Official Report 781KB pdf
Our next item of business is the first of two evidence sessions on Alexander Dennis. I begin by declaring an interest as I am a member of Unite the Union and the GMB. Today, we will hear from the trade unions and tomorrow, we will hear from Alexander Dennis management.
On 11 June, Alexander Dennis announced a consultation on consolidating its United Kingdom bus body manufacturing operations in a single site in Scarborough. That would mean that the site at Falkirk would close and work at Larbert would be suspended upon the completion of current contracts. Given the pressing timescales, the committee agreed to hold the evidence sessions this week.
I am pleased to welcome Robert Deavy, senior organiser for manufacturing, GMB Scotland, and Derek Thomson, Unite Scotland’s regional secretary. As always, I ask that members and witnesses keep questions and answers as concise as possible. I am grateful to the panel for joining us at short notice.
Clearly, this is one of the most significant industrial threats that we have faced in Scotland for many years, with 400 skilled direct jobs at risk at a company that should be playing a major part in Scotland’s net zero ambitions. We are keen to understand from the trade unions not only how we got here but what must happen urgently to try to save those jobs and prevent the closure from becoming a done deal.
My first question is what impact there would be for the affected communities if the proposed closure went ahead?
Thanks again for the opportunity to speak to the committee. You are right about the urgency and the timescales. It is important that we discuss the issue with you, given that the Parliament is going into recess, the fact that there is a 45-day consultation period, and that the plant will shut on Friday for two weeks because of the Falkirk fair. Four hundred jobs are at risk and we have seen what the devastating impact will be for the area, as highlighted by the PricewaterhouseCoopers report on Grangemouth. Our plant is close to and within travelling distance of Grangemouth. Our concern grows by the day that no immediate plan is coming forward. We want to try to articulate to the committee the options that are on the table and how we can take them forward.
Our concern is about the collapse of the bus industry in Scotland and the supply chain that goes with it, which we can talk about in more detail throughout the meeting. For us, from an industrial point of view, the proposed closure will be another devastating blow to that cluster, and it will have a devastating impact on Scotland’s economy.
I echo Derek Thomson and thank the committee for arranging the session at short notice. Time is of the essence as we are at the second stage of the collective consultation.
As a union, in discussions with our members, we have been raising the issue for some time, and I am pretty sure that Unite has been doing that as well. We believe that it is a political failure that requires a political solution. This is not a new issue; it has been on-going for a long time. You could say that Grangemouth was the start of it and the area will now lose another business. That is 250 jobs at both sites. I believe that the 400 jobs are outwith that, because a larger consultation is taking place, but that will be 250 jobs lost in the Falkirk and Larbert area in a matter of weeks. That will be absolutely devastating for the area.
We need everyone to come together: trade unions, politicians and, importantly, we need Alexander Dennis Ltd to be involved. By coincidence, GMB Scotland wrote to ADL three or four weeks ago to offer our support and to ask what we could do to help the company to get work. We did not know that this was coming down the line; we just knew that work was slowing up in the yards. To be honest, we received a “Thanks, but no thanks” response—although it was not as polite as that. That is why we are in this situation.
We will come back to the detail of what the business needs to do. Can you set out clearly for the committee what the political ask is? What do the Scottish and UK Governments need to do to protect the jobs?
There are a number of things. Plant utilisation fell below 50 per cent but that was not because of a lack of available contracts. Buses in the UK are a growing market but the long and short of it is that ADL was not winning contracts. We either need to make direct awards or have a better procurement process.
I understand—and it is only an understanding at this point—that the Cabinet Office has issued or will issue some form of guidance that direct awards can be made. That is one of the areas that we want the Scottish Government to look at.
We understand that, pending those direct awards or contracts, there is a four-month gap between bringing those contracts online and the end of the consultation period. We have been speaking to the Deputy First Minister about a time-limited furlough scheme to support workers while the contracts are being awarded.
The reason why the scheme should be time limited is that it is important that ADL does not get a chance just to walk away at the end of the furlough scheme and say that it cannot do anything else. A proper, controlled procurement policy must be in place.
We can go into detail about the Chinese bus companies and what they are bringing into the country later on. There is a supply chain for buses in Scotland. There is a growing market in Europe for buses and the UK is the largest growing market for buses. Direct awards can be made for other contracts in other councils. We are asking for a time-limited furlough scheme to support the award of new contracts behind the scenes. If we get that, work can restart at the plant in four months’ time.
The plant probably needs modernisation. We are acutely aware of some of the issues that have been raised with us about quality, but, in our view, that is a supply chain issue and it needs to be part of the wider Government discussions.
A time-limited furlough would be a significant option. It would be a real game changer in how we approach the just transition process going forward.
I agree whole-heartedly. In the long term, we need structural changes to how procurement is carried out. It is vital to maximise domestic procurement, particularly for Scotland.
In the short term, however, both sites urgently need contracts, and that is the conversation that we have been having during the consultation. ADL has mentioned that it has four contracts in the pipeline and, essentially, it was looking to us to help it push to get those out, but we found out yesterday during the consultation that none of those contracts will go to Falkirk or Larbert; they will go to Scarborough. The contracts are with the Go-Ahead Group, Liverpool, Blackpool and Arriva. Without sounding too harsh, I do not really want to be pushing for them. Our main focus is keeping the work and protecting the jobs in Scotland, not helping Scarborough to get more work when it means closing down our sites. In the short term, we need more contracts and more work for Scotland.
We also spoke about the furlough scheme yesterday. The company is telling us that the conversations that it is having with the UK and Scottish Governments are very vague on furlough. Things keep changing, so we do not have an idea of what it looks like.
