No Christmas cheer for British industry

News Analysis: A bleak new year of shut-downs, layoffs and reduced hours looms. Can more flexible working practices ease the pain?

BRITISH STEEL, Port Talbot - shut. British Steel, Port Llanwern - shut. Royal Doulton, Stoke-on-Trent - shut. Rover, Longbridge - reduced hours. Ford, Dagenham - reduced hours. As the country's manufacturers sink even deeper into recession, the message from the country's industrial heartland is: Britain is not working this Christmas.

The numbers give a graphic account of the plight of UK manufacturing. Overall, more than 11,000 workers will be forced to go home for the Christmas period because their factories had to shut early to cut costs. A further 19,000 will work a shorter week, as companies reduce shifts to meet the slump in demand for their products.

The problem is not new. Official figures show that manufacturing output has been contracting for some time and some 60,000 jobs have already been lost in British industry since the start of the year. But recent weeks have witnessed a pick-up in the flow of bad news coming from the country's producers.

In the last month or so, British Steel has announced massive job cuts, widely expected to total 12,000, the permanent closure of two rolling mills and sharp production curbs in other plants. Royal Doulton, one of the country's leading pottery makers, has said that it would scrap one of its main factories and make 1,000 people redundant - a sixth of its work force. Rover and Ford, the two car makers, have fared slightly better. But even their announcement of new flexible working arrangements to avoid redundancies is a symptom that Britain's industrial heartbeat has slowed down to a faint pulse.

The reasons for the manufacturers' malaise have been around for some time. The strength of the pound and the flood of cheaper alternatives coming from the crisis-ridden Asia have destroyed the competitiveness of British exports. At home, the slowdown in the economy and fading consumer confidence are making life difficult for UK-made goods. But if the problem is well known, solutions are not easy to find.

As the example of British Steel has shown, there is very little an export- led company can do when the markets and the exchange rates are going against it. The company is one of the most efficient producers in the world and has worked hard to improve its performance in the past few years. But productivity is of little help when demand is not there.

As one British Steel official put it: "The situation has got progressively worse during the first half of the year as the effects of the Asian crisis have resulted in oversupply and price falls." Hence the job cuts and the restructuring programme, which have received the blessing of the unions.

Lord Brookman, the general secretary of the Iron and Steel Trades Confederation, believes that the layoffs - to be achieved through voluntary redundancies wherever possible - were the best possible outcome in the dire circumstances.

He argues that without the unions, the cull would have been even more severe. "It is a cultural change. We have argued that this change in culture can develop but we aren't prepared to accept hard redundancies. This is a softly-softly approach".

However, Lord Brookman admits that he failed to breach the company's resistance to agree flexible working patterns in exchange for no redundancies along the line of the Rover and Ford deals.

Those agreements, widely seen as a landmark in the history of British industrial relations, were a direct result of the tough export markets faced by the car makers.

As the Asian demand for Ford Fiestas and Rover 200s slumped, the companies and the unions had to find a way to cushion the blow. In the words of one Rover official: "In the car industry, it is very difficult to balance supply and demand. We need the flexibility to be able to ebb and flow as the market does".

The Rover deal, which will ensure that Longbridge plant stays open to produce the new Mini, can be described as "workers on tap".

The company has the flexibility to ask the staff to work shorter hours during lean periods and longer days in booming times without having to pay overtime. As a trade-off, Rover's German parent, BMW, undertook not to lay off staff.

Tony Woodley, the unions' chief negotiator in the talks with Rover, says that the arrangement is a radical departure from "the boom-and-bust" strategy of many British firms. However, he maintains that such deals are still too rare in British industry.

"The legal framework in this country is inadequate compared with other European countries. We are Europe's soft touches, the easiest and the speediest to sack," he says.

But despite Mr Woodley's scepticism, the need to move towards more flexible working practices is being increasingly recognised by unions and employers alike.

One trade union official summed up the stark choices faced by workers' representatives in the current economic gloom. "It's very simple. There are two choices. To resist change and find out that the factory will close anyway or to tell the company, `We think than in a year's time you will be facing problems so let's sit down and discuss how we can solve them.' "

Ken Jackson, the general secretary of the Amalgamated Engineering and Electrical Union, believes that the first choice is not an option. " Trade unions can't stand still. Our members don't work for unsuccessful companies for very long, so it's in our interest to help our industry to change even if that means difficult choices for us."

Employers agree and point to the advantages of having the workers on side when dealing withproblems.

Neutral observers say that this spirit of co-operation is set to be put to the test by troubles to come. Both the Confederation of British Industry and the Engineering Employers Federation predict more manufacturing gloom in the first half of 1999. According to some forecasters, UK manufacturers will have to shed a further 125,000 jobs before hitting the bottom of this recession.