a further 1,500. I remind my noble friend that there was a time when many in this country thought that there was no future for manufacturing. Indeed, some argued that we were in a post-industrial society. I am sure that he does not agree with that.

My Lords, my noble friend is absolutely right: I do not agree with that sentiment one jot. Indeed, I say in every speech I make that, far from being a post-industrial economy, as some people like to describe our country, we are nothing short of being still the sixth largest manufacturing economy in the world.

I have not been informed of the figures that my noble friend refers to in relation to Corus. I know that the management of Corus decided to make changes both to secure the company's position when the upturn comes and to bring about necessary restructuring, which would have had to have taken place regardless of the recession. However, I will make inquiries because I am concerned that a greater number of redundancies may be made than those of which I was originally informed.

My Lords, the Secretary of State says that the Government are doing all they can to get help to businesses as quickly as possible, yet, despite his department having said in January that the business lending guarantee scheme, which is so urgently needed by so many small and medium-sized enterprises, would be operational by 1 March, it is not. The department now cannot even give a date by which it will be. Indeed, the Government are only now starting discussions with lenders over guaranteed pricing. Given that performance, how can small businesses have any confidence in anything that the Government say?

My Lords, they would have more confidence if the noble Lord were to get his facts slightly straighter than he did in his question. I think that he must be referring not to the business lending guarantee, but to the working capital scheme, which is not a scheme for making direct loans under government guarantee to individual businesses. None the less, we are expecting, as I announced in January, to reach agreement with banks to boost business lending through the scheme. We are currently working with three major banks on their potential loan portfolios. We are awaiting state aid clearance by the European Commission, and I expect that to be forthcoming in the next couple of weeks or so. That is not much beyond what I originally said in January.