As Derek Thompson said, however, furlough is not the answer. We do not want an indefinite furlough scheme. There has to be something at the end of it. There is no point in setting up a furlough scheme if no work is coming to Scotland to keep the sites open—that is not what we are looking for. It needs to be furlough because the lead-up to get work started on electric buses can be up to 20 weeks, to get in the equipment and supplies. That time is shorter for diesel buses; it can be 12 weeks. We need something to fill the gap until we can get the contracts in. Furlough is a last resort but we need the support to get the contracts in. That is a priority.
You raised a point about contracts, and we will question the company tomorrow. What assurances have you been given by the company that, if the contracts are secured, the work will be carried out in Falkirk and not simply transferred elsewhere? Has the company given you the assurance that, if it is able to get the contracts, it will be able to retain jobs in Falkirk?
No, we have not had any assurances. We have made it clear to the company that, if we are using our trade union contacts with the Scottish Parliament, the Scottish Government or the UK Government to help secure contracts, we expect that work to come to Falkirk and Larbert. We have made that clear, but if you are asking whether we have had assurances—no, we have not. Yesterday came as a bit of a surprise. The company had mentioned contracts in the consultations, particularly the Blackpool one, which it won. We know that that is factored into its planned work for this year and next year, but yesterday it was confirmed that that work is going to Scarborough and that no work will be coming to Scotland.
We have asked the company to consider the possibility of building chassis in Falkirk, which would save some, but not all jobs. It is going to look at that and come back to us in a couple of weeks with a response. It has told us that the Scarborough yard—I am sure that ADL will give you more detail tomorrow—can do around 1,200 buses a year. In essence, it is looking for something over and above that. It said yesterday that it is looking for an extra 300 orders. That is what it will be looking for in order to keep Falkirk and Larbert.
I am sure that we will come back to that very important point tomorrow with the company.
NFI Group, the parent company of Alexander Dennis, has instructed the company to consolidate production, anticipating prolonged low volume, but has not instructed how. The final closure of AD in Falkirk and Larbert has not been signed off. The company has been told that it needs to cut costs, and one of the options that it has put on the table is this closure.
Unfortunately, and prematurely, the company has begun the 45-day consultation period, which holds a gun to our heads. We are trying to be proactive and come up with solutions and put them to the company, and, ultimately, hope to find a solution through that process. However, production in terms of bus delivery is low across all sites. There are a number of factors to that, which we can probably come back to, including the EV mandate and stuff like that across the UK. Take London Buses, for instance—I think that it bought 433 buses, which were with Alexander Dennis and then went to BYD Company, which is Chinese.
There is a market for the buses here in the UK, but, unfortunately, due to a number of factors, including cost, supply chain issues and other elements, some of that work is going overseas to be brought back in. I am disappointed that there was nothing for the sector in the industrial strategy that the UK Government announced. There was something for England, but nothing for Scotland, so it is probably incumbent on the Scottish Government to look for solutions.
I am interested in understanding the scope of your representation on site. What is the breakdown of the areas that the two unions represent?
We are jointly recognised.
So, it is the same workforce.
Yes, it is the same workforce.
I just wanted to understand that. I will ask about two broad issues. First, how did we get here and, secondly, what can be done? I will delve into the points that Derek Thomson brought up around the Subsidy Control Act 2022 and the art of the possible. On how we got here, we have some numbers in front of us. It basically looks like the business has struggled to recover to pre-pandemic volumes. The pre-pandemic volume of buses was around 1,200 a year, and the business has been unable to recover to that level. Is that the correct assessment, or are there other factors that we should be aware of and be looking at?
As has been mentioned, a broken economic model allows contracts to go overseas all the time. There is basically a race to the bottom, which is having a huge impact on manufacturing in Scotland.
Outwith that, Chinese imports are having a significant impact on the UK bus market. There are already tariffs on that, and obviously, tariffs are a much wider issue, given the global situation. BYD, which was a partner of Alexander Dennis, now has UK contracts in its own right. Its model costs £400,000, which is around £100,000 cheaper than what it costs to produce here. There is a supply chain issue as well. In 2024, Alexander Dennis had 11.6 per cent of the UK market share, but it is estimated that Chinese imports will increase their market share over the coming years up to 10, 15 or 20 per cent of overall bus manufacturing.
The Scottish Government put significant money into ADL for research and development, which is obviously about the future evolution of the business, but there are major issues around that, as we all know. We have discussed before the issues around battery power and the structure of the energy market. Energy costs in the UK are massive and that will not change until 2027, under the new industrial scheme.
10:45As Robert indicated, a long, drawn-out death knell has been ringing for the industry over the past couple of years. Now we are seeing the Canadian parent company, NFI Group, looking to cut costs, with one of the markets being in the UK. It just does not see that we are able to compete in the current markets.
There is a need for investment in the site, and there is also a need for upskilling on the site, which we can come on to.
On that, I am looking at the head count numbers and the balance between production and selling and administration. Compared with pre-pandemic levels, production head count is lower, but selling and admin are considerably higher. Is there a question here about the focus of the business? Is it focusing more on the administrative side of things as opposed to the production side, or is that a red herring? I apologise if I am asking daft laddie questions.
I would need to look at the administration side of it. This has come a bit out of the blue for us, so we are still finding our feet inside the company. A lot of our research is focused on how we can secure the furlough and additional contracts.
I will certainly look at that point, and I am happy to email you about it.
That would be great.
We are the same—our focus has been on trying to secure contracts and get as good a deal as we can for our members in there.
