PARLIAMENTARY DEBATE
GKN - 24 April 2018 (Commons/Commons Chamber)

With your permission, Mr Speaker, I shall make a statement about the takeover bid by Melrose Industries plc for GKN plc. On 29 March, Melrose announced that holders of 52% of GKN shares had accepted its offer, and as of last Friday, the figure had reached 88.5%.

As I informed the House on 27 March, the Enterprise Act 2002 sets out three circumstances in which a takeover can be referred to the Competition and Markets Authority on public interest grounds. They are financial stability, media plurality and national security. Any such reference must take place within four months of the completion of the transaction, and must result from a quasi-judicial decision, made impartially, on the basis of an open mind and solely on the evidence presented. No grounds were advanced for a reference on the grounds of media plurality or financial stability. To inform my decision on national security, I asked for a comprehensive assessment to be made by the Ministry of Defence and other bodies concerned with our national security.

The Secretary of State for Defence has written to advise me that the MOD has completed its detailed analysis and has agreed with Melrose a set of undertakings, specifically: to ensure that the Government are informed in advance of any plans to divest a business, a component of a business, or assets which engage in activities that the Ministry of Defence considers to have national security implications; to ensure that the Government have early visibility of any prospective purchasers, including structures of consortia and persons holding significant influence and control; to prevent the disposal of the relevant business, components of a business or assets without the consent of the Government; to ensure that the Government receive suitable protections from any subsequent purchaser in the event of any future sale of elements of the business; to ensure the continuation of contractual obligations to protect intellectual property and classified information; to ensure the continued maintenance of any capabilities with a national security dimension; and to provide the MOD with powers to inspect information and facilities to ensure the protection of classified information.

Those undertakings are combined with the undertakings that Melrose agreed to make in response to my letter of 26 March, including undertakings not to dispose of the aerospace business for at least five years without the Government’s consent; to maintain a UK stock exchange listing for at least five years; to ensure that the business remains headquartered in the UK, and that a majority of directors are resident in the UK; to ensure that both the aerospace and Driveline divisions retain the rights to the GKN name; and to guarantee that spending on research and development will take place on at least GKN’s previous level, amounting to a minimum of 2.2% of sales for the next five financial years. In important respects, those undertakings go beyond commitments given by the previous management team. Melrose has also agreed to meet my officials and me every six months to provide updates on its ownership of GKN.

On the basis of the commitments given relating to national security, the Ministry of Defence concluded that statutory intervention was not required. That is consistent with the other assessments that I have received. On the basis of the assessments that I have considered and the undertakings that have been entered into, my judgment is that there are not reasonable and proportionate grounds to make a statutory intervention on the grounds of national security.

GKN is a very important business, performing vital work in industries—aerospace and automotive in particular—with an expanding global market in which British innovation and excellence offer great opportunities. This takeover bid has entailed a vigorous debate about which of the two alternative British managements could most credibly reap those opportunities. The shareholders chose—initially by a small majority, and finally more substantially—new management. All UK public companies are subject to that challenge of how they can best be run: it is an essential part of the competitive business environment for which Britain is renowned.

The takeover bid has been important in wider ways. It is the first contested bid in which the new regime of legally binding commitments on future conduct has applied. The commitments that have been made reflect the strong interest of stakeholders—including employees, UK taxpayers, suppliers, and research and development partnerships—in knowing the future intentions of a bidder, provided in a way that is binding. These responsibilities, which broadly reflect those placed on directors of ongoing businesses by section 172 of the Companies Act 2006, are important to ensure that the longer-term and strategic interests of our economy are considered and addressed during takeover bids.

Now that such an ability to make post-offer undertakings has been established, I expect them to be implemented. The new management’s stewardship of these important businesses carries with it important responsibilities for our economy and our country. I look to the management to honour its commitments in both the spirit and the letter, and to create a strong future for GKN, its employees, its suppliers, and the industrial sectors in which it will play a major role.

I gave the House a commitment that I would carry out my legal responsibilities seriously, meticulously and fairly, and that I would keep the House up to date at every phase of these proceedings. I believe that I have done so, and I commend my statement to the House.

I thank the Secretary of State for giving me advance sight of his statement.

There are two issues that I must raise today: the fact that the reported assurances obtained by the Government, both in the letter of 27 March and subsequently, are not sufficient to guarantee the security of the long-term prospects of the company and, indeed, the workforce; and the inadequate capacity of the takeover regime to protect companies outside the very limited grounds of national defence, media plurality and financial stability.

