1.  INTRODUCTION

  1.1  Advantage West Midlands have no evidence to offer on the roles played by the respective Secretaries of State during the disposal of Rover Group subsidiaries in 2000 and the MG Rover Group negotiations with Shanghai Automotive during 2004-05.

  1.2  However, for general information with regard to the Rover Task Force formed in response to the BMW decision to sell Rover Group Ltd in 2000, the committee is referred to the Rover Task Force Final report and recommendations to the Secretary of State for Trade and Industry dated 30 June 2000.

  1.3  This memorandum focuses on the third theme of the TISC inquiry stated as:

The effectiveness to date of the recovery package and taskforce for the Rover workforce and the West Midlands more generally after the company went into receivership.

  1.4  This response is on behalf the Advantage West Midlands (AWM) which was the lead agency for the MG Rover Task Force. The formation of the MG Rover Task Force was announced on the same day that MG Rover went into administration, and AWM was designated to lead the key organisations and individuals from the public and private sector to deal with the regional and local consequences of the closure. The terms of reference for the Task Force are shown in Annex 3.[1]

  1.5  There were 70,000 jobs in the automotive sector in the West Midlands in 2003, as defined by the DTI. It accounts for an estimated 4.1% of output and 3.0% of jobs, significantly more than any other region in the UK, and 16% of the manufacturing employment base. This strong presence accounts for around one third of the employment in the sector nationally. In spite of the MG Rover closure, the region will continue to have by far the largest single concentration of automotive activity in the UK with a wide range of firms, global players, a strong supply chain, and major concentrations in design capability.[2]

  1.6  Being operationally embedded in this "automotive cluster", AWM were best placed to assume the mantle for co-ordinating the response of the Task Force to the MG Rover Closure.

  1.7  Short and medium-to-long term plans were developed and acted upon by the Task Force to ameliorate the impact of the closure along the lines of three primary themes:

—    Employee Support—Ensure employees were immediately financially supported by rapid processing of benefits, statutory redundancy, and other compensatory payments. Ensure those with the appropriate skills were fast tracked into available jobs, and that those requiring up-skilling or re-training for different careers were given avenues and support to do so. Engage with employers to proactively job match vacancies, and offset travel cost barriers where appropriate.

—    Supplier and Vehicle Retailer support—Provide short term rapid response to avoid a domino effect of company closures by access to finance, business consultancy support, and a wage replacement scheme; all to safeguard jobs and the regional economy pending the introduction of business recovery plans. Follow-up with medium to long term consolidation programmes to improve the productivity and competitiveness of key suppliers to the benefit of all, and give a wider business support for new product development for penetration into new markets.

—    Community Support—To address the concentration of impact in the SW Birmingham area with short term actions on debt relief, employability schemes, training, and local business support, and ensure that these short term responses match the longer term vision of regeneration for the area being developed by Birmingham City Council.

  1.8  As part of its management of the MG Rover Task Force, AWM commissioned two reports to advise Government on the potential Economic Impact of the MG Rover Group closure, and produced three progress reports on the implementation of the £175.6 million MG Rover Support Programme. These and other associated reports are listed in Annex 2 and are available on the media section of the MG Rover Response website:

  http://www.advantagewm.co.uk/rover-response.html

  1.9  Of these reports, the following would give the committee detailed operational information on the initiatives mentioned briefly in this submission:

—    The Task Force One Month On report which outlines all the emergency actions taken to support the 5,300 employees made immediately redundant, supply chain companies, vehicle retailers, and the local community.

—    The Six Months On report provides in-depth coverage of the actions taken by the various agencies, the quantitative results at that stage, the lessons learned and recommendations to Government for improvements to deal with this type of event in the future. The Six Months On report also draws on the conclusions from the Economic Impact studies and a Review of the Insolvency Framework in the context of MG Rover.

—    The Final Update Report—The Work Goes On—gives the latest statistics on the employee's return to work and training provisions, and an overview of the new and continuing projects to complete the MG Rover Support Programme over the next two years.