Derek, you raised points about China and considerations under the Subsidy Control Act 2022. My understanding is that you can take into consideration social value and you can also, as you say, provide direct awards. You can also treat bids from non-treaty countries differently from bids from treaty countries, which China is not. I think that we all know the importance of encouraging people on to public transport and that transport should be seen as being absolutely critical to the economy. Could or should more conditionality have been placed on the grants provided by Scottish Enterprise and the Scottish Government? Do you share my understanding of what the 2022 act might allow us to do going forward?
That has certainly been my understanding over the past couple of weeks. We will wait to see the Cabinet Office guidance that I am sure will come to the Scottish Government on the issue of direct awards.
What was the question after that, Daniel?
It was really about the Subsidy Control Act 2022 and whether more conditionality should have been applied, on the basis of that act, to the moneys that came directly from the Scottish Government and to the grants from Scottish Enterprise.
I think that conditionality must be considered in a number of key public sector areas. We have been working really hard with the Scottish Government on the just transition plan and on bringing in conditionality for awards from the wealth fund and the just transition fund.
We should consider introducing some form of conditionality around, perhaps, council orders. We have a great model in Lothian Buses and others, which we could use as a model for councils. However, the Government will need to put its hand up to put that through.
Yes, I agree absolutely on conditionality. If the yards close—we are not at that point; it is not inevitable as we are still discussing it and are still in consultation—any public money that can be clawed back through those grants should be clawed back. When you are awarding or giving out those funds, I do not believe that the company would tell you that it was looking to close down the yards in five or 10 years. Any public money that can be clawed back should be clawed back. We would support adding such conditionality to those grants.
I will tease out the other element. My understanding is that, according to news reports, the Ministry of Defence is currently examining whether Chinese electric vehicles should be allowed on Ministry of Defence sites. Again, I emphasise the point that our bus network is critical national infrastructure. If we view the bus network as critical national infrastructure, do you think that we need to examine where we are sourcing buses from, considering the elements of national security?
There are a couple of issues in that question. One is the sourcing—the cost—and how much more expensive it would appear to be to get this stuff done in Scotland. That is down to the supply chain issue. There is an element of needing to look at the overall funding for areas such as this. You are right about the bus network. It is critical in a lot of rural areas, particularly in Scotland. You might be aware that Dumfries and Galloway are just about to sever ties with Stagecoach, which will cause issues in another rural area.
We have been saying for a number of years that the more in-house work that we do, the more secure we will be going forward. We need to examine the supply chain in Scotland. Are we getting the best bang for our buck? Are we importing? The cost levels for the Chinese buses are a lot lower because of the supply chain. I have got no reason to dispute NFI, but I think that it spent more than £1 billion on its supply chain to try to increase services. However, it is up against a company that can undercut it by £100,000 a bus, and, as you said, there is no conditionality based on that. Where were the discussions with the mayor of London when we were losing 433 buses to BYD? That was a cost-only thing. How do you change that set-up? I have been saying to this committee and others that, as we move forward into the just transition period over the next 10 to 15 years, we have to get this right or we will see potential devastation in another part of the industrial cluster. Again, we are talking about highly skilled manufacturing jobs.
On the issue of jobs, the 400 jobs that went in Grangemouth were at a different skill level from what we are talking about here. We have been working closely with Scottish Government officials to secure a job transition agreement that will, effectively, fast-track into interview the people who have the right skills. The skills at Alexander Dennis will not be at a level that is transferable to different parts of the industry, particularly when you are looking at project willow coming into Grangemouth, where transferable skills can go. The job market may not be as bad, but it will be catastrophic in Falkirk and Larbert to lose that amount of jobs. I am just adding that in as part and parcel of what seems to be an overall concern. It is not as if the just transition has just arrived on our doorstep; we have known about it for years, and it is now time to get planning for the future a bit stronger.
Buses have been getting built at Alexander Dennis for more than 100 years, and it could have another 100 years if a proper industrial strategy is put in place. Scotland is always going to need buses. You have made a great point about the political situation in the world. Where we get our buses from is critical. Buses are critical infrastructure for our economy and everything that goes on in this country. We keep letting orders go abroad, but it should not feel wrong to say that we want Scottish buses to be built in Scotland by Scottish skilled workers. That should not be a dirty thing to say. We should be happy to say it. To touch on what Derek Thomson said, any green industrial strategy should have sites such as Alexander Dennis at its core.
I will ask a question that I have asked in private. The last thing that you need is politicians describing the situation—you need politicians to do things. There are things for the UK Government to do and there are things for the Scottish Government to do. Are there things that MSPs could be doing individually to support your efforts to try either to win contracts or find solutions? What are the asks that you would make of us as MSPs?
The most important thing in the short term is to find us contracts and keep sites viable until we find a longer-term strategy, particularly with how contracts are awarded. As we mentioned earlier, the last resort is a furlough scheme to buy us a little more time, but that is not the answer. We need the work in Scotland. We need to keep these jobs in Scotland.
I was disappointed with the political football that happened just the other week, when no real concrete strategy was being put out. A blame culture seemed to be happening, although I get it—we are going to be moving into the elections.
We are looking for a consensus across Government on what should happen. That should start with a commitment to looking properly at a furlough scheme. In the UK, workers at Liberty Steel remain on furlough because the plant is of such strategic significance for the aerospace supply chain. A furlough scheme was negotiated for the one-year shutdown of Vauxhall’s Ellesmere Port plant, which is owned by Stellantis. Italy has a long-established state-funded furlough scheme, which can fund as much as 90 per cent of the wage bill. Germany has a similar scheme.
