Official Report 912KB pdf
The next item of business is a statement on Alexander Dennis Ltd. The Deputy First Minister will take questions at the end of her statement, so there should be no interventions or interruptions.
14:57
I am absolutely delighted to be back in the chamber to update members on the landmark announcement that Alexander Dennis delivered to its workforce in Larbert on Monday.
The First Minister was delighted to join Alexander Dennis’s workforce and trade union representatives as they received the welcome news that the threat of redundancy had been lifted and that the company has decided to continue bus manufacturing in Scotland.
The First Minister was pleased to announce £4 million of Scottish Government funding towards a furlough scheme for Alexander Dennis’s manufacturing staff. It is the first time that any Scottish Government has supported a company-administered furlough scheme. It is an innovative and exceptional intervention to support hundreds of jobs in Alexander Dennis, and it will act as a bridge to a sustainable future for the company in Scotland as orders pick up again.
The outcome has been hard won, requiring the trust, dedication and goodwill of a range of partners, including the management of Alexander Dennis, the workers, trade unions and our enterprise agencies. Together, through close collaboration, we have come a long way during a short period of time.
When I made my previous statement to the Parliament on Alexander Dennis, in June, the future was unquestionably uncertain, which was having an impact on the workforces in Larbert and Falkirk and on the wider community.
At that point, the company had just made public a new strategy for its United Kingdom manufacturing operations that was designed to consolidate all bus manufacturing into a single site at Scarborough in Yorkshire. If enacted, production at Falkirk would have been discontinued and the site closed, while production at Larbert would have been suspended on the completion of current contracts. Around the same time, the company commenced a statutory workforce consultation that placed up to 400 roles at risk of redundancy.
Without a substantive and agile response, Scotland would have faced the prospect of losing our bus manufacturing capacity for good. That would have ended more than a century of automotive excellence in central Scotland and dealt a hammer blow to the affected workers, their families and the surrounding communities.
However, the economic consequences would not have stopped there, as members reminded me during the statement that I made in June. Alexander Dennis estimates that, for every direct job in bus manufacturing, there is a multiplier of three to four jobs in the wider supply chain and support services.
The Government’s commitment was to leave no stone unturned to find practical solutions. We said that we would not posture or play politics with the situation and that we would explore every avenue to avoid redundancies, and we have done just that. Since June, ministers across the Government have engaged extensively with Alexander Dennis and its Canadian parent company, NFI Group, to understand the core issues and explore all possible avenues of support.
We heard about the challenges that are posed by increasing international competition and the need for a clear UK bus demand pipeline. We gained an appreciation of the huge scale of future demand for zero-emission buses from public transport operators across the UK, as they increasingly make the switch from diesel-powered to electric vehicles. Last year, in 2024, only 7.4 per cent of all buses in England were zero-emission buses. In Scotland, the adoption of zero-emission buses has been much faster, but, still, a great many of the buses on our roads today will have to be replaced over the next decade to meet our climate goals. A just transition to net zero requires that we retain the industrial capacity and skills that are needed to fulfil that demand and to build those zero-emission buses right here in Scotland.
Despite the present temporary lull in activity, Alexander Dennis is increasingly confident about its order book, but it needs a bridge to the future, and the Scottish Government has offered that with the furlough support that we have made available. The furlough scheme, which will operate for up to 26 weeks, is intended to be the bridge to a sustainable future for Alexander Dennis. If all the conditions of the furlough grant are met, including initial evidence of contracted orders, Alexander Dennis will be entitled to recover from the Scottish Government up to 80 per cent of the basic wage costs of its manufacturing staff in Scotland.
The terms of our scheme have parallels with those of the UK Government’s coronavirus job retention scheme, with a maximum claim of £2,500 per employee per month, which is equivalent to a gross annual salary of £30,000. The company will be responsible for the payment of wages above the £2,500-per-month threshold and for all employers’ national insurance and pension contributions. It is important that the Scottish Government support scheme extends only to those employees of Alexander Dennis whose roles are linked directly to bus manufacturing.