  1.10  Furthermore, the National Audit Office study on The Closure of MG Rover, published on the 10 March 2006, also provides a commentary and assessment of the effectiveness of the Task Force response in Part 3—"Dealing with the consequences of MG Rover's collapse".

  http://www.nao.org.uk

  1.11  The recommendations in the Six Months On report given to Secretary of State for Trade and Industry looked at the lessons learned from the closure, and covered issues such as:

—    Adopt a targeted approach for key sectors to enable individuals to undertake intensive vocational training (over 16 hours a week) and still access a training allowance from JobCentre Plus.

—    Review the application of the 28 day rule where temporary return to work in excess of this period excludes the redundant worker from a training allowance. This is a disincentive to take temporary work while waiting for vocational training.

—    Gather more data on the effects of the insolvency process on the whole economy and particular stakeholders. Compare this evidence with other national regimes and consider how changes in the process options/mechanisms could strengthen the "company rescue culture" rather than focusing on fair shares of the remains.

—    More systematic approaches to VAT recovery on bad debts and deferral of VAT, PAYE, and NI for all insolvency situations.

—    Establish a permanent transition loan fund to avoid the insolvency of otherwise viable companies.

—    Consider the key Task Force operational lessons from the MG Rover case study as the basis for a "model" response to any future major company failures with large scale redundancies and significant supply chains.

  A formal response from the DTI on the report recommendations is likely to be available before this committee hearing.

2.  CONTENT OF THIS SUBMISSION

  2.1  Since there is already a wealth of descriptive content in the above reports for the committee to draw upon in terms of the Task Force role and activities that have and are taking place, this submission will assume some knowledge of this background, and will focus on a summary of the interventions giving the results/outputs where known.

  2.2  This submission will follow the Task Force action plan themes as follows:

—  Employee Support.

—  Supplier Support.

—  Community Support—(the local residents).

—  Retailer Support—(the MG Rover UK Dealership network).

—  Communications.

  2.3  The committee should be aware that the MG Rover Support Programme includes funding for independent evaluations to be made of the success or otherwise of the interventions. The first (Phase 1) report on short-term interventions will commence during Q2 2006, with the report on medium to longer term interventions scheduled for Q1 2008.

  2.4  While AWM had direct control and in depth knowledge of most of the Task Force support actions, other activities were run independently from AWM and would best be reported by the departments concerned. Eg Direct redundancy payments to employees from the Department for Work and Pensions, regional training programmes support through the Learning and Skills Council; and community support actions through Birmingham City Council.

  2.5  The MG Rover Support Programme represents the total collection of projects and initiatives that make up the £156 million Programme announced by Government on 15 April 2004 plus a further £10 million committed each by AWM and Birmingham City Council giving a total of £176 million. A financial summary of the MG Rover Support Programme (MGRSP) is shown for convenience in Annex 1.

  2.6  Government, together with contributions from AWM, the European Commission, and Birmingham City, has provided the Task Force with the necessary funding over three years to deliver this response, both in the short-term and also assisting with the long-term modernisation of our regional business base. The response has been carefully costed. Public money—European or otherwise—has not been diverted from economic development activity in other areas of the West Midlands to pay for this response.

3.  SPEED OF RESPONSE

—  Friday 8 April—MG Rover goes into administration.

—  Monday 11 April—(week 1)—DTI decides to pay wages for one week to allow breathing space for a possible deal with SAIC or others under the changed circumstances.

—  Monday 18 April—(week 2)—redundancy notices issued.

  3.1  Once the crisis had occurred, the key to limiting the damage was to act quickly. Here the Task Force reaped the benefits of the contingency planning that had been in development since the beginning of 2005.

  3.2  Throughout this critical period, Government departments, notably the Department of Trade and Industry, the Department for Work and Pensions, and HM Revenue and Customs, provided the speed of service and flexibility to make things happen in the best interests of the affected parties. The following sample of emergency measures in the first weeks illustrates the speed and content of response that was achieved.

3.3  Employee support

Week 1

—    Task Force website goes live giving advice and contact details mainly to suppliers.

—    Jobcentre Plus helpline with advisors to book appointments, 11,000 calls in eight weeks.

—    Birmingham City Council announces help for applications for jobs with City Council

Week 2

—    Jobcentre Plus "Here to Help" pack issued to every worker with their redundancy notice.

