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Honda in Swindon

Volume 795: debated on Tuesday 19 February 2019


My Lords, with the leave of the House I will repeat a Statement made in the other place by my right honourable friend Greg Clark, the Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:

“Mr Speaker, with your permission I would like to make a Statement about Honda. This morning, Honda announced that future models of its Civic car, which are currently made in Swindon will, after 2021, be made in Japan. The Civic is the only vehicle that is made by Honda in Swindon, so the result of that decision is that the company’s manufacturing plant will close in 2021. I am not going to understate what a bitter blow this is to the 3,500 skilled and dedicated workers at Honda in Swindon and their families, to the many more people and businesses who supply the plant, to the town of Swindon, which has been proud to be home, for 34 years, to one of the best car factories in the world, and to the whole British economy. Honda has given the reason for its decision as accelerating the move to electric propulsion and choosing to consolidate investment in its facilities in Japan.

Following the entry into force of the EU-Japan free trade agreement earlier this month, tariffs for cars exported from Japan to the EU will drop from 10% currently to zero by 1 January 2026. Honda will then export from Japan, rather than Britain, to Europe and the rest of the world. The company has stated that Bracknell will be retained as its European headquarters, that it will continue to base its Formula 1 operation in Britain and that its research and development centre into electrification and connected and autonomous technologies will continue at Swindon.

Honda has announced an immediate consultation with the trade unions and suppliers on this plan. I have spoken with the trade unions, local Members of Parliament, the leader of Swindon Borough Council and the chair of the local enterprise partnership. Shortly, I will chair, in Swindon, the first meeting of a task force comprising these people and others to do everything we can to ensure that the much-valued workforce of Honda in Swindon find new opportunities which can make use of their skills and experience. We will work with the local community to ensure that Swindon’s justified reputation as being a place of industrial excellence in manufacturing, technology and services is maintained and expanded.

In our automotive sector, we will work in close partnership with an industry that is going through a period of technological change and adjustment throughout the world greater than at any time in its history—a period of change that is disruptive and even painful for many, but in which Britain’s industry can emerge as a global leader if we back innovation in new sources of power and navigation: one of the four grand challenges of our industrial strategy and the focus of the automotive sector deal.

I and many other colleagues in this House of all parties have worked hard over the past three years to make the case for investment in Britain to investors in this country and around the world, despite the uncertainty that Brexit has put into the assessments of investors in Japan and around the world. We have secured investments during this time from Nissan, Toyota, Geely, BMW, PSA, Aston Martin, Williams and many smaller firms. We have an international reputation for being a place to do business, with skilled, motivated staff, access to innovation—especially in automotive, which is the best on the planet—and a determination to make those strengths even greater during the years ahead.

This is a devastating decision that has been made today: one that requires us to do whatever and all that it takes to ensure that in the years to come, Honda will once again, building on its continued presence here, recognise Britain as the best place to do business and to build some of the best vehicles in the world”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for repeating in your Lordships’ House the Statement concerning Honda. It is a serious situation and I am deeply sorry for the loss of jobs this will bring to the economy, industry and people in and around Swindon.

The Statement talks about individual company circumstances, the industry’s business cycle and technological change. In the Government’s myopia over the EU and Brexit, interpretations of its relative effect in this case will once again be played out across the analysis. But the Government cannot keep finding and hiding behind individual business circumstances to deflect their accountability. After all, there now appears mounting evidence. Today, Honda in Swindon. Yesterday, Nissan in Sunderland. The day before, Hitachi in Anglesey. The day before that, Toshiba in Cumbria.

This is against the backcloth of continuing fallout on the high street, with December’s Christmas trading the worst in a decade. Twenty-three thousand shops have closed, losing 175,000 jobs, with HMV, House of Fraser and Poundworld recent casualties. Even in the Government’s own public services around the country, the Carillion and east-coast rail franchises have also fallen apart.

This portrays more than individual misfortunes. The Government are responsible for setting the right economic environment—a conducive economic climate for business risk-takers to thrive in. The Government’s false hopes in creating industrial sector deals do not appear to have deep foundations. Many appear to fall over as soon as they are initiated. We are seeing empty shops, empty industrial sites and empty promises.

