Honda in Swindon

Statement

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.

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.

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.

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?

Perhaps the one that will be brought to a vote in the near future.

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?