—    Jobcentre Plus opens on Saturday and Sunday with extra staff drafted in from other areas (1,000 MGR workers per day being processed for Jobseekers allowance).

—    Statutory redundancy payment within two days of claim, compensatory notice four days, and overall 99% of claims paid within 21 days (NAO report 3.11).

—    Extra skills advisors drafted in by LSC to provide training plans (350 processed).

—    Two Job Fairs planned and advertised (Cofton Park and Bournville College).

—    Employer hotline launched targeting jobs for MGR workers (1,600 vacancies from 219 employers).

Week 3

—    Programme of support launched for placement of 87 MGR apprentices.

—    Wives and partners of MGR and Peugeot workers given access to FE courses.

—    Manufacturing Skills hub launched with travel and training incentives and skills/job matching service. Employer hotline—2,439 vacancies from 446 employers.

—    Hollymoor Centre opened for skills advice and training plans (1,350 processed).

—    Cannon Hill Jobs Fair planned and advertised.

Week 4

—    Job matching service for manufacturing sector developed by Jobcentre Plus in conjunction with LSC, Engineering Employers Federation, Society of Motor Manufacturers and Traders Industry Forum, etc.

—    Task force provides funding to retain MG Rover HR team (10 people) to maintain hot line links for information, establish personal history training records for employee references/CV support, weekly communications packs posted to all redundant employees, assistance to Jobcentre plus on candidates for job matching. (HR team maintained at this level from June until end of December 2005.)

3.4  Supplier Support

  This first phase of supplier support was reactive—dealing with suppliers needing urgent advice or assistance in the aftermath of the closure.

Week 1

—    The Emergency Supplier Support Programme commenced with a Wage Replacement Scheme launched for companies in MG Rover supply chain. (£50 per employee per day (+ training) for up to six weeks). Administered through Accelerate team at Birmingham Chamber. Objective: to avoid knee jerk reaction in making unnecessary redundancies.

—    The above Programme also provided free business consultancy support funded to help with redevelopment of business plans and insolvency avoidance. 100 regional and national advisors from DTI, AWM, Business Link, and Manufacturing Advisory Service were mobilised within five days, with visits starting after two days.

Week 2

—    £598,000 paid out to 63 companies to safeguard 1,310 jobs through wage replacement scheme.

Week 3

—    Task Force and HM Revenue and Customs (HMRC) announce VAT deferrals on bad debt owed by MG Rover and Powertrain.

—    HMRC consider case by case supplier situations to allow VAT/PAYE/NI payment deferrals.

—    Task Force commits £280,000 to re-instate MG Rover's IT system and allow suppliers to retrieve their parts from the Longbridge Distribution Centre.

Week 4

—    Task Force establishes a £20 million Advantage Transition Bridge Fund to make loans of up to £500k available to suppliers and dealerships with a viable recovery plan.

—    Specialist vehicle manufacturers reliant on Powertrain engines also eligible for emergency business support.

3.5  Community Support

Week 1

—    Birmingham City Council hotline goes live for MG Rover workers and their families to provide support, benefits and financial advice. 20 advisors drafted in.

—    Birmingham City Council announce £10 million to support access to employment, community support, infrastructure and enterprise.

Week 2

—    Northfield Neighborhood Office opened over the weekend to offer advice and support.

Week 3

—    Wives and partners of MGR and Peugeot workers given access to FE courses.

3.6  Retailer/Dealership Support

—    All of the Task Force supplier support initiatives were available to retailers with the exception of conversion training of technicians to new brand vehicles because the training did not meet the Level 2 NVQ criteria.

3.7  Communication

Week 1

—    As mentioned above, a single dedicated Task Force website with suitable links to other relevant agency websites for all affected was designed, populated, and ready to go within half an hour of any announcement.

—    All media enquiries were channelled through the AWM press office with only Nick Paul nominated as spokesperson for the Task Force.

Week 2

—    An "Extranet" website provided for the Task Force member for updates on media work, meeting minutes, etc.

—    Weekly reporting mechanism established for latest information on achievements on employees back to work, supplier support initiatives, training, and community actions.