Brexit and its effects cannot be disentangled as the Government seek to agree new international trade deals as the litmus test of Britain’s new status. In contrast, the EU has just concluded a wide continental trade deal with Japan after seven years of negotiation. It will not have escaped the House’s notice that the four names already mentioned as examples of company withdrawals from all around the country, from the north and north-west to the south-east, are all Japanese companies with long-term investments and horizons.

The long-term commitment given by a previous Prime Minister, Margaret Thatcher, to the people of Japan that the UK would be a borderless conduit into the European market will be understood to have been broken. Just when delicacy was required, the Japanese felt insulted by the approach of the Secretary of State for International Trade, with accusations of foot-dragging. As evidenced by the Trade Bill currently passing through your Lordships’ House, trading partners do not simply accept a cut-and-paste transfer of the terms of EU agreements. As 29 March draws ever nearer, the certainty of failure is increasing. Business is raising its voice in dismay. Last week, Airbus spoke out on the catastrophe that a no-deal outcome would pose for it, even as the collapse of Flybmi was being felt in regional economies.

Returning to the Statement and the threat to mass-market car manufacturing in the UK, where 200,000 jobs are at risk, there does not appear to have been any close dialogue between the Government and Honda concerning plans and how any necessary change could be facilitated. The Statement says very little. Indeed, there appear to be lots of dots in the text. When will the Government join up the dots, change their policy direction and take no deal off the table? Was it wise for the Government to withdraw grants to support the purchase of electric cars? Will the Government undertake a thorough impact assessment of the effects of cutbacks in the automotive sector in the West Midlands, Sunderland and Swindon on their local economies? Will the Government act on that report with supporting measures? Today’s news is devastating for the people of Swindon, who found out about the situation only through social media. Unfortunately, the Government are today failing their citizens.

My Lords, as set out by the noble Lord, Lord Grantchester, last time it was Nissan, this time it is Honda. I wonder how many more such cases we will have to discuss before much longer. The Minister gave a spirited rendition of her department’s attempts to whistle in the dark. This is a blow. Before I go on, I refer your Lordships to my interests in the register.

It is clear that Honda’s Swindon plant has had challenging economics for some years. Last year’s output of 160,000 vehicles was sub-scale, yet Honda avoided closure and kept Swindon open—so why close it now? I am afraid that I do not believe in coincidences. It is no good the Minister saying that the company ruled out Brexit as a cause. Brexit promises to raise costs for parts and reduce access to the EU, which is fatal for an already marginal plant. Honda knows what it is doing, but it is a polite Japanese company that likes to keep out of politics. It also hates to close factories and sack people. The current chaos in this country gave it licence to act.

Beyond the absolute disaster this poses to Honda workers, and many more in the supply chain, this brings into question the Government’s industrial strategy. As Ian Howells, senior vice-president for Honda in Europe, said:

“We have to move very swiftly to electrification of our vehicles”.

Mr Howells also said that the company had to “look very closely” at where to put its investment. He explained that it has to be in a marketplace of the size that Honda requires to make the investment worth while; he emphasised scale. The conclusion that comes out of today’s announcement is that this does not include the United Kingdom.

That throws up at least three questions. First, given Mr Howells’ assessment that the UK market is sub-scale, how does Brexit create a more attractive market for investors? Making the addressable market smaller does not make good sense for future inward investment. Secondly, Dyson is going to Singapore, Nissan is stepping back and now there is this news from Honda. Where does this leave the industrial strategy? The Minister is right to emphasise the very fast pace of technological change, so where does this leave the electrification strategy in particular? Unless what the Government are attempting to do has volume car makers located in this country to deliver future vehicles, it will all come to naught, but volume car makers are departing this country. Clearly, Honda does not buy the Government’s plans, so what does the Minister know that makes her think that she knows better than Honda? Thirdly, Ford has warned the Government, and JLR clearly has issues. To date, Toyota is silent about Burnaston, but that plant is eerily similar to the Honda situation. Perhaps the Minister can tell us what conversations are going on with Toyota.

