Summary of today's Westminster Hall debate on the proposed takeover of GKN by Melrose

Opening the debate, Adrian Bailey, Labour MP for West Bromwich West, said the proposed takeover had a strategic interest for British manufacturing and wider implications for long-termism and responsible capitalism. The role of government was to ensure the national interest was protected and in such circumstances the private sector had to be regulated.

He said GKN was of enormous strategic importance to the British economy, being the major tier-one provider in the automotive and aerospace industries. It was well-placed to be a partner in the automated vehicle sector.

He pointed out that Melrose sought to own businesses for only three to five years, maximising shareholder profits, and quoted the example of Brush of Loughborough, which was taken over by Melrose ten years ago and was now failing because of lack of investment. Melrose had invested £230 million in research and development in various companies over the past five years, but that was less than they paid their top 20 executives in the last year alone.

Mr Bailey drew attention to the comments today of Tom Williams of Airbus, who had said it would be practically impossible to give work to GKN under Melrose ownership because of the short-term nature of the investment.

Another cause for concern was the relative size of the companies. Melrose was proposing to finance its bid by borrowing £3.5 billion.

On the issue of national security, he said GKN operated on a lot of UK defence platforms, with many foreign customers. The American government was highly likely to review a takeover and the British government should do the same. The public interest test applied under section 58 of the 2002 Enterprise Act.

Jim Cunningham, Labour MP for Coventry South, commented that Pratt & Whitney had always been after Rolls-Royce, indicating that if Melrose took over GKN the Americans would want to buy the company and the UK would no longer have a role to play in defence capabilities.

Mr Bailey said it was widely acknowledged that GKN was not a perfect company, perfectly managed, but in terms of their contribution to industry, employment and commitment to manufacturing, its future development needed to be carefully thought through. This takeover was not the best way of dealing with its problems.

He called on the government to widen their powers of intervention on takeovers, acknowledging the integrated investment and research-led nature of the 21st Century. The Prime Minister had said she would act in the national interest. The case of the GKN takeover gave her the chance to prove the strength of her commitment to make Britain a country that works for everyone.

Rachel Maclean, Conservative MP for Redditch, said she agreed with everything Adrian Bailey had said, adding that she feared for many of the 260 GKN jobs in her constituency which might be lost as a result of a Melrose takeover. Melrose had attempted to offer assurances, pledging to keep the GKN headquarters in the UK and to maintain the same levels of R&D, but it was not certain these pledges would be adhered to.

Richard Burden, Labour MP for Birmingham Northfield, said Melrose’s claim was to return GKN to being an engineering and manufacturing powerhouse. But their track record gave him no confidence that the takeover would be in the interests of GKN or the British automotive or aerospace sectors.

Mhairi Black, SNP MP for Paisley and Renfrewshire South, said the warnings could not be clearer that the GKN business could be split up due to the takeover. There would be potential unnecessary risk to national security. There was also an argument for the government to intervene to ensure the stability of the company and to ensure the security of the GKN pensions fund.

Jack Dromey, Labour MP for Birmingham Erdington, welcomed the all-party opposition to the takeover. He referred to Melrose’s ‘checkered past’ and expressed concern at what would happen to the GKN pension scheme. Melrose had failed to give the guarantees requested. "This country is proud of GKN and the last thing we want to see is for GKN, a great British engineering icon, to become history."

Wayne David, Labour MP for Caerphilly, said Melrose was a hedge fund and asset-stripper, despite their protestations, and their management lacked the appropriate experience. If the Secretary of State did not intervene in the takeover, it could be too late to do anything in the future.

Drew Hendry, MP for Inverness, Nairn, Badenoch and Strathspey, who is Shadow SNP BEIS spokesperson, agreed their was an urgent need for reform of the takeover rules. There were clear grounds for the government to intervene in this case. He added it was important to ensure the pension scheme was properly funded, whether under GKN or Melrose ownership.

Chi Onwurah, MP for Newcastle upon Tyne Central and Labour’s Shadow BEIS spokesman, said GKN was at the centre of the fourth industrial revolution with a significant economic contribution to make. She said the Melrose takeover would lead to the "financialisation" of GKN, placing UK jobs under threat. She agreed there was a case for calling in the takeover on national security grounds.

She broadened the debate beyond the GKN takeover to the wider economy, saying it was a litmus test for the government’s industrial strategy. Investing in innovation was a long-term bet. Melrose was a short-term player. She questioned whether the government was committed to building a high-wage, high-skilled economy as opposed to casino capitalism.

Andrew Griffiths, Parliamentary Under-Secretary for BEIS, said a key part of the UK’s dynamic economy was its merger regime and mergers and takeovers could bring great benefits to consumers and the economy. It had become clear that regardless of the success of the takeover, GKN would not be the same company as we know it today, with the sale of non-core businesses, possibly to foreign owners.

He said the government was exploring proposals to strengthen its powers to scrutinise investment for national security purposes, bringing the UK’s regime in line with other developed countries. The national security and infrastructure investment review closed in January and the government would be publishing its proposals in a White Paper later this year.