The Government warned last night that the crisis-hit British car industry faces thousands more job losses, amid mounting concern about the impact of the strong pound on manufacturing firms.
Government sources disclosed that Stephen Byers, the Secretary of State for Trade and Industry, is in discussions with "a number" of car-makers about "managing change" following BMW's decision to sell its loss-making Rover business. The companies include Ford, where workers fear 4,000 job losses at its Dagenham plant. Ministers fear that other multi-nationals will cut jobs in Britain or put investment projects on hold because of the strength of sterling. One cabinet minister said Honda's decision to halve production at its Swindon plant "will not be an isolated incident.
Mr Byers warned cabinet colleagues during the Government's public spending review that he will need more money to help alleviate the effects of the mounting job losses in industry. He has already promised £129m to tackle problems in the West Midlands caused by the Rover sell-off, and he told MPs yesterday that this figure could be raised.
The Government's refusal to take action to bring down the level of the pound, and the absence of special help for manufacturing in the Budget, has ended New Labour's honeymoon with business. Ministers will come under strong pressure to relieve the burden on exporters during the annual conference of the British Chambers of Commerce annual conference, which starts in London today. But Gordon Brown, the Chancellor, will deliver a tough "no change" message when he addresses the conference tomorrow. He will say the Government cannot protect firms from economic realities, and will urge them to improve their productivity to close the gap with other economies such as the United States.
Labour MPs from the north of England fear the Bank of England's monetary committee may announce a further rise in interest rates on Thursday, which would compound the problems facing industry.
Answering an emergency question yesterday on the crisis at Rover, Mr Byers told MPs: "We know there is overproduction in the European car market. That is bound to see further restructuring."
He said there could be "no knee-jerk reaction" to the job losses at Rover's Longbridge plant in Birmingham, but even some former cabinet ministers are beginning to question the role of the Department of Trade and Industry in the light of its apparent impotence during the crisis.
Mr Byers signalled that he will adopt the recommendations of the Competition Commission to force car manufacturers to slash their prices. But John Redwood, the former shadow Trade and Industry Secretary, warned the move would lead to further uncertainty for the industry. Car dealers are reporting a dip in sales, partly caused by buyers waiting for prices to come down.
In an attempt to deflect Tory calls for his resignation over his mishandling of the Rover crisis, Mr Byers is seeking the agreement of BMW to publish for the first time the minutes of meetings he held with the company's executives about the Rover sell-off. The Trade and Industry Secretary is adamant that the minutes taken by his officials will show he was not told in December by BMW that they were planning to halt their investment in Longbridge.
The embattled minister was forced to fight to salvage his reputation when the Tories secured an emergency Commons statement and accused him of a "cover up". Angela Browning, his Tory shadow, called for his resignation for incompetence and claimed he had "doctored" facts. "The Secretary of State has been negligent. On the fate of Rover, he knew it, and he blew it," she said.
The Tories tabled a Commons motion expressing "grave concern" at the Secretary of State's conduct. Mr Byers is due to release the minutes of his meeting with the the BMW chairman, Professor Joachim Milberg, to the Commons select committee for trade and industry before he faces a grilling over Rover on Wednesday.Reuse content