If the contracts that I mentioned are secured, there will be a gap of four months. Without going into the details, we have estimated that such a scheme would cost between £4 million and £5 million. How that would be funded is a significant question for the Scottish Government. Is the £25 million just transition fund for Grangemouth ring fenced for Grangemouth? Can that money be used in a way that supports the cluster? That is a question that the committee can ask. A commitment was made. What conditionalities are attached to the wealth fund money? We have not seen any of that £200 million being deployed. Could the money that has been promised to the Scottish Government for action to help with a just transition be used to help with the situation at ADL?
We want to put forward solutions that would not put the Government in a position in which it had to fund a furlough scheme that was not time limited but that went on and on. Robert Deavy was absolutely right. Tomorrow, the committee needs to be quite robust with the company and to ask it whether, should a direct award be made, it would commit in the long term to ADL in Falkirk. If it would not, why would we give it the money?
Let us not even get into the issue of what a redundancy package might look like. We are not even talking to our members about that yet, because we are in a time-limited window. We are yet to receive a response from the company on our proposal for the consultation period to be extended. My preference would be for the consultation period to be extended over the parliamentary recess, because that would give the politicians an opportunity to work with us as much as possible.
A lot depends on what ADL does. If the Scottish Government agrees to a furlough scheme, it will have to rely on ADL to buy into that. The Government needs to see a commitment at that level, too.
Mr Thomson has made some good points that we can take up as a committee. I make the simple observation that we have just had the provisional outturn, in which the Scottish Government had a £500 million underspend. I make that observation in relation to where money could be found.
Gordon MacDonald has a couple of supplementaries.
I want to ask about direct awards. At the moment, if my understanding is correct, no direct awards can be made. The ability for direct awards to be made is subject to an announcement that may or may not happen. Is that correct?
Things changed after Brexit, when different criteria were introduced in relation to subsidy control, which Daniel Johnson mentioned, and direct awards. My understanding is that, according to information from the Cabinet Office that came out only over the weekend, it is possible to make direct awards. We still need to look at that in detail—we have yet to be supplied with that information. If the option of direct awards is available, it is one that should be taken.
Things have changed, now that we are not a member state of the EU—it is not an easy issue.
I appreciate that. Apart from Lothian Buses, which I used to work for, all the bus operating companies are privately owned. The money that is provided by the Scottish Government is to offset the difference in cost between the cost of a diesel bus and the cost of a zero-emission bus, but the vast majority of the cost of the vehicle is still borne by the private company. How can we force a private company to use a particular supplier?
We had those discussions. It might come down to conditionality.
Awards were previously made under the Scottish zero emission bus challenge fund—ScotZEB. Reading my figures, I see that 169 Chinese buses were ordered for the Scottish market. We might be looking at the Scottish Government issuing a mandate to councils and local authorities. That might be an answer. We have events such as the Commonwealth games coming up. Could a direct award be made for buses for that, for example?
Are you talking about bypassing the private companies completely?
Not necessarily. I am talking about engaging them and asking them to be involved.
That is the conversation that we are having just now.
11:00
If I understand the situation correctly, the Alexander Dennis head office is at Larbert, where one of the plants is, so why has the company chosen to do all its manufacturing at Scarborough?
We raised that in the first consultation and got a frosty response—that is the best way to put it. The company said that it might look at that in the coming years as well.
Was there any indication that it was about costs?
The company said that it was purely down to a product issue. It needs more orders in. However, at the end of the first consultation, references were made to cost in Scotland. To put it simply—there is no other way to put it—it is a well-organised trade union site; we have had good negotiations and have got our members good terms and conditions. That was raised with us. In Scotland, the company pays £1.87 an hour more than it pays down in Scarborough.
Oh, right.
That was thrown in at the end of last week’s consultation, which is a bit disappointing because we are not there to talk about a race to the bottom.
What was the relationship like with management before the announcement? From doing a wee bit of research beforehand, I am aware that the company has been investing heavily in Scarborough for a while. It took over new warehousing, which allowed it to reconfigure the original factory to give it more production space there. That has been going on for several years. Has it been keeping you guys in the dark about what was happening down in Scarborough? What has the situation been?
No, we have been involved. I think that Scarborough is a Unite site. We are well aware of the situation. The company invested heavily in Larbert as well. It put a bit of money into that site, but I believe that the problem is that it is not big enough. It expected one of the companies that is beside its site in Larbert to move out and hoped to take over that site to expand the Larbert site and move all production to there.
There is no doubt that the site in Camelon is dated. It needs heavily invested in. When you go in, you see that the roof has netting over it. It needs a bit of work done on it. However, the Larbert site is modern and, with a bit more investment, could take on a lot of the work.
You said earlier that the union offered to help the company to find contracts but that its response was not good. Is that right?
That is correct.
One thing that you have asked of us is to go out and find contracts. What makes you think that the company’s response to us would be different from its response to you? Does it feel to you like it is trying to get out of it altogether?
Around 20 May, we wrote to the company and asked what we could do to help to procure more work for the two sites. The company had been speaking with the Scottish Government for months prior to that. It certainly did not make GMB Scotland aware of that and I am unsure whether it made Unite aware. I do not think that the reps on site knew about it. The situation is now in the public eye with everything that is happening in the area—we have seen the closure of the Grangemouth refinery and now another huge employer is withdrawing—so I think that the company would be more willing to listen to you about getting help to find more work for the sites.
If your question was about whether I think that the company has already made its decision, I do not think that it has. I would still say that the talks so far are positive to a certain degree. We have privately been making asks and trying to get the Blackpool contract over the line. I know that there is an issue with the funding being released to get that contract out for Alexander Dennis. Therefore, to find out yesterday that all that will be going to Scarborough was pretty disappointing. I thought that we could have used it to buy us time at least.