  By July, a weekly mail out was sent to all MG Rover workers via the HR team retained at Longbridge.

4.  TASK FORCE ACHIEVEMENTS AND THEIR EFFECTIVENESS

4.1  Working Together—Teamwork

  Throughout the last 12 months, we have seen the West Midlands region at its best. Advantage West Midlands, Accelerate and Birmingham Chamber of Commerce, JobCentre Plus, Learning and Skills Council, Birmingham City Council, other Local Authorities, the Unions, community groups, industry bodies, politicians, and many more organisations and individuals, from both the public and private sector, have come together as the MG Rover Task Force to develop solutions and deal with an industrial collapse exceptional in scale and suddenness.

4.2  Economic Assessment

  From the beginning the Task Force focused on three areas that were identified as crucial for the prospects for individuals and the economy: employees, MG Rover suppliers, and local communities. The economic assessment indicates how successful the Task Force has been in these areas:

—    As illustrated in Table 1, the current short term economic impacts are significantly better than the base line position projected in the July interim Economic Impact report. Reflecting well on the contribution of Task Force interventions so far, further improvements forecasted for the medium and long term will be dependent on the rate of re-employment of the former MG Rover and supplier employees into industries held back by skills shortages; and improvements to the competitiveness of the supplier base.

—    While the total number of lost jobs in the region due to the closure has been estimated at 9,000, the task force effectiveness on this issue for TISC can only draw on registered statistics from Jobcentre Plus and the results from surveys.

4.3  Employees—Redundancy and Compensatory payments

—    Redundancy payments were prioritised by the Redundancy Payments Service and fast-tracked through the system as quickly as the awards have been quantified. Payments worth £51.5 million have been made in respect of 4,604 Protective Awards, 5,492 claims of payment in lieu of notice, 5,618 Redundancy claims and 5,561 claims for holiday pay. (Trades Union representatives on the Task Force have been particularly helpful here in ensuring clear explanations have been given on the status and presentation of these payments)

—    As revealed in the NAO report: "the Redundancy Payments Directorate reported that on average it was able to make statutory redundancy payments within two days of applications being received from former MG Rover employees, well ahead of the normal targets to pay 70% of claims within three weeks and 92% within six weeks. Likewise, all former MG Rover employees who received redundancy letters were interviewed and able to claim and receive benefits promptly. Both agencies mobilised a large number of extra staff and took other measures to deal with the extra workload."

4.4  Employees—"Back to Work" facts

—    The prospects of former MG Rover and supplier workers of regaining employment are good. By 10 March 2006, 66% (4,176) of MG Rover and supplier employees were back in employment of the 6,323 who claimed jobseekers allowance following being made redundant. This is on track for previous estimates of around three quarters being re-employed within 18 months of the closure, particularly as supported by the training initiative.

—    The speed at which individual employees have returned to work has been influenced greatly by the circumstances surrounding the closure of MG Rover.

—  It is unusual for so many people to lose their jobs with no notice, and thus not have the chance to come to terms with their situation and make plans for the future before becoming unemployed.

—  Many employees, especially older shop floor people, had only worked at Longbridge and would have taken time to consider their options for re-employment.

—  The comparatively high pay at the company may have influenced individuals' jobsearch and their desire to re-train for a skill offering a similar level of pay.

—    Of these back to work individuals 751 have gained new jobs through the Manufacturing Skills Hub with 75% of these receiving training and travel support.

*Employment statistics from Jobcentre Plus as at 14 February 2006.

4.5  Employees—"Back to Work" support effectiveness

—    In April 2005, as part of the planned response to the closure, Jobcentre Plus estimated that 75% would no longer be claiming JSA after 12 months.

—    Projecting 10 March (47 weeks) achievement, would give a total of 73% no longer unemployed at 12 months—very close to the original estimate.

—    In the report, Closure of MG Rover: Economic Impact Assessment commissioned by the Task Force, the consultants, Regeneris have estimated that the overall re-employment rate after 18 months is most likely to be "around the higher 70%s". Again, we are on course to at least achieve, or more probably exceed that estimate.

