By Professor David Bailey
It’s hugely welcome news that Jaguar Land Rover management and unions this week reached a new two-year pay deal, as I fully expected them to do.
JLR revised its offer, with a pay rise of 4.5 per cent in the first year of a two-year deal, plus a bonus payment of £825 per worker. In the second year, workers will receive the higher of either 3 per cent or the Retail Price Index measure of inflation plus 0.5 per cent.
Around 15,000 members of JLR’s British workforce of over 26,000 will benefit from the deal, according to Unite, and the deal will now need to be approved in a ballot.
It’s good new all round. It’s good for the firm which is investing heavily in new products and technology. It’s good for the workers who have pulled out all the stops to work flexibly and to help the firm get costs down. And it’s good news for the government, as more pay means more spending in the economy, and more tax receipts.
Given that this deal was in the offing – agreement was reached late last week – it makes recent comments on the situation by Lord Bhattacharyya all the more bizarre.
In comments in last week’s Post, Bhattacharyya claimed that the pay ‘dispute’ might force JLR to shift investment overseas. He went on to say that the unions’ approach to the pay negotiations smacked of the “bad old days” of industrial relations, arguing that “what we are seeing is a glimpse of what used to happen in the past. Do we really want to go back to the past?”
The peer argued that other countries, including the United States, Hungary, Poland and Middle East states, were making “substantial and very tempting offers” to JLR to invest there.
He argued that “JLR has made what appears to be a generous offer. Yet in return they find themselves embroiled in negotiations by newspaper and public opinion”.
And he went on to say that “the unions should not be airing their grievances in public…. And they should also understand that, though Tata does not believe in short-termism, if it finds that JLR’s cost base has become too high here then it will have no hesitation in putting future investment abroad.”
Where the peer was right was in recognising the fact that but for Tata there wouldn’t be much of an R&D driven UK car industry left. But beyond that his intervention was disappointing on a number of levels.
Firstly, to argue that this smacked of the “bad old days” ignores the fact that industrial relations in the UK auto industry in general and at JLR in particular are on the whole excellent.
Indeed, unions are part of the solution these days and not the problem. The fact that Castle Bromwich was kept open only a few years ago was in large part down to local management and unions pulling out all the stops. The unions and workers agreed to increase the flexibility of working hours, thereby allowing JLR to increase the intensity of work during busy periods and get costs down.
More generally, the UK’s auto sector is experiencing investment on an unprecedented scale. This wouldn’t be happening if industrial relations were as poor as Bhattacharyya makes out.
Remarkably, over £7bn has been invested by major auto assemblers over the last 3 years, with more to come in the supply chain. A flexible, skilled and committed workforce is part of the attraction.
In fact, the peer’s inaccurate comments are unhelpful in that they could affect overseas’ investors’ perceptions of the state of the UK auto industry. That could be damaging for investment flows.
Secondly, for Bhattarcharyya to link JLR’s global expansion with the pay discussion is completely inaccurate. Yes, JLR are looking at investment in the United States and Saudi Arabia as well as that already underway in Brazil, India and China. We know that.
It’s to do with entering new markets and to access raw materials. To suggest that it’s to do with the possibility of rising wage costs in the UK is just wrong. JLR will invest abroad anyway as they have to do to become a global player. Unions understand that and have been very cooperative.
More broadly, the context of the recent discussions needed to be understood – something that Bhattacharyya failed to do.
JLR felt that they had made a good offer and of course stressed the need to remain internationally competitive at a time when they have face major pressures, for example on exchange rates and energy costs. And to those outside the industry the first offer of 3.6% in year one and a performance linked bonus sounded pretty good.
However, unions stressed that workers made big sacrifices during the downturn – including taking cuts in real pay – to help the firm stay afloat and since then have pulled out all the stops to work flexibility, get costs down and raise quality. They wanted a payback.
The expected deal has now been done. In fact industrial relations have so far been excellent and the unions and workers have played a really constructive role in helping the firm – and indeed the UK auto industry – to be successful of late.
That’s one the reason – along with the skills base and a positive industrial policy – as to why there has been so much investment in the UK auto industry over the last few years.
The days of the 1970s are long gone. Lord Bhattacharyya should know that.
Professor David Bailey is Professor of Industry at the Aston Business School