Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by the Luton Vauxhall Partnership

  Abbreviations used in this brief:

    EEDA—East of England Development Agency

    EEIA—East of England Investment Agency

    ES—Employment Service

    LVP—Luton Vauxhall Partnership

    RSN—Regional Supply Network


  General Motors (GM) announced on 12 December 2000 it was closing its Vauxhall car plant in Luton in March 2002 with the loss of approximately 2,500 jobs. About 500 of the workers are expected to be transferred to the neighbouring GM factory, IBC Vehicles, making vans in partnership with Renault and the Frontera. Around 70 per cent of the hourly paid workforce are resident in Luton with a significant ethnic minority element.

  The Luton plant makes the Vectra and GM propose to concentrate production of the replacement (codenamed "Epsilon") either on the continent or at Ellesmere Port on Merseyside. GM is due to make a decision around middle January 2001.

  Effect on suppliers is being researched but could be closely linked with closure of Fords at Dagenham, sale of Rover in the West Midlands and review of Nissan in Sunderland. Vauxhall Motors have already cancelled 600 purchase orders for the Epsilon which they acknowledge will affect 800/1000 local people. Vauxhall Motors are negotiating with suppliers who have committed investment affected by the cancellation.


Automotive Industry

  The automotive industry is a significant source of employment in the Region: although the motor vehicles sector accounts for only around 1 per cent of total jobs—an estimated 23,000 people—there are three major local concentrations in the East of England: at Luton (Vauxhall), Dagenham (Ford) and Norwich (Lotus).

  Manufacturers are taking advantage of international sourcing to remain cost competitive. While these changes are noticeable at the top of the supply chain, secondary and tertiary suppliers are also feeling the impact. In the Luton/Dunstable area some 1,200/1,400 jobs are being lost in components suppliers like BTR Sealants and Trico.

  RSN, as part of the Essex Economic Partnership, are already engaged in mapping the impact of the Dagenham closure.

  Under additional Competitiveness Development Fund allocations, EEDA is providing financial support for a study of the economic impact of the closure of Dagenham. The scope of the study will be widened to include the whole Automotive supply chain as it relates to Vauxhall and Ford.

  The employment effect of the automotive sector in Luton (and across the region) can be looked at as an aggregation of those employed directly in manufacturing, those employed by components manufacturers and suppliers; those involved in car retail and distribution; and those local companies which depend on the spending power of automotive sector employees for their business.

  The region's R&D expertise in the automotive field is a strength and we are keen to retain the know-how at such centres as the independent Millbrook Proving Ground at Ampthill, Nissan's Technical Centre for Europe at Cranfield, and at Ford's technical centre at Dunton where some 5,000 are employed.

  Luton & Dunstable have also started to attract inward investment from sectors other than automotive manufacturing including Amazon, Softco, FS Boeing and Astra Zeneca. This diversification could be assisted if InvestUK make the area a priority for inward investment.

  Further detail of the economic impact is detailed in the paper at Annex B prepared by Luton Borough Council


  Current unemployment statistics (claimant count at 9 November)

East of England

  The East of England accounts for approximately 10 per cent of the total UK employment in motor vehicles and generates 11 per cent of the total UK motor vehicle industry GVA. Around 7 per cent of the workforce in Luton is employed in the car manufacturing industry.

  Employment trends and prospects based on survey of 6,700 employers in the region last year:

    —  The Bedfordshire economy is growing more slowly than regionally due to the low level of growing service sector activities. Bedfordshire has a heavy dependence upon engineering.

    —  The long-term prospects for the Bedfordshire economy remain weaker than regionally. Therefore, employment prospects are also weaker.

    —  Bedfordshire's manufacturing sector is forecast to perform better than regionally, but job losses are still anticipated, particularly in craft occupations.

    —  Employment growth will be in the service sector.

    —  Gross employment recruitment (allowing for staff turnover) will be 35,800 per annum. Over 6,000 of these will be in skilled and semi-skilled manual occupations

    —  Regionally, manufacturing will also shed jobs. 9,000 job losses (30 per cent) in transport and equipment manufacture are projected over the period 2000-2010.

    —  Skills shortages: regionally, 12.6 per cent of manufacturing companies (2,700) have vacancies. Half of these have hard to fill vacancies (about 2,500 vacancies).

    —  Many of the vacancies are in skilled/SOC (Standard Occupational Classification) 5 (29 per cent) and semi-skilled/SOC 8 (26 per cent) occupations.

