The company did experience ups and down but in the past it has bounced back. Now it is set to close down after being in operation for almost 100 years.
Since summer 2011 locals, workers and some politicians have fought hard to save BAE Systems, Brough. There are other plants in the UK which will remain open. This means that some workers will be offered alternate posts in another part of the country. This however will only solve financial problems for a handful of workers. It will however do nothing for the region.
Kingston-upon-Hull has one of the worst levels of unemployment in the UK. Traditionally it has not faired well as far as work goes. The loss of its fishing industry during the Cod Wards of the sixties and seventies hit the area hard. The Caravan industry brought many jobs to the region but plenty of these have been lost in recent years. One of the largest employers in the region is the public sector and the NHS. With job cuts expected here the economic depression in this region will worsen.
Norman Tebbitt, a minister in Maggie Thatcher's Conservative government famously said the unemployed should do like his father years before and "get on your bike" to find work. Times change and this is not feasible nor practical these days. For some moving to a new town or city will be the answer. This however creates more problems such as:
- Leaving family behind can be difficult and damaging to a young family.
- House prices in Hull are low. This means that any move is liable to mean increased costs.
- Selling a house in the area, to move away, is not easy right now, unless you want to sell for a knock down price.
- Unemployment is high across the UK.
- What of the region you will leave behind?
"On the 27th of September of this year, BAe Systems, Britain's biggest engineering employer, delivered an agonising shock to its workforce. It announced that it intended to lay off 3,000 workers in its plants across the country. In this process it would be closing the production plant at Brough, in my constituency, terminating the jobs of almost 900 skilled workers and staff.
It was a shock, but it was not a surprise. The previous weekend the newspapers had published a lead of these plans, in breach of all of BAe's codes of corporate responsibility. This cruel treatment of a loyal and decent workforce was, frankly, a disgrace.
As I will lay out in my speech it was not the only part of this decision that was disgraceful, but I will return to that in a moment.
The symbolism of this retrenchment could hardly be starker. Both aerospace and defence are massively important businesses for the UK. BAe is by far the biggest employer in either industry in Britain. The size of the cutback is grievous, and is grimly symptomatic of the decline of manufacturing in this country. So far, so bad.
But there is a risk that in the storm of statistics and the sweep of grand economic strategy, we lose sight of what matters here.
What matters most is the misery that this decision visits on individuals, on families, on whole communities, the destruction of their hopes and the blighting of their futures.
The Red Arrows in their BAe Systems Hawks. Photograph: Ashley Hugo/Demotix/CorbisIn Brough, a community that thinks of itself as the "Home of the Hawk", centred on a factory that has been building military aircraft since 1916, the shock was visible. It is one of those factories where grandfathers, fathers and sons have successively worked, maintaining a proud tradition of skilled work down the generations.
A number of married couples work together there, meaning that after Christmas whole families will be looking for work.
And what a place and time to look for work. Many live in a part of Hullwhich has more unemployed people chasing every vacancy than anywhere else in the country. In the last four years, the city has lost 7,500 manufacturing jobs – a quarter of all the manufacturing jobs that are there.
So the closure of Brough is an industrial tragedy, but more, a human tragedy. All so painful, and all so unnecessary.
Because at the same time as BAe were announcing job losses across Yorkshire and Lancashire, Airbus were opening a £400m factory in North Wales, creating 650 new jobs and underpinning 6,000 more. It makes Airbus wings. In years past the Brough factory made Airbus wing spans. Not today.
Up until about five years ago BAe maintained a stake in Airbus. The close relationship meant that Airbus components were made by the BAe workforce. This was a smart strategy because, although civil and military aviation operate on different buying cycles, the manufacturing skills and requirements are largely interchangeable. The company was able to switch resources to whichever sector had the demand, and the countercyclical nature of the businesses stabilised the profits.
But five years ago, before the banking crash and the sudden constraints on public spending, defence sales looked lucrative and civil aviation looked just a bit too competitive. Now it is all reversed, with commercial aviation booming.
