Select Committee on Scottish Affairs Minutes of Evidence

Examination of Witnesses (Questions 449 - 459)




  449. I welcome you to the committee. For the purposes of the record, perhaps you will introduce yourselves.

  (Mr McFall) I am John McFall, Member of Parliament for Dumbarton.
  (Mr Robertson) I am Ken Robertson, Public Affairs Director of United Distillers and Vintners.

  450. At this stage of our proceedings would either or both of you—particularly Mr McFall, who requested this meeting—like to make a statement, but not a lengthy one which might pre-empt the structured agenda before us?
  (Mr McFall) Thank you, Mr Marshall. You have the report commissioned from Fraser of Allander[1] into the closure of the J&B whisky plant in my constituency in June 1998 with the loss of 470 jobs. From day one, Ken Robertson and I met. The atmosphere at that time was not good because I felt that the plant, which had been in my constituency for 30 years, should be kept open. However, rather than adopt a traditional hands-off approach I decided that it was important to establish a task force whose work you see outlined in the report. Of the 470 jobs which were made redundant presently, only 80 who worked in the plant do not have a job. Most people have received training and had the opportunity to be re-employed elsewhere. Obviously, that was achieved by a partnership. We have not remained at that level, because we established a company called the Strathleven Regeneration Company which we envisaged would act as the economic development arm for the wider community. As a Member of Parliament for 14 years I had been rather dissatisfied by the traditional response to such closures. If one approached a Minister, a council or enterprise company one would be bounced from one to the other. I thought that we should get together on this matter, given that Diageo was a multinational company which owed a debt to the community and had in my opinion, to live up to its social responsibilities. If we all got together—our partners, the council and the enterprise company—we could have a model for future economic development, and any surplus profits from redevelopment of the site would be used for the benefit of the wider community. From day one of the closure Ken and I met, and we are still here two-and-a-half years later.

  (Mr Robertson) The closure of any plant is always very difficult for the employees and the community. In United Distillers and Vintners and Diageo we take these matters extremely seriously. We usually work to a fairly lengthy timescale, which in the case of Strathleven was two years from the announcement to closure, to allow employees to work with us and help them into either new jobs inside the business or outside it and equip them with all the other skills that they may need; and we also work with the local community. Each case is different. The Strathleven experience had unique characteristics. Hopefully, we have ended up with something which, if not exactly a blueprint for other communities, will give us some learning that may well help other communities in that situation. From a business perspective, it is critical to point out that over the two-year period the Strathleven plant not only met its international orders but broke all its own records in the final few months before closure. That speaks volumes about our experience there.

  451. Perhaps I may begin by touching on the local impact. The evidence that we have received during our inquiry demonstrates the significant contribution of the whisky industry to Scottish manufacturing employment. The industry is particularly important in supporting fragile areas where there are few alternative job opportunities. The closure of the J&B plant in Dumbarton must have been a major blow to the area. What exactly was the impact of the closure on the town, and did it have any wider effects in addition to the loss of jobs?
  (Mr McFall) In my constituency unemployment is the third highest in Scotland, despite the general drop in unemployment, which we welcome; presently it is the lowest for 20 years. However, in Dumbarton unemployment has been relatively high. With the presence of Allied, J&B and a number of other small distilleries, Dumbarton has been regarded as a whisky town. Well over 2,500 people are employed in the industry. J&B had been established in the early 1960s and was very much part of the community. Therefore, the closure was a blow to the whole community as reports in the local papers illustrated. It was a disaster for Dumbarton and everyone felt the loss. The community suffered a loss of self-confidence, and that was why I decided to become associated with it. The question to be asked from the political point of view was: what could we do here? We could criticise the company for leaving but could we get something better out of it? We have all stuck together. One of the revealing elements is that the workforce and the trade unions in particular have remained faithful to the idea. The trade union representatives took it in the neck, as we all did. It was said, "There's not much future here. This big company has sold us down the river and we just have to live with the consequences." We said that the company could work with us, be faithful to its social responsibility and there was something better for us. The results achieved to date show that. The fact is that two months before the closure the plant still achieved record production levels. That is an example of people having trust in each other that a better future can be delivered.

  452. You referred to the fact that local people regarded Dumbarton as a whisky town. Was there any special local significance in the fact that a whisky plant was to close, or was it not an element?
  (Mr McFall) I think that it meant much more. Had it been a manufacturing plant which was to close there would have been headlines and adverse comment, but this was a stake in the heart of the community because it was the whisky industry which was to close. In the past we had had issues with Allied Distillers. Allied had been there for many years—I believe since the 1930s—as Hisam Walkers, but there were question marks over the future of Allied. At the time of the change from a manufacturing to marketing plant the trade unions and myself became involved with Allied in ensuring changes of working practice. One of Allied's commitments was that if the unions worked with the management to ensure a change of working practices it would invest £18 to £20 million in new facilities at Kilmalid. However, that was three or four years down the line. People said, "Are we going to make changes here and then get nothing out of it at the end of the day?" We were engaged in an exercise in faith-building; we said that we had to change because the drinks industry was a global market and there was a change from a manufacturing to marketing concept. If we did not change we would be left behind, and the trade unions saw that. We worked faithfully on the Allied situation and delivered on that. In many ways we had had that controversy three or four years before the closure of the J&B plant, so people felt very vulnerable.