Again, it is about keeping every option open in order to keep the sites open. We would like to think that the company will listen, whatever you do. To touch on an earlier point, if you manage to find work for the company and there is no guarantee that it will stay in Scotland, public ownership of the sites should not be ruled out. That should be on the table.
Derek Thomson, do you have anything to add on that issue of finding contracts?
I do not have a gut feeling that there is a strategy to close the place just yet. I think that the company is looking for support and options. As I mentioned, the parent company’s position is to cut costs, but there are two ways of cutting costs. One is to reduce head count, and the other is to get more orders and expand—you can actually invest.
I do not get the feeling that the situation is exactly what the company wants, but I will reiterate what I said earlier: we cannot hold the country or the Government to ransom on this. If we are going to do something for the company, it must be committed to that longer-term project. Robert Deavy is right to say that Larbert has been updated and that the other site needs work. We will look at all options that are available, including whether we could consolidate into a bigger site in the area. However, this is about keeping ADL where it is and in Scotland.
We are open to all talks. Because of the current volume of production of buses in the UK, which is due to the fact that a lot of measures are coming in, many areas are looking at four-day weeks and other ways to maintain production levels. It is worth noting that, overall, across the UK, we have considerably dropped our production levels for buses but, of course, we still have the 2035 targets and all those things. We are open to all options, and I hope that the company will see that.
You mentioned that some of the Chinese competition can undercut quite dramatically, which you said is largely down to supply chain issues. Before we go into more in-depth questions about the supply chain, apart from the additional cost for the workforce here that you say is the case—who does not want a well-paid skilled workforce?—would there be any greater supply chain costs in Camelon or Larbert compared to those in Scarborough?
We would need to do a wee bit of further research into that, but the supply chain is more a UK-wide issue about where we are buying parts from, how we are getting them and where they are coming in from.
We can probe that in more depth in a wee minute but, at this moment, without having done the delve, do you think that there would be any great difference between supply chain costs in Scarborough and those in Camelon and Larbert?
As I said, that issue has not been raised during the consultations. The issue has been purely orders—that is what the company has told us from the beginning. It is an orders issue.
Let us look at the supply chain in more depth. Take lithium batteries. That is probably one reason why some of the Chinese competition can undercut. They have access to lithium that we do not, and they produce such products in China, whereas I am not sure that we have the same abilities to do so here. Should we be looking at decreasing those supply chain costs?
There is a lot in the UK Government’s industrial strategy on supporting the scale-up and commercialisation of research and development in battery innovation. You might not have picked up on this, but all that was in the Government’s industrial strategy in relation to manufacturing was that the Government announced £15.6 billion for transport for city regions in England, which it said
“will allow local leaders to play a more active role”.
It went on:
“This will be further supported by the Bus Manufacturing Expert Panel bringing local leaders together to translate funding and reform plans into a steady and growing pipeline of manufacturing orders.”
There are other things—for example, £452 million has been put into the battery innovation programme, which is the rebranded Faraday battery challenge.
We must consider all those elements that have been brought in within the context of whether we, in Scotland, have enough of them in the supply chain, or whether we are having to import in those areas. We need to consider energy costs, which we have discussed in evidence sessions at various committees, and how much the grid must change to support all those areas.
I still think that the 2035 target is very much aspirational, given where we are with combustible engines and zero emissions. Producing those batteries at scale, for instance, will be a key element in moving everything forward. Nonetheless, we believe—if this answers Kevin Stewart’s question—that there are enough contracts available to keep the site going through that process.
It answers part of my question; I think that, at this time, there is no answer to some of it. The industrial strategy document takes a broad-brush approach, but we have to get down to the nitty-gritty of how we manufacture certain things in order to keep supply chain costs down and create a much more even playing field with some of the international competition.
My next question might—again—be one that you cannot answer, but it is extremely important. I have visited Larbert and talked with the workforce there. I had the great pleasure of meeting apprentices who were top notch, in my view and were obviously getting a huge amount out of working for the company. The company has received a lot of money from Scottish Enterprise for various things—according to the figures that we have in front of us, it has had some £17 million since 2015. Where has that money for investment in research and development gone? Has the company used it wisely?
That question would be more for the company in your session tomorrow. We are not seeing anything being invested in the Camelon site. You mentioned £17 million. Our figure is £30 million of job grants for research and development over 10 years—
That includes other elements as well, but the funding from Scottish Enterprise since 2015 amounts to £17.6 million. In total, £30.5 million has gone into the company.
You and your members in the workforce have not seen where that money has gone. Is that what you are saying?
It is not a question that I can answer here, but I would say no, we—certainly those at the Camelon site—have not seen where that has been invested.
That point brings us round to the question of what conditionality was attached to that R and D funding. The sector will rely heavily on R and D as we move forward, and every sector that is moving into the just transition process will require a bit of time to get that research and development done. However, we would want to know what the conditions, and the outcomes, were.
One of my criticisms of the UK Government’s industrial strategy is that there are no clear metrics in it. It is all very general—there is a hope that we will do something by 2035 or by 2037. We should be adding depth to that, so that, if a company is given R and D money, it has to show what it is developing in Scotland and how that will benefit the site and the public.
I am unaware what funding model Scottish Enterprise uses and whether conditions were set. Knowing the way that these things work, I imagine that there was probably a private and confidential agreement, but there might be something that the committee can dig up, or we will put in a freedom of information request—although the information usually comes back redacted these days.