The furlough support scheme is time limited to a maximum period of 26 weeks, and the total cost will not exceed £4.1 million. If Alexander Dennis chooses to take employees off furlough for periods of training or to conduct work, or during pre-arranged factory shutdowns such as the festive holidays, all costs for those periods will be borne by the company. Our furlough grant is a time-limited and proportionate intervention that protects our industrial talent base while limiting the burden on taxpayers.
Furlough is not a stand-alone intervention. During the period of furlough, training and other productivity-enhancing assistance will continue to be offered by Scottish Enterprise. Scottish Enterprise has a strong 10-year-plus strategic partnership with the business, and its research and development and operational support will help the company to meet market challenges through investment and support the sites to exit furlough with improved performance.
I have addressed the contributions of Alexander Dennis, the Government and Scottish Enterprise. I now want to acknowledge the workforce and the vital role that its trade union representatives in Unite the Union and GMB have played in the announcements that we and the company have been able to make this week. The past few months have been extremely worrying times for all who work proudly for Alexander Dennis, their families and the local communities of Larbert and Falkirk. In spite of those challenges, the workforce has demonstrated enormous resilience and collaborated with the company on an agreement that modernises operational working practices. That the shop floor approved those changes through an overwhelmingly positive ballot last week is testament to the workforce’s commitment to the future of Alexander Dennis. I have engaged with Unite and GMB representatives regularly over the past few months—they might be sick of the sight of my face—and I did so again yesterday. Throughout it all, I have been impressed by their determination to support their members, their desire to find solutions and their openness to change.
In conclusion, I hope that the announcements that have been made this week will bring comfort to the workers at Alexander Dennis and that they can look forward with confidence again. It is essential that we protect the skilled manufacturing capacity that we need to build our transition to a green industrial economy. With our innovative furlough support, the Government has again demonstrated a willingness to step in to support Scottish workers and to get behind Scottish manufacturing.
There is a lot more to do. I imagine that, with the Parliament’s permission, this might not be my final comment in the chamber on the matter. There are still some challenges ahead. However, I have been assured that Alexander Dennis is working hard to secure orders in national and international markets and that its confidence in the order book is increasing. As a result of collaboration between the company, the workforce and the Government, a bridge to a sustainable future for Alexander Dennis is now in place.
The Deputy First Minister will take questions on the issues that she raised in her statement. I intend to allow around 20 minutes for those, after which we will move on to the next item of business. I would be grateful if members who wish to ask a question could press their request-to-speak buttons.
I thank the Deputy First Minister for advance sight of her statement. I welcome the Scottish Government’s £4 million support package, which will provide some short-term relief for the workforce at Alexander Dennis in Larbert and Falkirk. That is a positive step, but it does not address the fundamental issue: it is not simply about bridging a few months, but about supporting the long-term sustainable future of bus manufacturing in Scotland. Alexander Dennis has been crystal clear with all of us, and with the UK and Scottish Governments, that it does not seek favours—only the chance to compete fairly.
At present, procurement rules tilt the field against domestic producers, while heavily subsidised imports, particularly from China, undercut Scottish manufacturers and win contracts that should sustain our industry and jobs. That cannot continue. If we are serious about jobs, skills and industrial resilience, procurement reform must be a priority. Will the Deputy First Minister commit to working with the UK Government and pressing it for a joint approach to reform that ensures that the problem does not persist in future? The future viability of companies such as Alexander Dennis depends on it. Will she publish clear proposals with timelines and firm commitments to deliver the level playing field that all manufacturers will need if they are to compete and win the orders that will secure their future?
I thank the member for the tone and the substance of his question. He is absolutely right that the furlough scheme is merely a means to an end—that end being the orders and the order book. We have set out that the furlough scheme can be drawn down on only when there is evidence that Alexander Dennis has received orders. I will not be able to go into any detail on the order book here, because that information is commercially sensitive. That is why I said that I would be happy to come back to the chamber at a later date to talk about it further.
