By Eddie Barnes
Published on Sunday 8 July 2012 00:00
‘WE KNEW they were haemorrhaging money, but we didn’t realise it would come to this,” said one worker as she came off the dayshift on Thursday.
The Hall’s factory in Broxburn is described as the lifeblood for the West Lothian town and the third largest private-sector employer in the local
authority region. Now, 1,700 jobs are on the line and the lifeblood is in danger of draining away.
As the worker noted, the fact that the company – which produces some of Scotland’s most famous meat products – was in trouble was not a secret. It had been rescued twice before from imminent closure. Above all, the plant’s parent company, Vion Food, revealed it was losing £79,000 a day in just keeping the factory open. Peter Barr, the chairman of the Dutch group, told the stunned workforce: “This is an extremely sad day and one we have strenuously tried to avoid for the past four years, but the huge losses
being incurred mean we believe we have no alternative.”
The repercussions of the Hall’s announcement spread quickly. The Scottish Government despatched the finance secretary, John Swinney, to the plant as soon as the news broke and by the time the evening news bulletins were broadcast, he was able to announce a “task force” of employment and regeneration experts was being formed to help plot a future for the factory and its staff.
The plan reduced the embarrassment for an SNP administration seemingly caught on the hop, coming less than a year after Alex Salmond had used First Minister’s Questions at Holyrood to declare his delight that Hall’s was to establish a new centre of excellence, creating 250 new additional jobs and safeguarding 1,000 others. This was, he noted, a further example of a major international company “showing their confidence and faith in Scotland’s future”. But nine months on, the brute laws of economics seemed to have ridden a coach and horses through the First Minister’s rhetoric.
The plant’s potential demise lay in the tribulations of the pig farming industry. The processing plant at Broxburn handles the majority of pigs bred in Scotland. But over the past ten years, the Scottish herd has declined by 50 per cent. Rearing pigs – which draws no lucrative subsidy from the European Union – is not as profitable an option any more, say farmers, especially as the EU Common Agricultural Policy now hands out cash to farmers simply for looking after the land.
Furthermore, production costs are already estimated to be 12 per cent higher than the EU average, with UK animal welfare standards having risen markedly in recent years. Consequently, the decline in volume meant that the Broxburn plant, which had been designed for 20,000 pigs a week, was barely taking in 8,000. Add in the fact that fuel costs are up, that the plant itself, now 30 years old, is, say managers, inefficient, and that the recession is eating away at demand, then the desperate situation is unsurprising.
For the next three months – Vion has announced a 90-day consultation period – the question will turn to whether ministers and enterprise chiefs in Scotland can somehow find a way of bending those economic realities to their will. The Scottish authorities have been here before, having had to mop up in the wake of a sudden exodus of a major employer – with varying degrees of success. So can those experiences teach ministers over the coming crucial months anything that can be re-used now? Or is it just a case of
going through the motions as the dole queues beckon?
With cruel timing, the announcement at Hall’s last week came only a few days after the 20th anniversary of the closure of Ravenscraig steelworks in 1992, when the final 1,200 workers who were left at the British Steel plant in Motherwell left work for the last time. For many, that iconic closure of a heavy industry powerhouse still represents the harshest act of mass redundancy in Scotland.
Today, the now unrecognisable area is presently going through a massive new regeneration scheme, although there are, say former workers, still scars from the loss of an employer which brought the community together. Unemployment is just one aspect: equally as important to many is the social impact of losing an employer which helps bond families and neighbourhoods in joint endeavour.
Contrast that bitter experience with nearly ten years later when, in 2001, Scotland’s biggest ever jobs axe fell at Motorola’s Easter Inch plant, when a total of 3,106 staff were made redundant. The experience was very different. Within three weeks of the announcement, a government task force was on site, delivering information sessions for staff, 24 hours a day. Job fairs were set up. Ex-workers were given advice on how to set up their own businesses. The result, despite the fact that the plant did end up having to close completely, was that – a year later – only 120 of the employees made redundant were still actively looking for a job. It remains one of the fastest redeployments from a large-scale redundancy event ever seen in the UK.
