The following article is replicated from The Sunday Telegraph published on the 3rd November 2013.
The Grangemouth oil refinery dispute took on a new turn in the autumn.
After learning that the petrochemical plant in Falkirk, Scotland, will stay open following a deal struck with Unite, allegations emerged of a campaign of bullying and intimidation echoing the union militancy of the Seventies and Eighties.
A senior manager at INEOS, the company that operates Grangemouth, claimed that the Unite union sent a mob of protesters to his home, leading him to fear for the safety of his wife and two young children.
Meanwhile, the daughter of another director said that she had received a “wanted” poster criticising her father, at her home in Hampshire, hundreds of miles from the Grangemouth plant.
David Cameron described the allegations as “quite shocking” and called on the Labour Party to investigate the claims about the union, which is its largest donor.
Len McCluskey, Unite’s general secretary, defended the tactic as “legal and legitimate”, adding: “If a company director is engaged in what we believe is an unfair attack on workers and their families and their communities, then the idea that faceless directors can disappear to their leafy suburbs and get away with that type of action is something we think is wrong.”
Here, Jim Ratcliffe, the chairman of INEOS, talks about how he took on the union, and what British industry can learn from a thriving Germany.
INEOS chairman Jim Ratcliffe reflects on the Grangemouth dispute and union militancy
Towards the end of 2005, INEOS acquired Innovene, the petrochemicals arm of BP, for $9 billion. It quadrupled the size of INEOS overnight and brought with it some of the world’s largest industrial sites. One of those was in Cologne, Germany.
Three months later I visited the Cologne site, similar in size to Grangemouth but far more profitable, where I met the union convenor. His name was Siggi, he stood 6ft 4in tall and was known to represent employees robustly, but fairly.
After 15 minutes of ‘get to know you’ chat, he said: “Jim, I don’t like your bonus scheme.” Taken aback, I replied: “But why, Siggi? It’s a very generous bonus scheme.” He responded: “I would rather you spend the money on the plant, on capital expenditure, maintenance and painting so we can be sure there will be jobs for the employees’ children and their children.”
There has never been a strike on that site, or a hint of one. The union, on behalf of employees and INEOS, share a common goal: a long-term, successful future. Employees retain good-quality jobs, and INEOS makes profitable returns and reinvests on the site.
Sad to say, but invariably a chemical complex in Germany is in better condition and is more efficient than an equivalent one in the UK. And, equally regrettably, the German chemical industry has fared better than its British counterpart, which has experienced a number of closures in the North East and North West.
The constructive dialogue that we encounter in Cologne has been lacking at the Grangemouth petrochemicals plant in Falkirk.
Unions can play a valuable role in large organisations where it is difficult to talk to a thousand people. They can negotiate annual pay awards with management, represent grievance cases, and explain and advise on complicated changes in employment or pension law. However, in my view, they must understand that a business has to be profitable to survive, that the world is always changing, so firms have to adapt to remain competitive, and finally that their role is to safeguard the long-term employment of their members.
On the Grangemouth site this year, Unite threatened a strike three times – in February, July and October. In February, the union demanded a pay rise of 3.9 per cent, a level that the business simply could not afford. We had no option but to accede, as the site was not prepared for a strike and it simply would have been too damaging. In late July, Len McCluskey, general secretary of Unite, telephoned the site personally and demanded the reinstatement of Stevie Deans – who had just been suspended following a discovery of thousands of Labour Party emails on our system – or he would “bring Grangemouth to a standstill”. Again, a strike would have been too damaging at that time. And then, in October, came the straw that broke the camel’s back. Unite declared a strike over the investigation of Stevie Deans but, critically and far more damaging, they refused to engage in discussions about the future of the site.
Without change, Grangemouth would certainly fail. The business had been unable to adapt to a world that had moved on and become more efficient and competitive, because the union had kept a stranglehold on the plant. Each operator on the Falkirk site now costs close to £100,000 per annum, if one takes salary of £55,000 plus a pension contribution of £35,000, plus bonuses and National Insurance. This level of expense is simply unsustainable in our industry.
It is misplaced for unions in Britain to think that we are the enemy. We are not. It is not necessary, nor appropriate, to sow dissent and misrepresent employees or constantly to threaten industrial action. It is wrong for “brothers and sisters” letters (this is how missives from the union to members on site are addressed) to describe doubters or anyone who deigns to cross the union as scabs. It also has the hallmarks of bullying. Not only is it wrong but it is also intimidating, and designed to suppress alternative views – an attitude that runs absolutely counter to the values of society today, in which freedom of speech is cherished.