—    While the rate of re-employment has been running at around 100 per week, it is recognised that it is essential to maintain momentum for the 2,000 or so people yet to be re-employed. Consequently, further JobCentre Plus and Learning and Skills Council services are now being introduced to facilitate the move from training into jobs, and to engage with those who are having particular difficulties in finding jobs or have not chosen to participate in any of the training or back to work initiatives.

—    Over 4,000 people have completed an individual skills advice session to develop their own Training Plan. Not counting one day assessment courses, around 2,000 individuals have received training, of which approximately 500 have had their full vocational training entitlement, and another 300 are scheduled to commence soon. 1,111 (57%) of those who have trained are now working. Over 30 people have started higher education courses at one of the regional universities.

—    As expected, many of the management and professional employees and skilled engineers were able to obtain jobs through their own initiative using commercial recruitment agencies, the internet, etc. However, it is estimated that at least 50% of those gaining re-employment have secured jobs as a direct result of the efforts and intervention of Jobcentre Plus, the LSC, and Birmingham City Council through Job Fairs, job search facilities, the manufacturing skills hub, job matching, CV and interview preparation, training, and special training links with guaranteed jobs.

—    Support has also been provided for those looking to set up new enterprises by the Chamber of Commerce:

—  Technicians and higher level employees—47 highly skilled individuals have been supported through the Mustard high growth start-ups programme.

—  Training for a trade—138 clients have attended enterprise awareness sessions, and

—  Generic lifestyle entrepreneurs—135 clients have been seen on a one to one basis for pre-start support.

4.6  Suppliers and Retailers—effectiveness in safeguarding jobs

—    The direct impact on suppliers has also been less than the baseline estimate. Based on a survey of those suppliers participating in the Wage Replacement Scheme (WRS), evidence suggests there have been fewer than 2,000 supplier redundancies as a result of the MG Rover closure, compared to our earlier July Interim report estimate that almost 2,400 were at immediate risk. (However, only 956 supplier redundancies have been traceable as JobCentre Plus claimants.)

—    While the WRS safeguarded 3,034 employees at 170 companies for a period of time, the survey also confirms that ultimately 1,329 jobs were definitely saved/retained as a result of the scheme. For the base scheme cost of £3.4 million paid out to companies this works out at £2,560 per job saved.

—    The VAT/PAYE support—was extensively welcomed with almost £12 million of deferrals agreed for 106 companies

—    Up to 20 February 2006 The Advantage Transition Bridge Fund (ATBF) had received 21 applications from 20 companies amounting to a total of £6 million of which £5 million have been approved (£2.7 million to Dealerships, £2.3 million to Suppliers) with draw downs totalling £2.8 million.

—    Approximately 1,050 jobs have been safeguarded as a result of the ATBF approved loans (accounts for an approximate 150 overlap with the wage replacement scheme).

4.7  Community Support—effectiveness of presence in the community

—    In the first six months, 6,922 clients were interviewed and supported by Birmingham Council's Neighbourhood Advice and Information Service—including family members and others affected from other Local Authority areas. Demand is still three times the norm.

—    In the same period, the Debt Advice Team has delivered 227 hours of work, averaging 6.1 hours per client. 35% of clients being from outside the Birmingham boundary.

—    Besides the formally represented membership of the Task Force there have been informal self-help groups created to network their problems, issues, and job information via e-mail or special websites. Notable amongst these is the Rover Community Action Trust, a support group formed by the partners of MG Rover workers who, through helpful liaison with the relevant agencies, ensured the Task Force were aware of the pressing practical and financial issues and the human aspects of the closure. This group gives particular sympathetic and morale-raising support to those living in the vicinity of the plant where more than one member of the family may have been directly affected.

5.  NAO REPORT OVERALL CONCLUSION ON TASK FORCE PERFORMANCE

  5.1  The large scale and speed of the Company's collapse in April 2005 created a substantial challenge for public bodies. The contingency planning to mitigate the impact on employees, suppliers and the local economy if the Company were to collapse (co-ordinated by the Department (DTI), involving HM Treasury, Advantage West Midlands, Jobcentre Plus and the Learning and Skills Council) enabled a rapid and effective response when the Company closed on the 15 April.