    —  Hard to fill vacancies are lowest within Bedfordshire. They are highest within Hertfordshire, Cambridgeshire and Norfolk.

    —  Employers believe that the main reasons for these difficulties is a shortage of appropriately skilled applicants.


  Established 13 December 2000 and includes EEDA, Vauxhall Motors, GO-East, RSN, ES, Benefits Agency, EEIA, Bedfordshire & Luton Chamber, Bedfordshire CC, Luton BC, South Bedfordshire DC, Chaired by Neville Reyner, Deputy Chairman EEDA, who reports directly to Stephen Byers, Secretary of State for Trade & Industry.

  LVP is not set up as a lobbying group although it recognises that individual partners may need to lobby. Its purpose is to identify key issues and problems, identify solutions and co-ordinate activities including applications for funding to Government and other sources.

  Actions to date:

    —  initial meeting on 13 December 2000 setting up partnership. Covered information from Vauxhall, initial actions by agencies, lessons from Dagenham, identify key issues and problems, media contact and agree next steps;

    —  meeting 20 December 2000 to receive update from Vauxhall Motors and agencies, agree media strategy and set up four working groups.

  Working Groups:

    —  Supply Chain led by Simon Ash (RSN) to consider all aspects of supply chain issues.

    —  Retraining led by David Sutherland (ES) to consider all issues relating to re-training and re-skilling. Will also prepare bid to Rapid Response Fund.

    —  Development opportunities led by Cllr Roy Davis (Luton BC) to consider all issues connected with inward investment and development opportunities.

    —  External funding led by Kate Phillips (EEDA) to consider all issues connected with opportunities through Assisted Area Status/Objective 2/European Social Fund.


  Luton has been recognised as an area of high need in the Index of Local Deprivation being one of the 50 most deprived areas in England. Significant resources have been allocated to Luton which are detailed at Annex A. However these resources do not address the further problems arising from the Vauxhall closure.


Assisted Areas

  Regional Selective Assistance (RSA) to provide direct financial assistance to business through GO-East assisted by Business Links. Discretionary grants to projects with fixed capital expenditure over £500k that creates or safeguards jobs. Assistance (generally within the range of 5-15 per cent) to establish new business, expand existing business, set up R&D and proceed from development to production.

  Eligible areas in Luton—Biscot, Challney, Crawley, Dallow, Farley, High Town, Lewsey, Saints, South and Stopsley.

  Eligible areas in Dunstable—Houghton South, Icknield and Northfields.

  The whole of Luton, Dunstable and South Bedfordshire are Enterprise Grant Areas. SMEs in EGAs are eligible to apply for help with the investment costs of projects with capital expenditure of less than £½ million. There is a regional budget (£300,000 in 2000-01) for this scheme. However, GO-East is willing to consider applications from the Luton/Dunstable area for special support outside the regional limit.

European Objective 2 (ERDF)

  Support between 30 per cent and 50 per cent for areas with structural problems. Activities include creation of SMEs growth and development, improving access to capital, developing key locations and clusters, developing key sectors, building community capacity and building the economic base to support sustainable communities. Regional allocation £85 million over six years.

  Eligible areas in Luton—Biscot, Challney, Crawley, Dallow, Farley, High Town, Leagrave, Lewsey, Limbury, Saints, South, Stopsley and Sundon Park.

European Social Fund (ESF)

  Support up to 45 per cent for the adaptation of systems of education, training and employment. Activities include guidance to obtain jobs, improve employability, promote equal opportunities, promote lifelong learning, upgrading vocational skills and improving the position of women in the labour market. Regional allocation around £24 million per annum.

  Redefining the eligible areas for RSA and ERDF is not considered a feasible option.

EEDA Land and Property

  A major role in redevelopment subject to resource allocations including:

    —  marketing;

    —  construction of Innovation Centre/Managed Workspace to maximise the establishment and survival rates for new businesses;

    —  acquisition and refurbishment/new build to provide an early first phase of redevelopment on Vauxhall sites.


  Unemployment in Luton will increase significantly due to the proposed closure. The actual level will not be apparent until the effect on suppliers to Vauxhall is known.

  Luton has long been recognised as an area of high needs and has been allocated significant public funding to overcome high levels of deprivation including unemployment. However these resources are insufficient to deal with the additional problems arising from the closure and further Government support will be required in the short, medium and longer term if we are to provide a solution that is sustainable.

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