These are multidimensional problems and I concede that our Minister is not in control of all of the issues out there, but the Government can do some things right now to calm industry nerves. In the Statement the Government have said that they will do whatever it takes. Well, they could rule out a no-deal exit now and they could look again at remaining inside the customs union and the single market because that is what the car industry wants to hear. Today’s announcement is devastating for Swindon, but how many more advanced manufacturing businesses will have to close their doors before the Government finally get this message?

I thank the noble Lords, Lord Grantchester and Lord Fox, for their comments. Some were very measured indeed—for which many thanks—but others I felt were a little harsh. I hope to explain why.

Let us start with the B-word. Although the leadership of Honda in Japan, Europe and the UK have specifically ruled out Brexit as the cause of this announcement, it is worth considering the impact of Brexit on the wider automotive sector. Of course, it remains our top priority to leave the EU with a deal that is good for business and provides the certainty that it needs. Within the Government and the Conservative Party, we feel that we are coalescing around a pragmatic compromise to achieve this deal. Unfortunately, the Labour Party seems to be more split now than it was 12 months ago, but I implore the remaining pragmatists in the Labour Party to back a deal because it is important for the industrial success of our country in the future.

We are determined to ensure that the UK continues to be one of the most competitive locations in the world for automotive and other advanced manufacturing. We have put forward a precise and credible plan for the future relationship with the EU and we are looking forward to working with the EU to put it into place. I have already made it very clear that Honda has made a series of global decisions. This is not unprecedented; it is a revision of the global manufacturing operations of a very significant automotive organisation. The current model, the Civic, is at the end of its production life cycle so it makes sense for Honda to cease operations in Swindon.

Much has been made of investment and whether that is a good thing by the Government at the moment and whether it is continuing. The Government have announced significant investment in this area. The automotive sector deal was announced in January last year. As a part of that, the Government and industry have committed £1 billion over 10 years to support the Advanced Propulsion Centre. The centre does research and development and it commercialises the next generation of low-carbon technologies, as well as keeping the UK at the cutting edge of low-carbon automotive innovation. We are talking about electrification, which is incredibly important. I beg to differ with the noble Lord: just because we do not manufacture hundreds of thousands of electric vehicles here, although I would very much like us to do so, we can achieve innovations by using this money. Already 44 projects have received £770 million to help them to leverage and get the intellectual property which we can then put into new types of engines and drivetrains that will make sure that these electric vehicles work. That is incredibly important. Also part of the automotive sector deal is £80 million for driving the electric revolution, focusing on power electronics and navigation. There is also the £400 million that the Chancellor announced in the Budget last year for charging infrastructure. That project is coming along well.

It is not just the Government choosing to invest in our country; businesses are choosing to come here. The noble Lord mentioned Toyota. Just last year, in February, Toyota announced that it would build the next generation of its hybrid Corolla model at the Burnaston factory in Derbyshire. The Secretary of State went to visit it, and it is now coming online. The new engines for this model will come from the company’s Deeside factory in north Wales, which will also help secure 3,000 jobs at this site. Toyota is not alone. Aston Martin has announced that the St Athan facility will become the home of its electric vehicle range. In February 2018, Greg Clark opened YASA’s new 100,000-unit electric motor production facility in Oxford. This goes back to what I said earlier to the noble Lord: it is not just about building the entire car nowadays but about building the components. If we have the ability to create these new engines, we must make sure that we use it.

Of course, we are in close dialogue with the car manufacturers; we were in close dialogue with Honda. I am sure noble Lords will understand that Honda’s announcement was hugely market-sensitive but it leaked anyway. That was hugely disappointing, mostly for those families who found out what was going to happen at Honda from the media, which I feel is wrong. The Secretary of State is now in close contact with Honda—as indeed he always is, but now more specifically—on building this task force to make sure that we get the skills and experience that are there into other manufacturing facilities in future.

I felt that some of the comments made by the noble Lords, Lord Grantchester and Lord Fox, were a little harsh. I recognise that there are mixed fortunes in the economy at the moment but all noble Lords who have ever run a business know that it goes up and down. Some businesses are not viable any more; others come to fruition. We must note that employment is at a record high and wages are growing; those are both very good things. Over half of SMEs expect to grow next year, and GDP is growing at 1.4%. I do not believe that this picture is of the dismal nature painted by the noble Lords.