Officials, however, are cautioning against any direct comparison between Motorola and the Hall’s announcement. Firstly, notes one former Enterprise chief, many of the highly trained Motorola staff had easily transferable skills. For staff at Hall’s, many of whom attest to having worked there all their lives, that may not be the case. And secondly, it is no longer 2001. Economic growth in early 2001 was rolling along at more than 1 per cent in the first quarter alone. Now the UK is officially in recession, with little prospect of a return to growth any time soon. One minister from the early 2000s notes: “That was the time when unemployment was low and when the economy was flying. Now it is immensely difficult.”
So is Hall’s to be another Ravenscraig then? Many fear so. For them, the sight of Swinney at the plant on Thursday earnestly talking up the merit of “task forces” only served to highlight the impotence of politicians. “This is actually what diminishes politicians in peoples’ eyes,” said one business figure.
Swinney’s emphasis so far has been on trying to keep the plant going – perhaps in the full knowledge that alternative employment just isn’t there. “I want to help keep this plant open,” he said. The aim would be to try to explore “any other alternative business ventures that may come forward”. He noted how there didn’t appear to be a lack of work at the plant. Staff had only last week been asked to work overtime, he noted. What’s more, the Hall’s brand was a successful one.
The trouble is that the parent company insists the current model is bust, maintaining that all options have already been examined to try to find a way to make the site turn a profit, without success. Just to emphasise its difficulties, on Friday Vion reported a loss of £39.6m for 2011, more than double the loss of the previous year. A statement blamed “record grain prices, unprecedented livestock prices for beef and lamb, and continued fuel and packaging price inflation, and consumers whose household budgets were under relentless and growing pressure”.
Analysts fear even an injection of capital investment in the ageing plant will be insufficient. Jo Armstrong, of the Centre for Public Policy for the Regions, said: “If the factory is not competitive, it is difficult to know how to make that competitive without significantly more investment in machinery, but the return on that investment seems to be inadequate.”
Alternatively, she notes that the UK or Scottish Government could try a combination of tax breaks and grant funding to either tempt Vion to stay or to attract another buyer. If that is unsuccessful, then Scottish Enterprise would need to start retraining programmes in the hope the economy picks up and other work is available for the staff
So is there any hope? Drastic solutions are being proposed – and it is the “Big Beasts” in the food business, the supermarkets, which are being targeted. Last week, a report by academics at the Centre for Research on Socio-Cultural Change (Cresc) at Manchester University suggested a complete overhaul of the meat processing industry was required.
It highlighted the way the system operates in Denmark and Holland, and is now being copied by the fourth largest food store chain in the UK, Morrisons. Rather than forcing processing plants to compete for business – and pushing their prices down by, for example, making them pay for marketing promotions, the researchers believe the stores should buy up the processing sector and do it themselves. Morrisons now does this with its own meat, and, claims Cresc, makes better profit margins than by farming it out.
One of the researchers, Sukhdev Johal, said: “We feel Scotland is uniquely positioned to enact this policy. Morrisons’ processed pig meat is actually cheaper than all the other processors, including those who import, despite being the most profitable processors too. You may ask why aren’t other supermarkets following. That has much to do with their trader mentality where a buyer squeezing a supplier reckons on achieving the best deal without realising that the Morrisons model works better.” The researchers argue that the Scottish Government should now offer one of the supermarkets a deal to take the Broxburn plant over themselves and reap the potential rewards.
It is notable that the research, published two weeks ago, was sponsored by none other than Vion UK. Supermarkets might well ask why they should take on a loss-making factory that Vion now wants to offload. For those in the trade, however, the bottom line is that processors like Hall’s, and others across the UK, can no longer cope. Jim McLaren, the chairman at Quality Meat Scotland, said: “Vion is the sixth largest meat processing company in the world so if they can’t make it work then you wonder if anyone can make it work.”
Salmond visited the plant on Friday to put his personal stamp on the rescue effort. With a referendum on independence due in two years’ time, the First Minister wants to be seen to be in the frontline of protecting Scottish jobs, one of the central themes of his current administration. But, as in other parts of industry and commerce, the recession has ensured that tinkering on the edges won’t work.
Rather, it may be that a rethinking of the way the entire business operates is what will be required.
• eddie.barnes@scotlandonsunday.com
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