Airbus 380. The civil aircraft market remains strongBut in 2006, in what must count as an astonishing piece of strategic myopia, the company made a hideously short-term decision, disposed of its stake in Airbus and withdrew from civil aviation. Now, Britain, the creator of the first jet airliner, no longer owns any producers of civil airliner. Today the workforce are paying the price for that strategic stupidity.
But that is not the only strategic error that has hit the workforce. Over the years BAe and its predecessor companies have had the symbiotic relationship with the government that is peculiar to defence companies. In the largely cost plus environment of defence procurement, the British taxpayer funds the development and production of weapons and aircraft. British test pilots risk their lives testing and improving their aircraft. In exchange, the nation receives the aircraft and equipment necessary to defend our shores and our interests, and also obtains a defence industrial capability that will support us in time of war. In addition, the government supports Defence sales in order to keep that domestic capability viable.
That is the theory. It seems to me that what has actually been happening is almost the opposite.
Take for example, the Harrier aircraft, perhaps the most iconic post war British aircraft. Without it we might have lost the Falklands war. It was developed with British taxpayers money, and tested by British test pilots, yet today it is an American aircraft.
As far as I can tell the Americans paid very little, if anything, for the transfer of the intellectual property rights in the most innovative aircraft development post war. So, British money, British skill, and American jobs. Sadly, this appears to be happening again. If we win the potentially huge order for the TX, between 350 and 1,000 Advanced Hawk aircraft will be manufactured in Texas, not in Britain.
And what that means is demonstrated by what has happened with sales of Hawk to India. In the last decade about 150 Hawks have been sold to the Indian Air Force. The vast majority, all bar 24, have been built in Bangalore. BAe will tell you that it was a necessary offset, and that it does not mean that we are moving Hawk production abroad.
Well, I looked to see what it said in the leading Indian newspapers, and in the speciality defence journals who spoke to both side of the Indian deal. This is what Ashok Nayak the Chief Executive of Hindustan Aviation said:-
Last year, while negotiating the contract for 57 Hawks, BAE Systems wanted to give HAL additional work in building Hawks in the future. HAL is looking for a large role in that build. What exactly, is still being discussed.
That was quoted in the Indian paper, Business Standard, India's leading business newspaper. But it was not just one paper. The journal Defence Now said much the same thing: BAe was discussing moving more production to Hindustan Aviation in order to create export sales out of India. And separately reporting at the Paris Air Show, the journalist David Donald reported:- BAE Systems envisions no problems in maintaining the Hawk's production status for many years, with the production line in India now driving and sustaining the all-important supply chain.
It is plain to see. Whether by accident or design, BAe are effectively moving to a position where the emblematic Hawk aircraft, the Red Arrows aircraft, is going to be made abroad. That is where some of our jobs are going.
And what happened to the Harrier yesterday, what is happening to the Hawk today, will happen to other aircraft tomorrow. In summary, successive British governments have maintained a policy designed to keep a cost-effective defence industry on British soil. BAe Systems have gamed that strategy with the effect that we have exported those jobs and capability to foreign soil.
But it gets worse. Since the 1960's, to maintain a viable defence industry, successive British governments have operated under a set of rules known as the Yellow Book, that determine which costs the company meets, and which the taxpayer pays. It transpires that when BAe lay off 3,000 workers, it is not BAe's shareholders, but the taxpayer, that meets the lion's share of the costs. This will mean that the British taxpayer will meet between £60 million and £110 million of BAe's costs.
I have to say that I think this is outrageous. A policy designed to protect our defence capability is being used to make us subsidise the destruction of that capability. A policy designed to protect British jobs, is paying to destroy British jobs.
I say this to the Minister, if I were him, I would not pay a penny. I would tell BAe, this is your decision, as the result of your strategy. If you don't like it, see you in court.