My Lords, I declare my interests on the register as a manufacturer of carbon fibre parts for the automotive industry. Does the Minister welcome the comments on “The World at One” today from His Excellency the Japanese ambassador, who said that—while the closure of the Honda factory is not about Brexit—Japan looks forward to an even more liberal and ambitious free trade agreement with the UK than the one it has signed with the EU?

I thank my noble friend for that question. I was not aware of those comments, nor his question, but I certainly thank him for it. Our approach is that we will continue to be a welcoming environment for Japanese companies. We have had a long and successful relationship with Japanese companies stretching back over decades, and if we are able to strike a good free trade agreement with Japan in future, that will be all to the good.

My Lords, I am afraid I thought that the complacency in the Statement and in the Minister’s answers was really quite horrific. I remind the Minister that unemployment figures are lagging indicators. The leading indicators, such as inventories, look extremely sick. Is it not the case that the Government have been warned from this side of the House consistently over the past two years that the course they were pursuing was going to undermine the basis for manufacturing in this country? How many more of these “devastating” announcements—I use the same epithet that the Minister herself used—will we have to hear, and will the people of this country have to suffer, before the Government realise the error of their ways?

I beg to differ with the noble Lord: there was certainly no complacency on my part, and I am sorry if he felt that was the case. The Government are absolutely committed to getting a deal that supports all businesses and takes away uncertainty. We now know the steps we need to take to achieve that. I come back to the use of the word “complacency”. It is certainly not the case. We will set up a task force for the staff in Swindon to look at how we can make sure they have successful future careers and we make use of their skills and experience. We have come very quickly to a stage where we have assembled all the key players: Unite the Union, the key trade union, is involved; local MPs and the local borough council are involved; the LEPs are involved. I am convinced that, if we can all work together, those 3,500 skilled and valued employees in Swindon will be very attractive to other employers.

Can my noble friend say whether Honda will continue with the development of its hydrogen fuel cell technology in the UK?

Unfortunately, I cannot, because I do not know anything about its hydrogen fuel cell technology. I will write to my noble friend.

My Lords, can the Minister be clear on what Brexit deal she would like this side to support? Is it the Prime Minister’s deal, which she did not vote for, or a mystical deal that does not exist?

My Lords, the best assistance the UK Government can give to our flagging car industry is to encourage sales of more electric vehicles. The Minister has outlined measures that the Government have taken to encourage production, but they have failed to do anything to encourage people to purchase such vehicles. Can the Minister explain when the Government will do something to encourage sales?

My Lords, the best way to encourage sales is to make sure that the cars represent value for money. One of the most difficult challenges in the electrification of cars is the battery, as I am sure all noble Lords know. That is why the Government committed £246 million to the Faraday battery challenge. This will make sure that the UK is at the forefront of developing and designing the batteries that we need for these cars. Eventually, the price of the car will come down as the batteries become more effective and their range improves. They will, therefore, become much more attractive to consumers as the cost per car falls.

My Lords, the Secretary of State has repeatedly and bravely made it plain that for this country to leave the European Union without a deal would be a disaster. Would my noble friend thank the Secretary of State for his steadfastness in proclaiming this and suggest that he has a quiet talk with those members of our party who support the ERG and whose wish is to crash out without a deal?

I thank my noble friend for his comments. Nearly all noble Lords will agree that no deal would not be a good outcome for the automotive sector or the economy as a whole. The Government are working extremely hard to get a deal. In the meantime, we are doing what any responsible Government would do and putting in place the necessary legislation for no-deal exit.

My Lords, was it not Baroness Thatcher who said that, for Japan, one of the unique selling features of Britain was that it was in the European Union, part of the customs union and part of the single market, and therefore cars could be sold freely around the European Union? What part of that analysis is no longer true?

I am sure Margaret Thatcher’s analysis was correct in her time. However, it is also the case that Britain remains a very strong place for inward investment. Indeed, I think it was Deloitte that earlier this year analysed 3,600 projects that have generated £140 billion of capital for our country—that has obviously come from all over the world. The UK is still an attractive place for inward investment, and we hope it will continue to be.