First, as I made clear last month, the assurances obtained by the Government in Melrose’s letter of 27 March were sadly inadequate. Apart from the first five assurances which were post-offer undertakings, what was in the letter was completely unenforceable. For example, there were no post-offer undertakings on maintaining employment or tax residency, which could easily constitute such undertakings. Indeed, the maintenance of employment is vital to our national security, and the loss of these jobs will cause the diminishment of vital skills that are integral to our defence industry.

Putting aside issues of enforceability, what of the assurances that have been reported since 27 March? The reported veto power that the Secretary of State for Defence has to stop the sale of certain businesses will not, I am afraid, solve the national security problem. Melrose reportedly has a short-term outlook which undermines the long term that is required for defence projects. That is important, and a veto on the sale of certain parts of the business by the Defence Secretary will not help significantly. Sadly, the Government’s failure to address the short-term horizons of Melrose may damage the capability of a business to deliver projects that could last for 10, 15 or 20 years.

Secondly, our takeover regime is inadequate, and the Secretary of State is acutely aware of that. If a takeover falls outside the grounds of national defence, media plurality and national stability, the Secretary of State cannot act, even though the takeover may be harmful for the business, harmful for employees, harmful to research and development, and harmful to supply chains.

Let us take the case of Unilever. Last year it was threatened with a takeover, and there was nothing that the Government could do because the takeover fell outside the three public interest exemptions. Unilever has since commented on the inadequacy of the UK takeover regime, and its recent decision to place its headquarters in the Netherlands was, as reported by the Financial Times, arguably driven by a desire to escape the poor safeguards for takeovers in the UK. Labour Members have called on the Government to broaden the public interest test. The measures that the Government have proposed so far are not good enough. We know that, in GKN’s case, they already had the power to act and did not do so. However, our takeover rules would not have prevented Unilever from being taken over had Kraft been prepared to follow through, because that had nothing to do with any of the three exemptions.

I agree with the Secretary of State that our takeover regime must be open enough to encourage foreign investment, but it must also protect against short-termism and long-term damage to our economy and national security. Arguably, too often it is short-termism that prevails. Only this week we heard reports that the hedge funds that bought GKN shares to make Melrose’s takeover possible are now targeting Melrose, shorting the company on the stock exchange.

What we needed from the Secretary of State today was not just a waving through of the deal, but action, both in obtaining concrete assurances from Melrose on the future of GKN and its workforce, and in the form of clear plans to reform and widen our takeover regime to protect British businesses. I fear that the short-term predators already smell their next victim—and it is not just Melrose; it is Britain’s industrial future.

Right from the outset, the hon. Lady has been unable to advise us of what specific undertakings she thought it was appropriate to obtain. She needs to understand that as this is a quasi-judicial decision, the statement that she made that she would block the bid would disqualify her from making that decision, as the right hon. Member for Twickenham (Sir Vince Cable) knows to his cost.

The evidence presented to me was that this was a British company taking over another British company, that no such takeover has ever been blocked on national security grounds, and that the Ministry of Defence and the other agencies said there was no reason for intervention on those grounds. I have to tell the hon. Lady that the previous directors of GKN themselves said that there was no reason for an intervention on national security grounds. She should reflect on the commitments that the Defence Secretary and I have secured to retain the aerospace division for at least five years, to ensure that the Government have the right to approve any future sale of any defence business or asset, and to invest in research and development to at least the current level. Not once in the past four months has she engaged in a similarly forensic way to set out what she thinks would be appropriate commitments.

The hon. Lady says that the commitments are inadequate, but they have been given as legal deeds and in some cases set out to the Takeover Panel as post-offer undertakings. The truth is that she has had the opportunity to engage with this matter, but having prejudiced her position by saying from the outset that the takeover should be blocked, she has given away the ability to have influence on what the regime should be.

The hon. Lady knows perfectly well what the Government’s powers on takeovers are, because the 2002 Act was passed under a Labour Government and sets out those limited powers, which are the same as in the rest of Europe. The difference between the Government and the Opposition is that when we came into government, we reformed those powers to allow post-offer undertakings to be given, so the situation when Kraft bid for Cadbury and undertakings were reneged upon cannot happen in the current circumstances. We have taken an active approach to ensuring that all stakeholders’ interests are secured, whereas the hon. Lady preferred to float above it all and simply say no before considering the evidence. We have proceeded responsibly, and she would do the employees of and stakeholders in GKN a service if she engaged more forensically in future.