I should tell the Minister that I have spoken to the Chairman of the Public Accounts Committee about this, and she has agreed to ask the National Audit Office to investigate it. I hope that stiffens the MoD's spine in this matter. I have since discovered that BAe have benefited to the tune of hundreds of millions already from these Yellow subsidies for failure. I will also ask the PAC to investigate that.
Which brings us to today. The company is in the middle of the 90 day consultation period. They were told from the start that we would hold them to their legal responsibilities to be open and transparent in this process, and to consider properly all viable options put to them. On their behaviour to date, it seems to me entirely possible that they have broken their legal responsibilities, but I will leave that to the Rt Hon Member for West Hull and Hessle to outline that. I certainly expect them to demonstrate why they rejected out of hand the other options that they themselves raised before September of this year.
Secondly, I expect them to give proper consideration to the plan drawn up by their own management to preserve employment and production at Brough, albeit at lower levels.
The workforce at Hull is in the best in terms of attitude, professionalism, and skill that I have seen in my 20 years in business. BAe senior management agree. Their attitude is positive and their productivity is high, and both the member for West Hull and I have always been told that they are competitive on costs and quality. They deserve a proper chance.
Vince Cable, the business secretary, set up the Skills and Jobs Retention Group Photograph: Leon Neal/AFP/Getty Images
If the company do a proper, open minded review, and the figures do not add up, then I am afraid that their responsibilities do not end there. We have been fortunate that the Civitas think tank have spent £50,000 assembling an expert team to find an alternative employment for the Brough factory and workforce if all else fails – for which I thank them warmly.
The government's Skills and Jobs Retention Group is at work looking for alternatives. The government acted within a week of my request and gave us an enterprise zone to help us. But if they cannot come up with an alternative we will see, again, the loss of another critical mass of skilled workers in a deprived part of the country.
And this is the nub of the matter. These job losses, Brough and elsewhere, are to a large extent the direct consequences of the company's strategy over the years. The company's profits, on the other hand are to a large extent the result of taxpayer support. What is more, the company is best placed to find alternative employment precisely because of its historic involvement in the wider aviation and engineering industries. I believe that because of these factors there is a moral pressure on the company to preserve this skill base if it possibly can.
There has been a lot of criticism in recent weeks of very high level executive pay. Some senior executives have enjoyed an increase of over 4,000% in 30 years. I do not disapprove of high pay when it is earned. Despite severe criticism of its senior management over the years, BAe senior executive pay has grown by 8,000% in the same period. Perhaps they can justify that by doing their duty, not just by their shareholders, but by their employees and their country too".
Wednesday February 29, 2012 it was announced that around 850 jobs will be lost when the factory closes. This is expected to happen next year, 2013. Apart from a loss of work and spending power in the area the job losses will represent of loss of job skills in the region. BAE Systems had great training opportunities for school leavers, graduates and more. After all of Mr Cameron's promises the UK Government has now said that site and business operations are a matter for the company. In other words there is nothing that they can do.
The BBC quoted a wife of a BAE Systems employee as saying, "I think it's just very sad."I think the government and BAE have let the workers down. The government cut the orders for the airplanes in the first place and manufacturing orders have slowed. I think because of the amount of skill that is down there more should have been done."
A Government spokesperson said, "We understand this decision was made primarily in response to changes in key international defence programmes and the need to remain globally competitive at a time when defence spending in many nations is under huge pressure. We will continue to work with the company, local authorities and local enterprise partnerships to make sure that everything possible is done to help those individuals affected."
In the last few weeks there have been reports that homeless people in London could be moved to Hull where housing costs are cheaper. As London house prices continue to rocket, to the UK government this seems a sensible option. With the cuts to welfare benefit and caps on such incomes it will solve some of the Coalition's woes.
It will however add to the problems of the City of Hull and Yorkshire. We well know that the UK government cares not one iota about the North of England but surely this is a step too far? With jobs being cut all the time and unemployment steadily increasing in the region, are they looking at making Yorkshire a No Man's Land?