Bill Gleeson: So why could we not hang on to Rolls Royce?

Nov 7 2007 by Bill Gleeson, Liverpool Daily Post

THE news about the loss to the region of Rolls Royce’s Netherton plant is different from all those other stories we too frequently hear about manufacturing migrating from these shores.

Most other UK factory closures follow a decision by their owners to relocate operations to cheaper labour economies in eastern Europe or the Far East.

But that is not the case with Rolls Royce. Instead, its gas turbine operation is going west to a factory in the United States. On this occasion, it would appear, the usual excuses don’t apply. The US is definitely not a cheap labour economy.

This raises the question why Netherton was unable to compete and retain the work.

The answer is undoubtedly complex, but several factors are likely to lie behind Rolls’s decision.

While US labour costs are generally higher than the UK, the Americans more than make up for the difference with higher levels of productivity, making unit costs cheaper there.

It can be cheaper for any business that prices its products in dollars to make them in America when the US currency is weak. That logic, however, is partly offset by the fact that Rolls is a UK-quoted company and pays its dividend in sterling. It’s not much help protecting dollar profits if the dividend paid to shareholders is worth just 50p per dollar.

Rent also appears to be a factor in the decision. It can’t be a coincidence that the Netherton factory is scheduled to close just one month before a break in Rolls’s tenancy agreement with its landlord can be exercised. It would be no surprise to discover a rent hike in the equation.

The age of the factory may also have played its part. Netherton was built shortly after World War II. It is probably time for some modernisation.

If so, local investment and business support agencies would do well to examine their part in the region’s failure to hold on to such an iconic name. Why wasn’t better quality, affordable property available for Rolls to occupy here when we have had so much subsidy and grant aid in recent years to build this sort of industrial property? The answer to that question probably lies in the almost inevitably slow and grinding pace of our local economic development quangos.

* NORMAL business appears to have been resumed for the region’s shipyard industry.

The industry appears to have done a fantastic job of making a come- back in the face of what appeared to be a disas- trous set of circum- stances six years ago when the Cammell Laird shipyard went bust. John Syvret, his colleagues and work- force at Northwestern Shiprepairers, have shown immense resilience.

Many others quit these shores to find work in overseas yards where it was still plentiful.

Many obstacles and much scepticism had to be overcome. Even Wirral Council had redesignated the Cammell Laird yard for residential develop-ment. Rivals had acquired some of the dry docks, only to do very little with them. Northwestern had to make do with less suitable facilities further along the River Mersey. Indeed, at one stage, Northwestern had to take a prime contract to refit an MoD ship up to Glasgow where it had access to better dry docks and workshops.

But now ship repair and conversion work is back where it should be. Even the old name of Cammell Laird is making a comeback next year, and all the talk is about growth and even a return to ship- building. It’s almost as if the last six years didn’t happen.

Well done to all concerned.