What are the sanctions if commitments are not honoured?

Sanctions with regard to undertakings to the Takeover Panel are those for contempt of court, which include everything up to imprisonment.

I thank the Secretary of State for advance sight of his statement.

The Secretary of State mentioned holding Melrose to the spirit and letter of its commitments, but traders have been short selling £725 million, or 17%, of Melrose stock, effectively betting against it making a success of GKN. What action will he take if there is any breach of the spirit or letter of the commitments?

The Secretary of State did not cover jobs in his statement. I asked him following a previous statement to what extent he would require assurances to prevent assets from being stripped and jobs lost, and not just those in the MOD or national security. What assurances has he had on the financial restructuring involved in the takeover, which will mean more debt and less investment at the core of GKN? How will that situation progress the Government’s industrial strategy, and can he explain how allowing the takeover will protect the skilled jobs that we require and tackle productivity issues?

I am grateful to the hon. Gentleman for his questions. He will know that one undertaking that has been given is a commitment to at least five years of research and development investment, including participation in the joint industry bodies, which have been a successful part of our arrangements in the aerospace and automotive sectors and are an important part of our industrial strategy. That is a valuable commitment that I would have thought the hon. Member for Salford and Eccles (Rebecca Long Bailey) and he would welcome.

The previous GKN management criticised the commitment to retain the aerospace business, saying that it should not have been entered into given that the sell-off of GKN’s automotive business had already been agreed to. It constitutes a longer-term commitment than was made during the latter period of the previous ownership.

The hon. Gentleman will understand that in obtaining commitments from a bidder, I have to bear in mind commitments that the incumbent management have or have not made. No commitments had been made on the total number of jobs, and indeed the sale programme involved a majority of the business. One of the features of today’s results announcement was that the debt of the previous business was higher than anticipated, and the plans that the new management have set out include paying it down.

I thank the Secretary of State for his statement and welcome the undertakings that he has secured.

The future of GKN was determined by speculators who came on to the share register in the final weeks of the bidding process to make a quick profit. Does the Secretary of State agree that that is no way to determine the future of a great British manufacturing company, and will he now conduct a review of the takeover code to ensure that speculators cannot participate in that way in a vote to decide a company’s long-term future?

I understand my hon. Friend’s concern, and a number of hon. Members have raised that point before. There are a couple of things to say about it. First, most people who have bought shares latterly during the takeover process bought them from longer-term shareholders, and one way in which a bid can be backed is for people to sell before the end point of that bid. That situation was looked at, appropriately, by Professor John Kay, who published a substantial review. His panel noted that one suggestion was that voting rights should accrue only if people had been on the share register for a specified period. The Kay review concluded:

“We were persuaded that the introduction of such provisions by legislation or regulation would involve practical difficulties and would be unlikely to achieve the intended effect.”

That was an expert review by a serious person, but of course in all circumstances such as this we keep our corporate governance arrangements under review, and I will certainly do that now.

I would like to follow up on the point that the hon. Member for Telford (Lucy Allan) raised. Other countries have a rule that people must have been shareholders for a certain period before they can vote on a takeover deal. Some sort of financial transaction tax would also reduce short-term speculation in companies that leads to their being taken over in this fashion. I urge the Government to look again at the takeover code, particularly for businesses that are so integral to our industrial strategy and have received a lot of taxpayer funding, in this case for the R&D work that GKN has undertaken.

I am glad that the hon. Lady mentions the R&D work, which is very important. The commitments that have been made on R&D, both to keeping up investment and to participating in R&D partnerships, are extremely important. She and her Business, Enterprise and Industrial Strategy Committee asked for undertakings to be given on that and a number of other issues, and were not satisfied with the undertakings that were offered. I persuaded the company to go further and obtained undertakings relating not only to national security but to R&D and the ownership of businesses, and I hope she will acknowledge that that is valuable.

On the hon. Lady’s point about differential voting rights for shareholders, I mentioned the John Kay report, which her predecessor Committee scrutinised—I think the right hon. Member for Twickenham (Sir Vince Cable) gave evidence backing the report’s judgment. I know that her Committee is correctly interested in keeping our arrangements up to date, and if she and her colleagues want to review these matters, what their predecessors said is a good example of how that can be done.

I congratulate my right hon. Friend on his statement, and on the work he has done on this difficult issue, especially in relation to securing the five-year guarantee for the aerospace business, which is unprecedented for a business such as GKN. Indeed, as he has just said, the last management refused to countenance such an arrangement. I visited the plant in my constituency a week or two ago and, despite some cynical scaremongering by some in the party opposite, the management and workers there are optimistic about the future and looking forward.