Alexander Dennis is increasingly confident about the short-term opportunities for orders. The member is right to say that, beyond those, we need a long-term pipeline of orders. First, we anticipate, through the UK Government in particular, that there will be evidence of mayoral authorities, local government and the UK Government procuring more buses over the medium to long term. That would have been too long a period for Alexander Dennis to wait, which is why the Scottish Government has stepped in to provide support in the short term.
The member also asked about regulatory changes. In its first press release, Alexander Dennis referenced that and what it perceived to be an unfair position. The short answer is yes, because we have not yet seen any progress on the regulatory changes that Alexander Dennis wants to be made. We are continuing to engage with the UK Government on those points.
The issue is, in part, to do with subsidy control legislation. There are a lot of technical details behind that, and I would be more than happy to pick up with the member, or any other member, on the detail of what needs to be changed. However, it is within the UK Government’s gift to make those regulatory changes.
I thank the Deputy First Minister for an advance copy of her statement. These have been incredibly difficult times for the workforce of Alexander Dennis, so this is undoubtedly a welcome intervention that provides breathing space for the firm to repair its order book. Surely that must be the focus now. That is why Scottish Labour has been reaching out to colleagues, especially mayors, to see what can be done to win orders. What efforts is the Scottish Government making to secure orders, and what is the Deputy First Minister’s expectation in that regard?
The issue raises questions about industrial strategy. The Scottish Government’s efforts are welcome, but surely things should have been put in place up front. Despite £30 million-worth of funding over 10 years from Scottish Enterprise and £40 million from the previous round of the Scottish zero-emissions bus challenge—ScotZEB—fund, only 44 bus orders were obtained by Alexander Dennis.
If ScotZEB 2 is being reopened, what lessons have been learned? What will be put right through future Scottish Government funding rounds so that further orders for Alexander Dennis can be won?
I say up front—this will be a common refrain in response to every answer that I give this afternoon—that I will not go into detail about orders because of commercial sensitivity.
The member asked about efforts to secure orders, and I will not go into detail on those. He also asked about our engagement with the UK Government. There was a lot of noise when the announcement was first made in June, and the UK Government promised to work on a pipeline of orders. We await details of that pipeline, which we had been assured would come in the autumn. We were always aware that that period covers the medium to long term, which is definitely important, but that would be too late for Alexander Dennis.
I am more than happy to continue to engage with the member on the question of orders, but, in the short term, a bridge is required, and that is what we have secured.
A lot of members wish to ask questions, so I make the usual plea for brevity when asking those questions and, as far as possible, when giving responses to them.
I offer my thanks to the Deputy First Minister for her considerable level of engagement on the issue with the trade union, the company and me directly over the summer.
On Monday, the company was clear that, in order for it to create a sustainable pathway, procurement reform is necessary. When I met the trade unions—Unite the Union and the GMB—at the factory on Monday, they were very clear on the need for the Subsidy Control Act 2022 to be reformed in order to create that pathway for procurement reform.
That legislation was introduced by the previous Conservative Government and is now in the hands of the Labour Government in Westminster. What commitment has the UK Government given to the Scottish Government that it will address the issues of concern in relation to the 2022 act, to ensure that we do not again find ourselves in this situation with Alexander Dennis?
I thank Michael Matheson immensely for his staunch representation of his local constituents and for the constructive way in which he has engaged on the issue.
The member asks about the route to reform. I remain of the view that we need regulatory reform alongside a medium to long-term pipeline of bus orders.
We continue to engage with the UK Government on subsidy control legislation. Section 17 of the Subsidy Control Act 2022 prohibits the giving of subsidies that are contingent on using
“domestic over imported goods or services”,
which are often referred to as local content subsidies. That prohibition is founded in long-standing World Trade Organization law and also implements our commitments in the European Union-United Kingdom trade and co-operation agreement. Michael Matheson will understand that the Scottish Government must operate within certain limits, and that we need the UK Government to make any changes that are required. The same would go for procurement law as well.