During the dispute, a female employee in accounting, who was worried by the union drumbeat, expressed concern about her job and confirmed that the business was in financial difficulty (she prepared the figures each month) in an email that she put out across the site. She received rude anonymous phone calls, with the phone being slammed down.
This small incident was much discussed in INEOS. It upset many of us that a lady in our company, a mother of three, was unable to express her views and concerns freely. It played a part, ultimately, in our resolve not to accept a solution for the site that did not bring with it changes on many fronts, but most importantly, in attitude and working practices.
The union issues on the Grangemouth site date back to the Seventies. Only three weeks ago, half a dozen friends and I were guided on rocky trails through the high Alps in Italy on mountain bikes. One participant, Tony Loftus, who had been the operations director for INEOS’s predecessor, Inspec, revealed in a discussion about the troubles at Grangemouth that his first job after a chemistry degree at Manchester University had been as a graduate trainee on the Grangemouth site in the early Seventies. He said, quite spontaneously: “When I was in Grangemouth, there were no problems, we didn’t have any strikes, and management did as they were told.” Little has changed since, and today the site struggles compared with its German counterparts.
While unions did not play a part in my family life when I was being brought up, my early years were most certainly spent in a working-class community. My first 10 years were in Failsworth, a northern suburb of Manchester, close to Oldham. I recall being able to count more than 100 mill chimneys from my bedroom window – this is probably how I learnt to count. We lived in a small cul-de-sac called Boston Close, in what I remember as a very pleasant council house. It still exists today. I do recall my father telling me that when he was younger he had climbed every tree in Miles Platting, a neighbouring suburb where he was brought up. It was only many years later as a teenager that it dawned on me that there were no trees in Miles Platting. It is a far cry from the leafy suburbs of the Home Counties.
These communities in Lancashire developed in the late 1700s. Workers migrated from the fields and sought new employment and opportunity in the Industrial Revolution that began in the heart of Lancashire. Britain invented the concept of manufacturing. I can clearly see in my family tree many of my ancestors moving from the fields of Derbyshire to Manchester. All signed their name with a cross.
I undoubtedly have an affinity to manufacturing, as do many from this part of the country. I am a strong advocate for actually making things in a major economy like Britain. That is not to say I have anything against services. I do not. But I believe that a robust, balanced economy requires a healthy manufacturing sector. We spend a good portion of our income on goods of one sort or another, from washing machines to handbags (heaven knows why so many are required), and it is common sense that we are better off making some of these goods than importing them.
Britain has suffered a collapse in its manufacturing base in the past 20 years. A typical economy splits three ways: agriculture, manufacturing and services. Agriculture is normally quite small, at less than 10 per cent; services is generally the largest sector; and manufacturing might be in the 20 per cent range, as is the case in Germany.
Twenty years ago, Britain lagged behind Germany by a small margin, maybe 2 or 3 per cent. Today, Britain’s manufacturing sector is only half of Germany’s.
The obvious questions are, why this collapse, and is it important? For me, it certainly is important. An over-dependence on services leads to a fragile economy. Germany emerged from the 2008/9 recession much more quickly and vigorously than Britain. Equally important is the geographic divide here. The Midlands and the North are much more heavily biased to manufacturing, and communities have suffered from high unemployment. London is clearly services-based, and very successful for it. But they are not the only game in town.
I see some tendency in government, which sits in a ‘services environment’, that is to say in London, to believe that the future is all about the City and its love affair with financial services. We should take some lessons from Germany, where they have a strong attachment to their thriving manufacturing base and recognise its key role in a balanced economy.
I see the rapid decline in manufacturing in Britain stemming from previous governments’ lack of recognition of its importance.
Britain doesn’t have a knock-out sales pitch to attract manufacturers. INEOS has several sites in Britain, but they are not as profitable as our plants in Germany, Belgium and, particularly, the US. Britain has expensive energy, skills are not at the levels of other countries, pensions are expensive, and unions can be difficult. Historically, government was not switched on to manufacturing in Britain. In contrast, the USA has excellent skills, most of our sites there are non-unionised, energy is a fraction of the cost in Britain, and they have an enormous market. Germany is simply good at manufacturing – as we used to be.
There is no reason that manufacturing should not revive in Britain. The present Government is becoming more attuned to its importance in maintaining a healthy economy. We should never forget that the Brits invented manufacturing.
To return to my main theme – the unions and the headlines asking “Unions, good or bad?” – I maintain that Seventies-style union behaviour leads to ruin. By contrast, Siggi, the convenor in Germany I mentioned, is in the 21st century. He challenges, he tests, he shakes the tree and negotiates, but he always persuades INEOS to invest. A good union is good for employers – and for employees.