Huw Irranca-Davies

Labour Party | Ogmore

Speech on Christie Tyler to GMB Conference

CFTA Section, Blackpool, 19/03/06

Thank you and let me begin by saying that it gives me great pleasure to be here with you today at the beginning of CFTA section of the GMBs 2006 Conference. As a long-standing GMB member myself I am doubly pleased to be with you. It looks set to be an exciting and challenging conference, with issues of pensions and apprenticeships, tax credits and disability benefits, minimum rates and the future of manufacturing. I wish I could be with you to hear the address by Hernando Hernandez Tapasco of the Columbian Agricultural Workers Union on Monday, as the first ever full speech I made in Westminster was on the very issue of trade unions and the persecution of trade unionists in Columbia, a cause which still demands out full attention and support.

I have a very particular focus today on receiverships, but can I say as I look ahead at this conference, the range of subjects affecting working people and working families, the need for unions and government to constantly be vigilant on behalf of the labour-force, the need to always seek to improve the lot of the working woman and working man, the need to seek to improve the lot of all in society – in terms of health and wealth and welfare and quality of life – reminds us of why the links between the wider Labour movement and the unions and the Labour Party are deep, and will continue to be an integral part of the way in which Labour policy is shaped in this country. Government and unions do not always have to agree, but we have to agree to work together recognising that there is much common cause. This to be the basis of the relationship.

Unions have always been at the heart of Labour, and Labour takes heart from the support that unions give. Being in government puts strains on that relationship, but also gives the opportunity for greater joint achievement. The minimum wage – one of Kier Hardie’s original demands over a hundred years ago, greater workplace union recognition, parental rights none of these would have been achieved in opposition. None would have been achieved without a powerful partnership between the unions and Labour.

Having made this point, and an important point, let me turn to the issue of companies going into receivership. I can illustrate the points I want to make by simply telling you the story of what happened in Bridgend. It is the story of a workforce that were sold out by the management of a company, a management who first made sure that everything was in place to ensure their own safe, secure and prosperous exit. It was the reverse of the captain going down with the ship. The captain in this case made ready the life-rafts with champagne and canapés, gathered his first officers around him, and paddled off in the night before the crew and passengers had a chance to realise they had been left adrift.

Let me walk you through this tragedy, and in so doing, explain how it could easily happen again. Not because the government hasn’t changed the rules by which companies should operate – it has – but because for those companies who were established before the changes in legislation on insolvencies came into place they can play by the old rules. Most don’t, but the choice is there.

Christie Tyler Ltd was one of the 10 subsidiaries of the HMTF Furniture Group Ltd, and for some time leading up to the summer of last year they had been facing trading difficulties. The insolvency of two major trading partners, Courts PLC and Allders Ltd worsened the situation, and discussions with secured lenders who held debentures on the company had been ongoing for some time.

This of course happens against the general background of trading difficulties in the furniture sector for some time, which you are all too familiar with, particularly due to pressure from imports in the mid and lower end of the furniture manufacturing sectors, and more recently a weak retail environment. For Christie-Tyler, like others in the sector, this meant repeated after-tax losses leading to cutbacks worsened by further trading difficulties followed by more cutbacks to reduce overheads, and so on in a declining cycle. Unable to service it’s debts, the group looked to restructure and refinance its operations, but proposals were declined on 21st June 2005.

On the 1st July 2005, administrative receivers were appointed.

The use of Administrative Receivers is a key part of this saga. Under recent insolvency legislation introduced by this Labour government, there is a different route open to companies facing such trading and financial difficulties.

But, Christie Tyler decided to go down the other route, the older route, of handing the company over to the administrative receiver. This is significant, because under this approach, the prime duty of the receiver is to the debenture holder who appointed him, and he is duty bound to put the interests of the debenture holder above all others in making any decision as to the disposal of assets or the future of the company.

Under this approach:-

The interests of the loyal workforce count for nothing.
The interest of the local community count for nothing.
The interests of economic development or job retention count for nothing.

All is focussed on the interest of the debenture holder. As the Joint Administrative Receivers stated in a report to my office on 16th September, “Following the closure of the Pendragon and Contour factories in Bridgend, we have been considering a number of offers for the remaining assets and we will be accepting the highest offers, and maximising realisation to the creditors”.

There is no fault with the receivers here on this issue at least. No criticism implied or explicit. It is what they are sent in to do. But the very fact the company facing insolvency sought to go down this route rather than take other options that could have taken into account wider considerations suggests a calculation and ruthlessness in their motives that – the former Bridgend employees would tell you (some of them here today will tell you) – is indicative of the directors approach to the Bridgend workforce.

What would those wider considerations have been? Forget the emotive arguments for a moment about the job losses and the loss of employees who have stood loyally by a company through thick and thin over many years, forget the impact on families and communities. What if a little more time and effort could have bought not only a better deal for the creditors, but would have preserved more jobs by attracting other viable bidders for the business. A lot of “what if’s”, and what-if’s don’t carry a lot of weight to be frank. Except these “what-if’s” seem to have substance behind them. These “what-if’s” have led to myself and the Bridgend Labour MP Madeleine Moon, together with local former management and union representation, seeking meetings and answers from the Department of Trade and Industry to a series of questions.