I see that 11 members want to come in, but we have just under 12 minutes left.
Given that Alexander Dennis has invested in the site in Scarborough to consolidate manufacturing there, in order to improve efficiency, what can the Scottish Government do to improve the long-term viability of the Scottish sites? Although the prospect of new contracts is extremely welcome, it is not a full solution if the parent company, NFI Group, believes that those contracts could be delivered more efficiently and effectively in Scarborough.
Scottish Enterprise is actively working with the company on the long-term viability of the sites. That will be part of the overall package of support, to ensure that there is investment so that the company can deliver on any orders that are forthcoming.
We met Alexander Dennis’s senior management team at our Economy and Fair Work Committee not so long ago, and I was hugely impressed with their commitment to find a solution to save the business and jobs in Scotland. Does the Deputy First Minister share that view, and is she confident that, going forward, Alexander Dennis is in safe hands with good management and fantastic staff?
I have been hugely inspired by the management team’s level of commitment and the workforce representation. Having worked on a number of cases in which redundancies are being threatened or there is the prospect of closure, I know that much of it hangs on whether a company and its management and unions are willing to co-operate collaboratively. In this case, it has been very impressive to see them do that.
I remind members of my entry in the register of interests.
Will the Government give environmental performance, social value and Scottish economic impact much greater weighting in the evaluation criteria in future rounds of its Scottish zero-emissions bus challenge fund?
As the member will know, particularly from my earlier quite long answer, we operate within the legislation and regulation that we are required to operate within. Any of the changes that the company itself has said that it wants would have to be done through the UK Government. When all this news broke, I received so much advice about what changes we could make. For example, one recommendation from Labour was to use the Crown Commercial Services contract, because that had worked in Manchester. However, that still would not allow us to identify a particular company or location. We have to operate within the law. If the member wants the law to be changed, he will have an ally here on delivering those reforms.
The wellbeing of Scottish manufacturing and Scotland’s industrial economy is a key priority, which is why the Scottish National Party Government has fought tirelessly against the closure of Grangemouth oil refinery and worked to secure the jobs at Alexander Dennis. Can the cabinet secretary speak to existing UK Government policies and the negative impact that they have on local job retention in Falkirk and Larbert and on job creation across Scotland?
We want a strong manufacturing sector to drive Scotland’s economic growth, and we want to maximise the opportunity for Scotland’s industrial sectors. I talked about the number of buses that might be in the pipeline as we make the just transition, particularly from diesel to net zero. It is about protecting the talent right now. At the end of the day, there is a lot more work UK-wide than there is purely in Scotland, for the sole reason that we have already made a lot of the interventions and investment. It is about ensuring that there is a fair share of work right across the UK.
It is really welcome that jobs have been saved through the introduction of the furlough scheme for 26 weeks, but what assurances can the cabinet secretary give that Scottish Enterprise, which has worked with Alexander Dennis for the past 10 years, will ensure that the company has a viable future in Scotland after 26 weeks? What will Scottish Enterprise do differently compared with its work over the past 10 years? What will it do more of to ensure that there is a viable future?
I do not think that the company has at any point complained about the support that it has already received from Scottish Enterprise, because that support has helped it to make improvements and drive productivity growth. The challenge that the company referenced was about securing an order book. Of course, it can draw down the furlough scheme only if there is evidence of an order book. We need to keep working intensively to ensure that we do not end up back here in a few years’ time, for the reasons that others have set out. Ultimately, there needs to be a secure long-term order book for the company to give its workforce the confidence that it needs.
The scheme is good news, but does the Deputy First Minister agree with Michael Matheson that it is essential to reform the Subsidy Control Act 2022 to secure the long-term future of Alexander Dennis?
Willie Rennie will have heard in my answer to Michael Matheson that reform was one of the company’s asks. I have set out in some technical detail where we stand on that.