You talked about supply chains. Paul Soubry wrote a letter to the First Minister in August 2024. He said:
“In fact, in an attempt to enhance our price competitiveness we have already been forced to offshore certain fabrication functions to China.”
The company was doing that to try to become competitive.
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That is one of the key elements in how we get the approach right for the future. What are the areas of the supply chain in which we could bring manufacturing back to Scotland? Is that a possibility? By how much would it reduce costs?
Companies here are buying things that are being manufactured in China, but that will apply to Scarborough in the same way as it applies to Larbert and Camelon. Therefore, what are the cost differences between those sites, and what is the reasoning for preferring Scarborough? That is what I am trying to get at.
Again, it has been hammered home from the first consultation that it is an orders issue—that is what the company is telling us. It needs more orders.
Okay. Thanks a lot, guys.
Good morning, Robert and Derek, and thank you for coming in.
I have a number of questions, some of which are about trying to get some information ahead of our meeting with ADL tomorrow. You have suggested that, on average, there is a difference of around £100,000 across all bus models. Is that figure widening?
I do not have evidence to show that the figure is widening, but the average price for the construction and manufacturing of a bus that comes from China is £400,000 while the figure for here is £500,000.
Scottish Government schemes—and probably schemes further afield—such as the Scottish ultra-low emission bus scheme and the Scottish zero emission bus challenge fund are all open to foreign buses; they are not excluded.
You mentioned the cost of furlough. What estimates do you have for that?
These are only our estimates. When we spoke with the Deputy First Minister, she talked—as she did in her statement to Parliament—about looking at all the options that are available. Alexander Dennis had furlough during the Covid pandemic, as every other business did, so it is looking at what that cost in national insurance contributions and all the other elements.
My understanding is that in some countries—Germany, for instance—the employer pays 10 per cent and the Government will pick up the rest, so there are taxation issues and that kind of thing. Our understanding of ADL’s position—the committee might need to get that from the company’s representatives tomorrow—is that, because of the extra money that it has had to put into bringing stuff in to support the supply chain, it would not be able to pay furlough, so there would have to be Government intervention.
Our figures—you should not use these verbatim—are that 100 per cent of pay for six months, with an average wage bill of £37,000 a week across the areas, would be around £7 million.
Okay.
Sorry about dotting around, but, as I said, I want to ask about a fair few things. You talked about the Scarborough site—I think that you said that the production capacity was around 1,200 buses. What is the current production capacity? Looking at the Larbert and Falkirk sites, what could they produce at full capacity, and what is currently being delivered?
I have no idea what the production capacity is in Scarborough just now—that is not one of the sites where we organise. In Falkirk, the work will run out at the end of July; that will be the last of the orders. The company started the year hoping—well, last year is when it got the figures for future work—that it would have orders for around 1,600 buses for all the sites. That went down to 1,400—
Over the three sites?
Yes, over the three sites. It then went down to 1,200, and it is now 900, and the company is not sure whether it will even have those 900 buses.
As I said, I am sure that the company will be able to give you more detail on that—those are the figures that it has been giving us at the consultation. The total is around 900 for the year.
Around 900 for the year. You are not sure of the overall capacity across all three sites, but you know that Scarborough could produce—
Yes—we have been told that Scarborough can do 1,200 a year.
Essentially, ADL is limiting itself to 400 buses a year fewer than it had hoped to do over three sites.
I do not think that it is limiting itself; I think that it is just about the orders that have come through. For whatever reason, some orders have not happened.
Do you have any estimate on the cost for upgrading the sites in Scotland?
Not at this stage.
The Larbert site does not need any upgrading; it is a modern site. It is more about the Camelon site. The health and safety is good, but it could just do with a bit of work. I believe that they can do between six and eight buses a week in the Falkirk site—I am sure that that figure was given.
Where contracts are being won—you mentioned Blackpool, where, I think that there have been a number of new buses, recently, and a hundred, overall, over the period—why are buyers choosing Alexander Dennis, at additional cost, and not going for the cheaper Chinese options?
It would cost—
If they are choosing to buy from Alexander Dennis and pay an additional £100,000 per bus, that is £10 million for those 100 buses. I know that we are using rough figures. There must be a reason why they are choosing to do that. Is it because they want to buy from a UK company or is it to do with quality? Those reasons are important when considering how to make the business sustainable so that there is choice in the future.
As Robert Deavy said, ADL has existed for more than 100 years and is an established bus manufacturer across the UK. This is like any situation in which a company starts to see things being made more cheaply elsewhere. We need incentivisation for ADL to produce quality buses. Issues of quality have been raised with ADL, to which it does not adhere. We need to look at that to make sure that the site produces the highest quality of vehicle, on time, with the best components and the best supply chain. Again, I mention the four-month lead time, which will leave the company with a gap of £3 million to £4 million.
The company says that Scarborough can produce 1,200 buses. It estimates that keeping everything going would involve another 300 direct awards at Falkirk and Larbert. It is about the requirements that are stipulated for those buses, is it not?
I think that the target is still 3,000 low-emission buses across the UK, of which 1,500 are still to play for—that is, the contracts are available. However, people are looking at different options, so we need to make sure that Alexander Dennis is at the top of that list.
As I said earlier, and as Kevin Stewart alluded to quite well, the supply chain costs in the UK are probably what adds the additional £100,000 to the build.
Okay. Thanks.
Gordon MacDonald, do you want to come back in with a supplementary question?
Yes. I am keen to understand.