[Madeleine’s letters]

I have to thank the GMB union at this point for the work they have done on this matter. Don MacGregor, Christie Tyler Branch Secretary wrote to the receiver at the time asking why it was that while the union and the workforce were officially told of the receivership on 4th July, within ten minutes of the receivership being set up on the 1st of July there was cherry-picking of the company by the former directors of the most profitable parts of the company and arrangements to sell off other plant and equipment for production in Lithuania.

Why was it that an alternative potential bidder waiting in the wings – a bidder that could have saved more jobs and kept more factories going - does not seem to have been treated with the same favour and transparency that the former directors of Christie Tyler were. We know it was a serious alternative option because the evidence is in my £250 phone-bill in the course of one week! I spoke with the alternative employer in detail, who felt they had not received equal treatment, and it would be worth citing briefly from a later e-mail.

[read Steinhoff letter]

The good news is that, following direct intervention from the Economics Minister in the Labour-led Welsh Assembly Government that company is now hopeful of building a base in the Bridgend area.

And then there is the question, which the union and I and Maddy Moon have raised with the DTI, over why a the directors of a failed company – or in this case perhaps the failing directors of a company - can be allowed to opt for a type of administrative receivership that throws a workforce out, cherry-picks in a seemingly pre-arranged fashion the most profitable assets of the old company so that their own future is secured, and – wait for it – because of the way the insolvency was handled has the government , or the taxpayer, ie you and me, ie the redundant workforce pay for all the cost associated with the redundancies! Astonishing! You couldn’t make it up.

Many of the episodes in this sorry saga would be comical if they were not so tragic. One morning, the Bridgend MP Maddy Moon and I were together on the train from South Wales to Westminster, talking through the whole business when the phone rang. It was Don MacGregor saying that the equipment from the Bridgend sites were being moved off site by container lorries. We knew they had been dismantling the equipment as if ready for sale or transport for days, but we had also been in constant contact with the receivers because – wait for it – the sale had not been formally agreed by contract signature. So as we went up to London on a bright Spring day, our phones went into overdrive.

We spoke to the receiver who assured us that nothing was moving off site. We checked with Don and others who told us they were watching it happen. The receiver told us nothing was moving. Surely someone was being economical with the truth. You see, it’s not just politicians! We told the receivers we could provide date-marked photographic evidence that equipment was moving off site. He replied, in a phrase now that sticks firmly in my mind “To the best of my knowledge, I can assure you nothing is moving off the site.” One of our phones rang again. Somehow, a truck that was of course not moving any equipment off-site but in reality was heading off to the motorway had now stopped and was returning, completely unconnected with the flurry of phone calls of course about a strip-out of equipment that was not really happening.

Standing here in Blackpool, home of seaside entertainment, it seems appropriate to say that it could have been a seaside farce scripted by top comic writers, if the reality wasn’t so bleak.

To top it all, there came the e-mail some time later by the receivers in response to my written enquiry on this episode, which stated “We had given instructions to the purchaser and to company staff that no assets were to leave the premises until the sale had completed. To the best of our knowledge this did not happen.” Well, Mr Receiver, the camera date-recording camera never lies [hold up photos].

Look. Let’s be fair for a moment to the directors of Christie-Tyler and SBI and to the receivers. It is possible that everything they did was right and correct, and this was just the hard real world of manufacturing, international competition, business people who want to do right by their employees but as their first priority have doing right by their creditors and bankers, receivers who diligently follow the regulations without fear or favour as they should. It may be all that. It may be.

But it may also be something very different because colleagues, something doesn’t sit right in my stomach when I digest the facts around this, and for the former employees it leaves them feeling sick.

I must be fair to the DTI, who when they met with a delegation from the GMB led by Maddy Moon and myself, listened with sympathy but - more importantly – recognised the need to go away and look at this case in some detail. We await their response with interest. Because this type of insolvency action, which just seems to the outside observer as too well-ordered and convenient for some parties while causing chaos and tragedy for others, may be Bridgend today but tomorrow … well … who knows where tomorrow.

I am a realist. I know that sometimes companies will get into difficulties and become insolvent. I haven’t heard the government announcing recently that it plans to nationalise the furniture sector, so we have to accept the competitive climate which affects all of manufacturing and other sectors whilst doing our best to provide support to indigenous industry. But when a company faces difficulties, in an era when employers large and small talk big on corporate and social responsibility, we should demand that decisions are not taken in haste that will be repented at the leisure of the former employees and their families.

I hope that the outcome of the DTI enquiries will be to find ways forward that avoid this cavalier approach to disposal of assets and disposal of employees to happen. Companies do go belly-up, but when they do, there must be a moral and ethical imperative to find the best way forward for all concerned, and not just resort to dog-eat-dog tactics where the best placed – often the former directors – come up smiling while everyone else goes hang.

Thank you for listening, and thank you to the GMB for inviting me here. We haven’t got all the answers yet, but if something good comes out of this that will help change the handling to future insolvencies, then that can only be good for GMB members.