Dealing with Auto Industry Rundown and Closures: A Perspective from Birmingham

Session on Mono-Sectoral Cities, Open Days University 2011

David Bailey, Coventry University Business School, UK(with Caroline Chapain, Alex de Ruyter, and Gill Bentley)

Outline

1. Introduction / background2. The MG Rover research project3. Surveys of workers and the spatial impact of

plant closure4. Overview of workers in 2008-20095. Training and policy support6. Different pathways, different stories7. Conclusions and policy recommendations

Birmingham and the West Midlands

Birmingham and West Midlands: traditionally the UK’s auto centre...

• One third of jobs in Birmingham in 1960s/1970s estimated to be auto related

• But high profile plant closures through 1970s and 1980s, most recent Jaguar (Coventry), MG Rover (Birmingham), Peugeot (Coventry), LDV (Birmingham), plus in related industries

• Fears over Jaguar Land Rover plant: ‘saved’ 2010/11• BUT still an important industry in terms of supply chain

and R&D

Attempts from 1980s to rebalance / reposition the city

• City Centre redevelopment projects – tourism, finance, law, business services...

• But ongoing net loss of jobs (Centre for Cities, 2010)

• Auto industry: modernise, diversify away from auto and major local manufacturer MG Rover

• First ‘Rover Task Force’ – over 2000-2005: advance action ‘saved’ some 10,000-12,000 jobs

‘Place Renewing’ leadership(Bailey and De Propris, 2010)

• Entering and securing high-value market segments

• Cross-sector fertilisation• Repositioning within the global value chain

MG Rover case• Closed in 2005, with the loss of 6300 jobs

directly, c 3000 more in supply chain• Major economic shock in city and region

MGR: turnover = as much as 1% regional GDP£200 million in lost govenment revenueOwed £1.4 bn to creditors; £104m to suppliers - received 1p in £

• How was this dealt with, and what were the outcomes?

Picking up the PiecesGovernment Package: c.£176 million £50 million: training£40 million: redundancy payments£24 million: loan fund to help otherwise viable businesses£41.6 million: support MG Rover suppliers sustain tradingEC: up to £68 million of regional aid could be usedRDA: £42 million on redeveloping the Longbridge siteRDA: June 2005: £7.5 million on supplier diversification

Business Support

170 component suppliers received cash through the wage replacement scheme;

This kept around 3000 workers in jobs during the critical months after collapse, with 1329 confirmed ‘saved’

Advantage Transition Fund: make loans to firms

2. The workers...Where are the ex-workers 3-4 years after the closure?

• Where the workers have found work and where they live?• How the workers have been affected by the closure and how they have coped?• What support they have had, how useful it was?• What work or education or training they have gone onto?• Where they have worked?• Whether they have experienced unemployment?• How they feel about their new jobs?• What has been the impact of the closure on their health?

2. The workers• ‘Third wave’ survey of ex MG Rover workers in April 2008 based on two

previous surveys from the Work Foundation. Follow up, in depth interviews in 2008/9.

Unique Longitudinal Analysis

• Three Waves:– Wave 1: July 2005 (3 months after the closure)– Wave 2: December 2005 (8 months after the closure)– Wave 3: April 2008 (3 years after the closure)

• In April 2008, 204 respondents participated in the survey - 176 from Waves 1 and 2, 9 from Wave 1 and 19 new volunteers.

3. The respondents and the spatial impact• Our respondents were representative of the MG Rover workers

– 90% male– Mostly in the 40’s and 50’s– 80% were married (compared with 42% in the West Midlands)– 93% were home owners (compared with 70% in the West Midlands)– Majority worked in Powertrain and Manufacturing– Variety of occupations with skilled, professional or technical

occupations – only 11% had no qualification (compared with 18% for the West Midlands)

– 98% worked full-time– Average salary in 2005: £514 a week compared with £444 for a man

in the West Midlands.

3. The respondents and the spatial impact

In 2005, MG Rover workers• 44% lived in Birmingham• 24% in the ‘Black country’• 12% in Bromsgrove• 3% in Solihull• 18% in the rest of the WM

and England.

4. Overview of workers

• ???

By 2008, 90% were in work, mostly in full-time work.