You said that you thought that the capacity across the three sites was about 1,600 buses but that it has been reduced to about 1,200 buses, with orders for about 900. Given that you have been manufacturing for 100 years, what bus companies were previously buying from you guys but are no longer doing so? I mentioned London Buses, which, obviously, is one of the biggies, but do you have a list of bus operators that no longer buy from Alexander’s but previously did?
As has been mentioned, McGill’s does not buy.
McGill’s used to be First Bus.
I believe that it gets its buses from China now.
It is all the companies. You asked why Blackpool is doing it, and I would like to think that it is because companies want the buses to be built in Britain. That could be a thing. However, as Derek Thomson said, most companies will be looking at costs. Lothian Buses uses Volvo, but Volvo has a deal in Egypt—with MCV—for the chassis and stuff, and I believe that Stagecoach gets some orders from BYD or other Chinese operators. Again, through the tendering process, most companies will look to see where they can save a buck or two.
Do you think that it is purely down to money? According to the figures that I saw, at the end of 2024, China had 10 per cent of the market and is now looking at 35 per cent. Is it purely cost that is driving this?
Cost and incentives are driving it. BYD is referenced as having a market share of 4.2 per cent in 2024, and Yutong Bus had 3.3 per cent. The contracts to build a total of 628 buses went abroad in 2024, and, as we have said, ADL’s forecast for 2025 is 800 to 900 buses. As its market shrinks, the company is finding it more difficult to compete. We need to think about incentivising the process to make sure that Scottish manufacturing and Scottish buses remain competitive in the market. If we need to incentivise, that is a decision for the Scottish Government to make.
The cliff edge is approaching. If ADL goes down, I would be worried about what is left in Scotland with regard to bus building. Does that market just automatically go? Although Scarborough is still in play, what does it do for the long-term aspirations of ADL as a company when it is losing more and more contracts? Of course, ADL is owned by a Canadian multinational company, NFI Group, and it is only a small part of that business, which has other massive business interests in America. Its profit margins are pretty good—$841 million in revenue and an adjusted EBITDA—earnings before interest, taxation, depreciation and amortisation—of $60.7 million, with an increase of 84.4 per cent year on year. NFI is making money, but it is probably doing so by cost cutting in markets that are too expensive.
We all know the issues that we have when we are dealing with multinational companies that have invested in Scotland. If they can get the work done cheaper somewhere else, they will, and we have seen that in other areas. We should not be frightened to say that we need Scottish jobs and Scottish buses for Scottish workers and communities in order to generate work in the economy in towns.
The ground that I was going to ask about has mostly been covered by Gordon MacDonald and Kevin Stewart, so I will ask a couple of brief follow-up questions around the choice of Scarborough as opposed to Falkirk and Larbert. I will put these questions to management tomorrow, but I am interested in your perspective. First, are you aware of any difference in efficiency or productivity between the Scarborough site and the Falkirk and Larbert sites?
I understand that the company was down in Scarborough maybe last week and was talking about moving to a four-day week and modernising the working conditions. Obviously, the workers there are paid £1.87 an hour less than they are paid in Scotland, but I emphasise that that has not been mentioned as a reason why the company is moving there. It keeps telling us that it is an orders issue.
Our understanding is that ADL wants to move to Scarborough because it is a much more modern site. No other reason has been given. The terms and conditions were thrown in, and there has been talk about modernising. The company has met the trade unions and the management down there to talk about flexible working and four-day weeks, but that has not been given as a reason why it is choosing to keep the site in Scarborough and close down the sites in Scotland.
Our information shows that plant utilisation, which is how efficient a plant is, has dropped by 50 per cent in Falkirk and Larbert. That is due to a lack of orders and maybe some technical issues around the lines and what they can produce. The modern EV buses are slightly wider and bigger, so they are roomier than some of the old diesel buses. The line probably needs to be adapted a bit, but that is an R and D thing. The company seems to be following what Vauxhall and Stellantis did at Luton, which was to close a plant and consolidate the work into one area.
Is it the case that we pay too much in Scotland? I do not know. After yesterday, we are certainly considering that that is a possibility. We have seen far too much modernisation that involves companies making cuts to conditions and jobs, and we are concerned that that is probably the direction of travel.
11:30
We will put that to the company tomorrow and see what it says.
Secondly, has there been any suggestion that workers at Falkirk or Larbert might be offered relocation to Scarborough? Has that been part of discussions?
We have not got that far in our discussions. As I said, the whole focus has been on keeping the sites open. I am sure that, if decisions are made, we will start to look at how we keep people in work in these highly skilled jobs, but that has not been raised at this point in the consultation. Our sole focus is on keeping the work in Scotland.
Good morning. Thank you for joining us. Obviously, the situation is a significant concern for me, because of the implications for the wider Falkirk district area. What other information or perception do you have about the impact on related jobs, and what are the implications of the loss of skills?
I think that Derek Thomson touched on the fact that, if these sites close and these jobs are lost, the skills will go and the sites will not reopen. The skills will be lost forever.
For the record, can you outline what the skills are?
There are engineers. I have not done the work myself, so I cannot tell you exactly what is involved, but I know that there are engineers. You can imagine that the work that goes into building a bus involves highly skilled jobs, and it would be devastating for Scotland to lose those jobs.
On the impact on the area, we need only to think about what has happened in Grangemouth. How many big employers are left in that area?
From the Ernst & Young report, we know that the wider jobs impact in relation to the refinery was about 2,900 losses. Do you have a sense of the impact that would result from this closure?
That is still being scoped. As I said, the number of transferable skills at the refinery is probably a bit higher because of what will come in as a result of project willow. We know how many jobs are starting to go, and the Ernst & Young report is probably bang on.