It is always sad when people lose their jobs, whatever the reasons, but let us get some facts straight, including those studiously ignored by the Opposition Benches. First, Toyota is going ahead with producing the most popular model of car in the world in this country. That is good news ignored by Liberal and Labour Benches. Secondly, Honda is also closing down its factory in Turkey, which is within the customs union, showing that customs unions are not a magic solution to all our problems. Thirdly, it is worth putting on the record that Honda had the lowest value added in this country: 58% of the value of its Civic is imported from Japan, 26% is made in the UK and only 16% of its components are imported from the rest of Europe. Does that not show that you can run a just-in-time production line with the bulk of your components coming through customs procedures, as Honda has been doing?

My noble friend makes a number of interesting points. Certainly, the plant in Turkey is also being closed by Honda as it focuses its operating facilities in Japan and the US. Sadly, there will also be 1,100 job losses in Turkey. We have to make sure that if customs processes are in place, they are as frictionless as possible. Some interesting facts—I found them interesting anyway—are that the Honda plant has to have 2 million components delivered every single day in 350 lorries and that it has one hour’s worth of components lineside. Noble Lords will therefore agree that making sure that lorries can get in and out of plants and across borders is important.

My Lords, does the Minister accept that not only 3,500 direct jobs are affected but as many 30,000 jobs in supplier industries, as reported this morning? Given the extent of this disaster—while welcoming the Secretary of State having recognised that Brexit has had an effect on industrial investment—at what stage will the Government reconsider the whole unfortunate Brexit episode if this is to be the consequence?

The noble Lord mentioned the supply chain. Forgive me for not mentioning this earlier but one of the key strands of work for the task force will be to identify the supply chain. At the moment, we are not clear on exactly how many jobs are involved. I know that some companies are 100%-owned by Honda and there will inevitably be job losses there. For others, Honda represents one of their customers and we need to understand the impact on such companies and whether there are alternative sources of revenue and investment that they can make use of.

My Lords, the Department for International Trade’s state-of-play document states that it will not be possible for there to be a continuity agreement on trade with Japan before 29 March. That means that if we leave without an agreement, we will not even be operating on certified WTO rules. In response to Honda’s announcement today, the motor industry has asked the Government to categorically act now to rule out no deal to prevent the industry and others preparing for a catastrophic set of circumstances. Will the Government listen today to the motor industry and categorically rule out a no-deal Brexit so that the industry and others can focus on what is best for the industry and jobs in the country?

As the noble Lord will know, no deal is the legal default. It is not the Government’s position that we would like no deal: we categorically do not want that to happen. However, to avoid no deal, one must have a deal. Therefore, as I said, I implore all the pragmatic and sensible people left in the Labour Party to support the Government’s deal so that we can give industry the certainty it needs.

My Lords, I draw attention to my entry in the register of interests as UK co-chair of the UK-Japan 21st Century Group. We tend to see everything through the prism of the Brexit debate but in this instance it is not correct. My noble friend is right to draw attention to the closure of the Honda Civic plant in Turkey because it illustrates that this is not a Brexit-related decision as such. However, there is a Europe issue: why should a Japanese manufacturer think that Europe will be the second largest market for electric vehicles in the future, but that it does not need to manufacture in Europe to serve that market? We have to address that issue, and the best answer to it is in the context of a free trade agreement with Japan, so that it can sell to us and we have the equal opportunity to sell to it. Will the Government listen carefully to what Prime Minister Abe has said about the importance of the withdrawal agreement and a transition period to enable us to enter into such an agreement with Japan?

Those are wise words from my noble friend Lord Lansley. The decision by Honda will clearly have been reached after some very detailed financial analysis of the cost benefit of manufacturing in various parts of the world. Our relationship with Japan will certainly be very important and constructing a good free trade agreement with it will, I am sure, be towards the top of the list of work that Liam Fox will have to do. I will pass my noble friend’s comments on to the department and I am sure they will be well received.

