Business

British jobs, for German workers?

BBC business editor Robert Peston on flexible market fears

For years I've been banging on about the "headquarters effect", or the propensity of multinationals to favour their respective countries of origin when it comes to decisions about where to put new investment or where not to impose draconian job cuts.‬‪

For many, it's one of the few respectable arguments against the British propensity to sell any company or asset to the highest bidder: the HQ effect implies that when a British plant is owned by a overseas company, it may be more vulnerable to being closed down if the going gets tough and may also be less well funded than operations in the company's home territory.‬‪

Nice theory. But in the boom years from 1992 to 2008, the headquarters effect didn't seem to be too serious a problem. The point is that when the UK economy and global economy were growing with only smallish dips and interruptions for 16 years, there were plenty of new opportunities for those made redundant by the corporate pruning and reshaping ordered by executives resident hundreds of miles distant.

Don't those easy-come, easy-go years feel an era away? Today's world is uncertain, shrouded and perilous. Which is why cross-border investment has diminished and why some multi-national businesses are putting safety first and staying a bit closer to hearth and home.

That said, few have taken the defence of the corporate home - a kind of corporate patriotism - quite as far as Siemens, in its recent agreement with its works council and the IG Metall workers' union that it will never make any forced redundancies among its 128,000 German workforce.

Siemens' German employees - not just this generation but all future generations - have been given a guarantee that their jobs are safe.‬‪

Now the traditional British or American critique of Siemens' protection of German employees would be that it has surrendered a vital ability to respond to unexpected shocks by slashing jobs and thus costs.‬

That may be so. But Siemens employees in the UK tell me they have a different fear - which is that they're now more exposed than they were to being fired: if Siemens wants to adjust its cost base, it's the Brits in their hire-and-fire culture who will be volunteered for the boot.

This may be an unfounded fear. But given that Siemens employs just under 17,000 people in the UK, it's as well to treat it seriously.‬‪

As it happens, I've been contacted by employees of Trench UK - a small business that became part of Siemens in 2004 as part of the acquisition of a larger outfit - who are battling against Siemens' decision to close their operation down.‬‪

To be clear, the original threat to shut Trench - which will cease operating in September 2012 - pre-dates the German job protection deal.‬‪

But, on the face of it, there are reasons to be troubled by the planned closure.‬‪

The point is that Trench UK seems to be a highly successful British-based manufacturing exporter - and there aren't too many of those about.‬‪

It also operates in a part of the UK, Tyne & Wear, where private-sector exporters are a bit too thin on the ground.‬‪

Now Trench isn't a huge business. It employs just 91 and can't be seen as of major strategic importance to the UK - although its existence probably supports a few hundred other British jobs.

But it is an important supplier to the National Grid as the maker of a specialist electrical product, called a Bushing, which connects transformers to cables.

The managers on Trench UK's employee consultation committee tell me that turnover and profits have grown strongly over the past five years and that 70 per cent of output is exported.

Profit was more than £5m in 2009, up from almost nothing in 2005 - and the past 12 months have delivered another record performance.

These managers say that they have a highly productive business, which has immensely loyal customers. They believe that Trench UK could be a small but useful contributor to Britain's industrial revival.‬‪

So why is it on its way out? Well the managers' conviction is that Siemens main motivation is to channel Trench UK's orders through a larger but less successful Siemens plant in Cologne, Germany.

Which, if true, may well be a rational commercial decision by Siemens.

But we need to hope that Trench UK isn't some kind of last swallow of an economic summer.

Or to put it another way, the evidence suggests that the famous flexibility and openness of the British economy has helped to bring in investment over the past 25 years.

These putative advantages of investing in the UK persist. But if it's easier to create and expand productive capacity in the UK than elsewhere in Europe (for example), it's also easier to shut up shop and go home.‬‪

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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