  5.2  The agencies on the ground expanded their capacity quickly to meet the immediate large increase in demand for advice and services from both the 5,300 people who had been made redundant from MG Rover on 15 April and from companies in MG Rover's supply chain. The prompt processing and payment of statutory redundancy pay and social security benefits helped many employees and their families at a particularly stressful time.

  5.3  There is evidence that some former employees have been frustrated by the time taken, for example to get on to training programmes, although others have been successful and obtained both training and employment.

  5.4  The prompt availability to suppliers of advice, wage support, small loans and VAT deferrals helped mitigate the impact of the sudden loss of liquidity and business.

  5.5  Public bodies should draw on the lessons that have been learnt, and documented, by those involved in the MG Rover Task Force as well as the perspectives of those receiving services.

  5.6  A key issue for public bodies in such situations will be their ability to respond in a cost-effective manner to the need to increase quickly their capacity to offer relevant training and to ensure that the support and information they provide to employees on training and employment opportunities is made available at a time and in a manner which is most beneficial to the recipients.

6.  THE FUTURE

  6.1  As we reach the 12 month milestone the MG Rover Task Force entity itself has ceased, and management for implementation of the MG Rover Support Programme has devolved to the operational agencies where the emphasis is changing from addressing immediate problems to building for the future, based on the lessons learned. Some of these responses are being put in place now; others will need to be reflected on in the Review of the West Midlands Economic Strategy which will start early in 2006. A Task Force Executive Sub Group chaired by AWM will continue to monitor the ongoing delivery of the support programme.

  6.2  Employee support is focussing on those people who are making a major career change, on finding employment for those coming out of the training programmes, and on developing support packages for those former employees who are still out of work and for some reason have not yet gone through any of the support programmes.

  6.3  Community work will emphasise maintaining the confidence of families and individuals in the most affected areas, and notably the area around Longbridge itself. This will include work with young people, as well as debt advice and specific neighbourhood work. Special programmes are in development to undertake these actions and contribute to overall South West Birmingham growth and development proposals being led by Birmingham City Council.

  6.4  As part of the longer-term approach, programmes are being developed which focus on increasing the number of businesses which are truly globally competitive. These programmes are focussing on the productivity of complete supply chains as well as capability in new product development and design.

  6.5  The work in support of the current West Midlands Economic Strategy will continue to be a major part of activity following the closure of MG Rover. For example Longbridge lies within one of the Region's High Technology Corridors, which has been active for some time in attracting and establishing a focus for innovative industries of the future. The Regional Skills Partnership is working to upskill and reskill employees and leaders for the new economic challenges, and the Automotive Cluster is developing and implementing regional initiatives to support the future success of its sector.

  6.6  A more comprehensive description of the activities mentioned above, and of others not mentioned, is to be found in the MG Rover Task Force update report—The Work Goes On. While mindful of the size of the task still to be achieved, the Task Force has been impressed by the willingness and ability of the Region's organisations and businesses to work together, and the energy and capability of community groups and prominent individuals, and believes that this start bodes well for the future.

7.  CONCLUSION

  7.1  Factual indications given in this submission confirm that the Task Force activities have been effective; with back to work expectations being met, supplier or plant closures limited to eleven so far, over 2,000 jobs in the supply industry safeguarded through wage replacement and loan schemes, and projects commenced to give longer term competitiveness to the supply chain.

  7.2  However, it is recognised that getting the remaining 2,000 or so employees back to work probably represents the hardest part of the exercise, and new employability initiatives are currently being put in place. This "Working for Jobs" initiative will have more presence and vigour, and in combination with other practical support initiatives targeted at the local community, it is intended to get the atmosphere of the area back to one of optimism and inclusion ready for the longer term major development plans.

28 March 2006

2   Regeneris Consulting-Closure of MG Rover: Economic Impact Assessment-An Interim Report-July 2005. Back

3   Economic Impact of MG Rover Closure-Interim Report-Regeneris Consulting-July 2005. Back

4   Economic Impact of MG Rover Closure-Stage 2 Report-Regeneris Consulting-September 2005. Back