My Lords, does the Minister accept that car manufacturers will build electric cars only in the event that charging infrastructure is in place? The Government have today announced £400 million, which is peanuts, for charging appliances—maybe it was preannounced but it was repeated today and the Minister referred to it. I estimate that to be about 20,000 charging units. How can we expect manufacturers to stay in a market where the Government do not back them up with the very infrastructure needed to ensure that sales of electrical cars make that worth doing in the United Kingdom?

I beg to differ with the noble Lord: £400 million is certainly not peanuts but a significant investment in the charging infrastructure in our country. We also have the plug-in car grant. Based on the many people I know who have electric cars, I think those drivers will have their own charging points at home and will not need to use charging points outside the home. As innovation in batteries continues and their range improves, I would expect that to be more the case.

My Lords, will my noble friend acknowledge that the future of diesel has been an issue in this, as it was with Nissan? Owners of diesel cars have been demonised in recent years, probably quite rightly, but I am told that a modern, brand new diesel car is just as clean as a slightly older petrol car. The problem is that there is a great deal of uncertainty in the industry, and particularly with the general public, about whether it is all right to buy a diesel car at the moment. This is causing problems for the industry. Can my noble friend assure me—I fear she will not be able to—on whether, if I bought a new diesel car today, there would be any restrictions, taxes or charges put on that car in the next five years that would affect its second-hand value? That is what is causing the problems in the diesel car market.

While I would love to give my noble friend that assurance, it is clearly not possible for me to do so from the Dispatch Box. The number of new diesel cars is declining at the moment, although it should be pointed out that the proportion of diesel cars that Honda was making in Swindon was only around 10%, which is not a huge proportion in the context of its total production. However, there has to be a balance and the move to electric cars is a good thing, once we can improve their range. We should focus our energies on making sure that electric vehicles are the sort of vehicles that consumers need.

My Lords, I completely support my noble friend’s view that electric vehicles are important for the future of our industrial strategy. But can she explain why, this year, the company car electric vehicle tax has gone up from 13% to 16%? That will clearly put people off buying an electric vehicle. Furthermore, I implore her to go back to the department and echo the calls from around the House for the Government to take no deal off the table. It may be the legal default but there is a legal mechanism for withdrawing our notification to leave, by revoking Article 50 unilaterally.

My noble friend is right to say that the electric car tax increases from 13% to 16% but it will then drop from 2020, so the effect will be short-term. However, if I get any more information on that, I will certainly share it with her.

My Lords, will my noble friend please clarify when Parliament will be told what tariffs will apply to Japanese imports in the event of no deal?

I thank my noble friend for that question. Unfortunately, I cannot tell Parliament what tariffs will apply or when they will be published. Noble Lords will be aware that a number of things will have to be put in place if no deal becomes imminent. Obviously, most of us hope that that will not be the case but certainly the level of any tariffs, if any, will be one of the important components.

My Lords, does the noble Baroness feel, and share, the sadness of the House at our impotence? Does she recognise that making an appeal to the Labour Party to help the Government deliver their policy is probably a waste of time? Does she recognise that she should listen to the noble Lord, Lord Lansley, take his message to the ERG and persuade its members that they are the people who can ensure that we find a solution to the problem the country currently faces?

My Lords, some members of the Labour Party already support the Prime Minister’s deal, and I do not think it is out of the question that one or two more might see that it is the way forward for our country. As I have said, and say again, the Government’s position is that we do not want a no-deal Brexit. I agree with the noble Lord that there are certain members of my own party who also need to look very carefully at the potential outcomes. They need to weigh up the options and decide accordingly.

My Lords, I noticed that the Minister did not answer the point made by the noble Baroness, Lady Altmann, about the Government’s options in relation to no deal. A few minutes earlier she fell into the trap, which many Ministers fall into, of stating something that is not correct: that the only alternative to no deal is a deal. That is not correct. We have the opportunity to unilaterally withdraw Article 50, to request an extension or to put the matter to the people of this country again. Why do the Government keep saying something that is incorrect? They put 29 March 2019 into the legislation and they can remove it but stubbornly refuse to do so.

I was merely stating the Government’s position. We believe that the option on the table is the best one for our country and therefore we would appreciate its support.