4. Overview of workers

• Their overall activity rate (in work and looking for work) equaled 95% which is above the regional average (83%)

• 86% are on permanent contract

However• 65% of the employed and 85% of the unemployed stated having faced

difficulty:– Too many people applying for the same job– Age– Lack of skills and experience

4. Overview of workers

• 1/3 of workers in full-time job in 2008 reported having had at least another job before;

• This proportion rose to – 70% for those in unemployment;– 100% for those in part-time job;– 75% for those inactive and not looking for work.

4. Overview of workers

How respondents heard about their job?

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4. Overview of workersStill a high proportion of manufacturing work but a conversion towards services…

Employees jobs by industries: Wave 3 respondents versus West Midlands economy.

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Wave 3 employed respondents - 2008 West Midlands - 2006

4. Overview of workers

A mix of upward and downward mobility in terms of occupations– 34% have higher occupational roles – 31% have lower occupational roles

More than 60% have now a different role using different skills

A median annual salary decrease of ₤5,640 (adjusted for inflation)

Only 28% think that their current job is better than the one they had at MG Rover but 63% see themselves doing it for the foreseable future.

4. Overview of workers

• 54% increased their commute time to work

•less anxiety•better job quality•more skill use•more autonomy•more challenge at work

Longer Commute

5. Training and policy support

• Over 60% of respondents have had some form of training since closure

• This is a higher figure than that reported in previous studies. Related to the specific and job-relevant nature of training and education taken up?

• A majority of these retrained for ‘positive’ reasons…

5. Training and policy supportReasons for deciding to retrain/study.

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5. Training and policy support Wide ranging and speedy policy response – 86% made

a benefit claim (82% registered within two weeks) Most used policy support: job fair, information on job

opportunities, help from job centre plus, free place on a training course

Most helpful support: free travel to a training course or job interview; a free place on a training course; being sent on a training course by a new employer; help with setting up a business.

… yet most people who found a new job did so through their own initiative or through personal contacts 70%

6. Different pathways and stories• Differential overall profile

– Workers in full time job: male, younger, worked slightly less longer at MG Rover

– Workers in self-employment: older, more qualified, in managerial position at MG Rover and owned their own home

– Workers in part-time job: female, higher qualifications, worked longer at MG Rover and now work in services

– Unemployed and looking for work: older, lower qualifications and did not own their own home

– Inactive: close to retirement age, female, lower levels of education and own their own home.

In job 3 months after the closure

8 months after the closure

3 years after the closure

Age

Qualification level

Managerial position 47% 46% 36%

Using same skill

Now working in services 56% 68% 66%

Had training since leaving MG Rover

Travel distance 40% 56% 25%

Median income

Proportion who increased their income

30% 30% 7%

Different pathways to work…

7. Conclusions: Work• 90% of ex-workers were back in work 3 years on. Most in

full-time job with permanent contract or self-employment.• BUT; interviews in 2009 suggest some have lost jobs again• Difficulties in finding work: age, skills/experience and too

many people applying.• Personal initiative and networks have been key to ex-

workers finding their current job.• 60% use different skils to those used at MG Rover• Jobs are diversified with only 30% in manufacturing and a

mix of lower and higher occupational status. • Different pathways back into work

7. Conclusions: Income & Well-being

• Median salary / wage substantially lower than at MG Rover (minus £5640 adjusted)

• A quarter of households in a financially difficult position, but three-quarters financially stable. Two-thirds feel worse off.

• Overall, respondents perceive their current state of health as slightly worse than when working at MG Rover.

• 45% see job as worse than at MG Rover but most still like job• Those travelling furthest to find work reported more positive

ouctomes. • 60% undertook retraining or education; some difference in

perceptions of health where people have done training• Families and connections have played a key role in terms of

support.

7. Conclusions:Policy• Policy measures had varying degrees of success• Policy: Proactive and reactive policies required• Advance action and rapid response crucial• Need for institutional capacity ( Regional Task Forces)• Need to support good quality manufacturing jobs• Avoiding sudden closures and try to slow down the process • Ensure that employees have skills to cope as industries

change, through high quality, flexible education, training, information and mobility programmes (ability to travel).

• Tailored response• Abolition of RDAs in England in 2012 – how respond in

future?

Update: 2008-9 Recession

• 2008-2010: Regional Task Force• Vulnerable places, businesses and people• Lessons learned from MG Rover experience• Abolition of the English regions:

Will this expertise / experience be lost? Wider policy learning?