Dear Chief Secretary to the Treasury,
I'm afraid to tell you there's no money left.
Signed, Liam Byrne

(Outgoing Labour Chief Secretary to the Treasury. May 2010)

Friday, 18 June 2010

Forgemasters' government loan(s).

A factory's expansion plans ... have been halted after the government cancelled an £80m loan.
Oh dear, that doesn't look good. It'll probably annoy a few people.

Let's just, very quickly, look at a couple of 'tweets' about this cancellation. First from Edmund Conway who wrote,
... mandelson's big pre-election pr stunt
Mrs R recalls that there suddenly seemed to be an awful lot of spare money just before the election, a lot of things were promised but, in reality, Labour knew the country was broke, had said there 'would be cuts' but hadn't said where, and knew they were not going to be re-elected. So instead of things being widely publicised and then quietly dropped (as had happened during the previous 13 years) all the cost-cutting and all the cancellations were part of the poisoned chalice passed on to the next government.

Lord Drayson tweeted that this £80m was,
a real investment in low carbon jobs
Mrs R isn't quite sure how these would have been 'low carbon' jobs, because the money was intended to help the company to install a 15,000 tonne press to make large forgings for the nuclear energy industry. Mrs R understands that nuclear power might be 'low carbon' because it doesn't involve using fossil fuels, but steel production uses quite a lot, and tends to look a bit like this. (pic BBC).

The £80m was meant to help 'create' about
about 180 skilled jobs
And that, you see, is something Mrs R "'just doesn't get".

If jobs were so important to the last government, why they didn't make a bit more of a fuss or do something a bit more proactive that could have stopped other companies being bought out, with jobs vanishing from Britain for ever. There really are too many instances to list, but do include a lot of chocolate manufacturers including Cadbury's, with 400 jobs lost at Keynsham. Then there was Corus on Tyneside, with the loss of 1,700 jobs to India. The 180 jobs to be 'created' at Forgemasters is all well and good, it's a start, but is tiny by comparison with elsewhere. Were, for example, the thousands of Corus workers meant to be happy to be put on the dole scrapheap?

Looking back to 1998 the government didn't seem to do anything much when, according to Forgemasters own site
the company was sold in two parts to USA buyers - the aerospace business to Allegheny Teledyne, and the River Don and Rolls businesses to Atchison Castings.
It went a bit pear-shaped, and then the situation improved ...
Atchison's management failed to develop the business and in 2003 their whole enterprise went into liquidation. A major turnaround at River Don enabled local management led by Graham Honeyman to ring fence the business from administration.

After two years of negotiation to overcome major hurdles including a difficult market and pension problems, management was able to complete an Management Buy Out [under Dr Graham Honeyman].
who fortunately
... returned Sheffield Forgemasters International Ltd to profit in just six months when he took over the loss-making company in 2002.

Within less than three years turnover increased from £35m to £100m, rising from £83,000 to £150,000 per employee. Today the company is an internationally competitive business with investment in people at its core.
It's a truly remarkable turnaround, and in such a short time too - from being in liquidation to making so much money. It's no wonder Mr Graham Aubrey Honeyman was awarded an CBE and all sorts of other prizes from the RAE and so on. Picture Yorkshire Post

It's strange that, such an important and successful man doesn't have a profile on Wikipedia, but that's by the by - he's done well, and there are people who are grateful to him and his business acumen.

Mrs R is more interested in that £80m government loan which's just been cancelled. You see, she's not too thrilled with that amount of taxpayer's money going to any private business, more especially one that's apparently so successful and which, she's fairly sure, could attract private investments and loans - leaving the cash available for smaller business and, maybe, even to pay for things that benefit the whole country. She wonders if it's a sort of sideways nationalisation, even though it was a 'loan' not a gift, but she could easily be wrong, because she's really quite ignorant about that sort of thing. And anyway, how would you go about nationalising, or part nationalising, just a small part of a multinational company? Anyhow, that aside, Mrs R does note that
The Government loan comes in addition to funds lent by other businesses including nuclear power firm Westinghouse Electric and the Sheffield office of the Lloyds Banking Group.
Errm, Lloyds? That rings a rather loud bell.

Would that the same Lloyds the Labour government pumped a fair bit of money into, so that now the British government is the major shareholder?

And Westinghouse Electric Company? It would appear that this company was bought, in 1999, by British Nuclear Fuels plc. And BNFL is owned by the UK Government.

So, to Mrs R's slightly ignorant eyes it looks as if the previous government had managed to push quite a bit of cash in the direction of by Sheffield Forgemasters - in a roundabout sort of way. She could, of course, be wrong - as she's already said, she's quite ignorant about this sort of thing.

Anyhow, while Mrs R was wandering around the internet learning about companies and loans she discovered that Sheffield Forgemasters was awarded a £2.7million R&D grant from Yorkshire Forward?

Yorkshire Forward is the Regional Development Agency for Yorkshire and the Humber, it was set up in 1999 after people in the north east voted against regional agencies and assemblies - and they got an assembly too, but nobody gets to vote for anybody who works there. There are regional agencies all round the country, and not one of them makes any money, none of them is a business, they are all funded by central government and via the EUs 'Regional Development Fund'.

So it does look as if Forgemasters might have done quite well out of the last government and, actually, there's nothing wrong with that if there's plenty of money to splash around, but there isn't because, as Liam Byrne said, "There's no money left!".

Mrs R wishes Forgemasters' management and all their employees well. She hopes they never find themselves in the same situation as other companies formed as a result of management buyouts, such as Ineos, who decided to base themselves in Switzerland because of the UK tax situation. But they might not have to do that, not with 'global' offices dotted around the world in Africa, Asia, Australia, Europe, North America and South America.

Despite predictions of gloom from Pat McFadden and Dennis McShane The BBC says they'll manage okay without this cash loan, and quote Dr Honeyman, who said
"While the press would have placed the company at the forefront of civil nuclear manufacture, it is important for us now to focus on other elements of the company's development.

"The government clearly has a remit to reduce spending and cut the economic deficit and it is for them to decide how best to do that.

"Sheffield Forgemasters will continue to develop its significant involvement into civil nuclear, thermal and hydro power generation markets and seek other ways to develop the business."

No idea what happened to this post, it was queued to be 'live' yesterday, but blogger disagreed - maybe the software decided it was too bitty and fragmented, and not worth publishing!


opsiamth said...

quote No idea what happened to this post, it was queued to be 'live' yesterday, but blogger disagreed - maybe the software decided it was too bitty and fragmented, and not worth publishing! quote

If it did that, Mrs R, it was quite wrong - it was a most informative and fascinating piece of work - the best I have seen lately.

Thank you

13th Spitfire said...

The way I see it is this; if it such a bloody good press then they should have no problem getting private fundings from private investors and banks.

TheFatBigot said...

When the "loan" was announced my first thought was that it was related to the number of marginal seats are in or around Sheffield.

Economically it didn't seem to make sense for the reason given by Mr Spitfire.

Catosays said...

Ahoy, Mrs've got mail.