As you know, Michelle, the workers spend their money in the town. The growth deal for the Falkirk area has just added more money, and it could be looked at as part of this.
On skills, we will not be taking on any more apprentices if the site closes, so what will happen to the younger generation that is coming through? We have already raised that issue with you, Michelle, in relation to some of the stuff that is happening in the area. I raised with the Deputy First Minister the issue of whether, with modernisation, we need more training for the staff in order that they can deal competently with EV batteries, different types of chassis and so on, and whether, given the money that the Government is giving to Forth Valley College, we could look to it to upskill people.
At Grangemouth, we successfully set up training for workers who were made redundant from the refinery, and that training might need to be opened up further, because people who are made redundant will need to be retrained and reskilled. However, as part of a plan, if the sites are producing higher-spec orders, if research and development is coming in and if upskilling needs to be done, we could jointly commit to the company, and the upskilling for that could perhaps be done at Forth Valley College.
I am genuinely concerned about the manufacturing base going, what will be left and what will fill that hole.
You alluded to the fact that you have had number of discussions with the Deputy First Minister. Throughout this evidence session, you have articulated well the big picture with regard to manufacturing, globalisation, supply chains and so on. Have you had any discussions with the UK Government specifically in relation to what you said about the light touch with regard to the industrial strategy, or have you had discussions only with the Scottish Government?
I have expressed my disappointment about some of the politicking that happened the other week, given that we are in such a time-sensitive window. I saw one statement from the Secretary of State for Scotland in which he said that furlough should be considered but that the Scottish Government should pay for it. Our understanding is that some kind of working group is being set up. However, as we have intimated throughout this meeting, we are catching up on a lot of the research because we are in such a time-sensitive window, with the Scottish Parliament going into recess and the holiday season coming up for the company, meaning that we have only four to five weeks left in which to try to secure the future of the site. There have been no discussions at a UK level, but, as I said, the UK Government seems to have passed the buck to the Scottish Government.
Derek Thomson, the one thing that I am hanging on to is that you have said that the final closure has not been signed off yet. That gives everybody some kind of chance. From what I have heard from colleagues around the table this morning, it doesnae appear that anybody has made a business case for Scarborough that you could look at, scrutinise, compare and so on and so forth. However, is there time for you, with the help of the UK Government and the Scottish Government, to put a business case together for retaining what we can in Scotland?
Robert Deavy, you spoke about proposed chassis production in Falkirk and things like that, so you are putting pieces together that might ultimately be part of a business case to retain production in Scotland. Do you feel that you have the opportunity to prepare that business case? Have the two Governments given you an indication that they are listening?
They are listening and there is still time, but that time is running out. The consultation should end in a couple of weeks. We have asked for an extension until 15 August, but the company has not yet given us an answer on that. There is still time, and that is why we are doing this and why we have been in contact with the Deputy First Minister. We are trying to get all the options on the table in order to keep the jobs there. Although there is time, it needs to be emphasised that it is limited and is running out.
It is not fair to expect you guys to just suddenly come up with a business case. Everybody needs to help and to pitch in. It reminds me of the case in my constituency where Diageo walked out of Kilmarnock and took 700 jobs with it. We were in the process of trying to get a business case, but it was too late in Scotland. If you have an opportunity to put a business case forward, what kind of help do you need to put it together?
We need a commitment that, in principle, the business and the workforce will be supported, first, in getting orders and, secondly, in finding financial support during the period in which those orders are being worked on. I get the concerns that have probably been raised in relation to Government-funded furlough setting a precedent, but there is a precedent for that elsewhere and we can prove that to you. If ADL goes, it will be a huge loss not only in terms of the people, but in terms of the industry and what it means in the UK in particular. We will just fulfil the fear that we have always had that we are only an import area.
The Scottish Government has told us that it is looking at all options, which includes looking at the costs of furlough and that kind of thing. However, we do not know what options it is looking at, who it is speaking to about orders or what direct awarding it is doing. Component parts could be part of it, but the key is that we do not want to be in the position of having compulsory redundancies. We have managed to mitigate those as much as possible, and I do not think that we have had any yet at Grangemouth, which is good. Compulsory redundancy does not sit well with a just transition programme.
We are working on this on a daily basis—we are on it 24/7. We have representation down in Scarborough, and I talk to them regularly about the issue. We really hope that, by Friday—I know that that is a short time—we will have some kind of formal wording or commitment from the Government, at the UK or Scottish level, to have either a pipeline of orders in process or an agreement on a furlough-type scheme. We are talking about emergency support here rather than about the longer term. Youse will probably tease more out of ADL tomorrow than we have done. We will happily work with anybody, but, as Willie Coffey says, we need a better understanding of where the Government is sitting in terms of the pipeline and bridging in order to keep the site on.
Now should be a great time to put together a business case, given that we are on the net zero journey and we have the capability and the skills here. We should surely be able to put together a decent business case that points at retention of production in Scotland, because everything is in our favour. We will need buses from now on—you said that yourself at the outset—so it should not be too difficult to put forward a really strong case for retention here. However, you still need access to whatever business case the company has made for the closure and its business case for Scarborough. You need to be able to compare the two business cases in order to strengthen your own, and I am sure that you will do that.
I wish you all the very best with that. I am sure that, as committee members and MSPs, we will gladly do anything that we can.
That brings us to the end of the evidence session. I thank both witnesses for coming along at fairly short notice. I appreciate how important this issue is to your members, to the community and to all the workforce that is affected. As we heard earlier, we will take evidence from Alexander Dennis in an extra meeting tomorrow.
11:41 Meeting continued in private until 12:34.