Miss Begg

  453. What were the reasons behind the decision to close the plant?
  (Mr Robertson) Just prior to this event there had been a merger of Guinness with Grand Metropolitan. That brought together two spirits companies: United Distillers and International Distillers and Vintners. That provided the opportunity to look at a different model to manage the main part of production which was the packaging side of the business. Obviously, that is where we employ most people and capital. One of the background facts to have in mind is that traditionally the whisky industry has had low asset utilisation in its packaging plants, and we have always had to work to improve that. With the merger, the company wanted to consolidate all its UK production in Scotland, which meant the closure of two plants. A white spirits production centre in Essex was also closed at the same time. We took the decision to make an investment of £50 million to provide the company with a different production model. That was one of the factors that drove the closure. It was also driven by the fact that competition in scotch whisky is much fiercer now than 30 or 40 years ago. We face increased competition, and our marketing budgets are very substantial. We need to be as efficient and economic producers as possible. The merger offered us an opportunity to do that and also to consolidate the whole UK spirits production in Scotland.

  454. You have talked about consolidation of plants and competitiveness. Does that mean it is inevitable that other whisky plants will close in the next few years?
  (Mr Robertson) It is difficult to sit here and use the proverbial crystal ball. I think the view shared by the industry is that there is still over-capacity. However, in part it is created by very low asset utilisation, which is probably unique in the scotch whisky industry. No shifts were worked and people did not work at the weekend and so the assets were heavily under-utilised. It is difficult to say what may happen. If we have a massive upturn in overseas volumes over the next few years it may produce a different picture. However, when we took the decision to close these two plants inside UDV we envisaged that the remaining plants would be reconfigured, with massive investment and doing things differently from before so that they would be able to meet our needs for the foreseeable future.

  455. Therefore, production did not drop but moved elsewhere when you closed the plant?
  (Mr Robertson) That is correct. We were able to take certain kinds of products and put them in specific places. For example, at Shieldhall in Glasgow we created probably the most modern plant of its kind in the industry. We have doubled the volume from something like 10 million to well over 20 million cases a year. But the products there are basically all of one kind; they are brands which come in a certain shape and size of bottle and will go down the lines very quickly. Kilmarnock is at the other end of the scale, in that there we do a lot of hand-finished work with a very complex product range. At Leven in Fife we consolidated mainly round white spirits. That gave us the opportunity to tidy up or rationalise the methods of production and to be much more efficient, which is essential in keeping down costs. Therefore, it allows us to pour more money into marketing.

  456. Is there room for even more efficiencies?
  (Mr Robertson) I can speak only for my company. It is difficult to give a finite answer. However, as of now we hope that we have the configuration we need for the long term. We now have the right number of plants. Obviously, we can make a drive for further efficiencies, but now it is more about adjustment rather than any radical, major change.

Mr Tynan

  457. You say that production targets were met and the workforce worked right throughout the two years before closure. Two years is a long time for the closure of a plant. Was that period chosen by design or because of the existence of the task force? Without the two years could it have been the success that it is?
  (Mr Robertson) We always want to allow a long time frame. Apart from anything else, we believe that to give people the bare minimum of three months is not fair; it does not give them the time to readjust or the company the opportunity to work with the local community. Arguably, in a short, sharp closure there is a shock and suddenly it happens; over a longer period, emotions move up and down and it is very difficult for everyone involved. I stand by our decision, in that it gives time for people to think of future options, to work with local agencies and for retraining. We consider that to be the right model for us. Whether that is right for other companies I cannot say.

  458. In the event of a closure in future you would like to see as long a lead time as possible to give the community the opportunity to adjust?
  (Mr Robertson) That is our preferred course. We have never done it in anything less than, say, one-and-a-half years; that is probably the least time that we would allow. The average period is perhaps two years.
  (Mr McFall) It was crucial to the success of the task force. I do not speak for Diageo. However, I believe it realised that its announcement in Dumbarton would have a significant impact and, therefore, the need to be close to the community was very important. But that two-year period has been crucial, in that Diageo has significant resources and has provided anything for which we have asked. You see from the report that it gave £200,000 to the bursary fund. Though what I will now describe is tangential to the work of the Task Force, it is still important to the local community in Dumbarton. Dumbarton Football Club has been threatening to go out of business for the past two years. The directors approached me a year ago and said that the club needed around £250,000; otherwise, the club would go out of business. There are two ways to look at it: if it is at the bottom of the Third Division to go out of business is perhaps no great loss but, given that it is one of the oldest clubs in Scotland—it dates from the 1870s—it is important to keep it. I scratched around to get that £250,000. The Football Trust through Tom Wharton and others provided £100,000. We were left with £150,000 to find and then Diageo came in as a major contributor to the club. Therefore, Diageo has contributed to the wider community and, through the development of the football club, is helping the economic regeneration of the area. Therefore, significant resources have been provided. However, the main focus of our work was with the workforce. A lot of personal counselling was undertaken. The Department of Employment and Clydebank College were involved, and that resulted in 190 workers obtaining SVQs. Given that traditionally it had been a workforce with low skill, and a lot of people did not know what skills they had, to obtain those SVQs was a booster for them; they realised just what skills they had, but time was required. Time was also needed to form the alliance at local level. All of us had different agendas. The work undertaken by West Dunbartonshire Council, Scottish Enterprise Dunbartonshire, voluntary groups and trade unions has been tremendous. That could not have been achieved if the plant had been given six months' or a year's notice.

Sir Robert Smith

  459. You referred to the under-utilisation of assets in the industry. Was that true throughout the whole production process from the grain to the end product?
  (Mr Robertson) By and large, that arises in packaging plants.

1   The Closure of the J&B Whisky Bottling Plant, Dumbarton (June 1998-December 2000), Summary of Fraser of Allander Institute Interim Report, January 2001. Back

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