The other issue is procurement law. Although it is a devolved matter, it is still subject to UK-wide and international obligations, which are reserved. In order to amend procurement law to enable preferential treatment, for example for domestic manufacturers, the UK is required to make changes to its international trade obligations. Scotland cannot legislate in isolation in favour of domestic bidders at the expense of bidders from other countries with which a relevant international trade agreement applies. We need to be conscious of that and make representations to the UK Government if we think that changes need to be made.
I very much welcome the announcement that 400 jobs have been secured as a result of the Scottish Government’s intervention and furlough support. Can the Deputy First Minister say any more about how the funding will be deployed to secure a future for the Alexander Dennis workforce?
Some of the details about the furlough support are commercially sensitive, but the intention is for funding to be made available to Alexander Dennis once a certain threshold of new orders has been evidenced. Once met, the furlough grant entitles Alexander Dennis to recover 80 per cent of the basic wage costs of its manufacturing staff, which gives the company the much-needed flexibility that it needs to place employees on furlough in the period when materials for new orders are being sourced and ensures, crucially, that the facility will be operationally ready to commence work at the end of the 26-week period.
The Deputy First Minister mentioned in her statement that the furlough support scheme is time limited to a maximum period of 26 weeks. What will happen at 27 weeks, should the strategy not work?
As members have mentioned, decisive procurement reform is needed. Does the Deputy First Minister accept that, if procurement reform does not give domestic manufacturers a fair chance to win contracts, it will result in the offshoring of vital jobs and skills? What contingency plans are the Scottish Government considering, should the strategy not work, to ensure that we do not lose vital skills and jobs?
I am determined that it will work. In response to the substance of Meghan Gallacher’s question, I think that there are some important elements to consider.
First, the furlough funding will be made available only once there is evidence of new orders. As I said to Jackie Dunbar, that gives the company the time to source materials. Essentially, that is the timescale that the company has identified as required for it to prepare for the work to arrive.
Secondly, that order book needs to be constantly updated and refreshed. In other words, we do not want to end up in the same place again, which is why there needs to be intensive work to ensure that there is a longer pipeline of work in the medium to long term.
Thirdly, on the procurement changes and the Subsidy Control Act 2022, I have gone through the technical details, but there is an appetite from our side of the chamber to work collaboratively to see whether changes can be delivered by the UK Government.
I commend my colleagues Ian Murray, the former Secretary of State for Scotland, and Euan Stainbank, the member of Parliament for Falkirk, for their efforts to save bus manufacturing, particularly by extending the new UK Procurement Act 2023 social value provisions to Scotland. Ultimately, Scottish bus manufacturing must have the most advanced vehicle production facility in the world if it is to be competitive, and the Government can offer direct subsidy to manufacturers such as Alexander Dennis to achieve that—notwithstanding the Subsidy Control Act 2022. Will the Government co-operate with the UK Government on benchmarking the site at Camelon, which is antiquated, ensure that it is upgraded and ensure that bus manufacturing facilities in Scotland are competitive?
In short, we will work with anybody to deliver improvements and changes. I have to say that there were a lot of helpful interventions at the very beginning of the process. I, too, commend Ian Murray for taking a number of my last-minute calls as I tried to make progress.
Sadly, though, over the past few months, there has not been the progress that we would have liked to see. We have been promised information about a pipeline of orders in, we hope, the autumn. We will be into autumn fairly soon, but we have not yet seen that pipeline. By that point, it would have been too late, because the consultation period, which had already been extended a few times, ended on Monday. The furlough scheme is being funded entirely by the Scottish Government; the UK Government has not provided funding. However, we really need its help with the longer-term pipeline.
The furlough scheme is very welcome, but it is contingent on the company providing evidence of orders. When does the Deputy First Minister need to see that evidence? How many orders are needed to meet the requirements of the scheme?
Please be as brief as possible, Deputy First Minister.
I will be brief, because I am afraid that any information about orders is commercially sensitive. I look forward to the point at which members can quiz me on any orders that are forthcoming but, at this point, I am afraid that I am unable to answer any questions on orders.