I am grateful to my hon. Friend for his comments. It seems to me that when we establish a regime of post-offer undertakings, it is necessary to be active and to apply ourselves to the undertakings that it is important to secure. It is true that there has never been any commitment to own an important business such as that for more than five years, and I think that this will be valuable and welcomed by the employees in his constituency. I recognise his assiduousness in visiting the plant and talking to his constituents who are employed there.

Further to the excellent intervention from the hon. Member for Telford (Lucy Allan), the Select Committee Chair, does the Secretary of State accept that the role of the short-term investors has been highly destabilising? They acquired 20% of the stock, they forced the takeover through and they are now short selling. If he is not persuaded of the merits of differential voting, how does he propose to deal with this problem?

The right hon. Gentleman was not persuaded either. He commissioned a report, he had a respected and eminent individual look into this, and he gave evidence to the Select Committee to say that he was not persuaded. I have described some of the circumstances involved. Those who bought shares in the latter stages bought them from people who had decided they did not want to back the existing management. He knows that I take a great interest in ensuring that our regime of corporate governance is the best in the world. The fact that people can invest here with confidence forms an important part of our reputation. We have been successful over many years, and of course if the Select Committee wants to review the experience since the report that he commissioned, it has the ability to do that and I would be very happy to participate.

The Minister will be aware that the global headquarters of GKN are in Redditch, and that this has been my first priority ever since we heard the news of the takeover. Is he also aware that I spoke to Melrose on Friday, and that it assured me that it has no plans to shut the Redditch office? It believes that many of the jobs will be reabsorbed into the functions of GKN. Does he agree that that is really good news, and contrary to some of the things we have heard in the media? Will he also comment on observations in the media about the Airbus relationship? Again, we have heard that the takeover could have a negative impact in that regard, but that is not what I have heard from Melrose, which thinks that the relationship could continue. Can he comment on that further?

I congratulate and applaud my hon. Friend on being active and engaging with the new management to talk about the important headquarters function in her constituency. She has indeed secured good news from the company in that respect. I understand that the divisional heads of the aerospace and automotive businesses have been reappointed by the new management. Let us bear in mind that the incumbent management’s proposal was, latterly, that the automotive business should be sold, and that it would now be in the process of being sold. Airbus is clearly an important company, and there were some comments ascribed to it, although I do not think that they have been repeated. It will be important for the new management to set out its plans, so that all suppliers can have confidence in those relationships.

Is the Secretary of State aware that short selling has been the decisive factor in this, and that that is a matter of great concern throughout the House? Also, he has rightly been concerned about the reputation of Melrose Industries plc for taking short-term measures. It cuts, closes and sells on at a profit. That is its reputation and, as far as I am aware, that is what it has invariably done. He has therefore sought longer-term undertakings—and five years is a significant period—that will keep the plants going and ensure that the company redoubles its commitments. However, his statement contained no indication as to whom those commitments are to be made, except presumably the Takeover Panel. What powers does the panel have to impose binding sanctions or, if necessary, to take the company through a legal process that he claims in his statement will be legally binding? On these crucial issues, he seems to have made no progress at all.

This is the first time that any such commitment has been given on the ownership of assets for a period of five years. I have been active in establishing this regime, and I think the hon. Gentleman knows that, in my engagement with manufacturing and other industries, I have considered carefully the strategic importance of continued investment and stability. In the final analysis, there was a greater commitment to stability of ownership from the bidder than there was from the incumbent management. On the question of enforceability, I will place in the Library of the House the deeds that have been entered into in favour of the UK Government by the company. Some of them are under the Takeover Panel regime. As I said to his colleague on the Labour Front Bench, the effect of this new regime is that there will be sanctions up to imprisonment for a breach of those undertakings.

I welcome the encouragement that my right hon. Friend gave to the Chair of the Business, Energy and Industrial Strategy Committee to look at the issues surrounding this takeover, and I am sure that the Committee will do that. Importantly, he also pointed out that this was a contest between two British management teams. Does he agree that the British taxpayer should expect companies that receive public money, either through contracts or through research and development, to be prepared to give an undertaking to take a long view when it comes to investment decisions?

That is right, and I would also welcome consideration of these matters. Right from the beginning, I have made a commitment to the House that I would take a considered, comprehensive view and use the powers that I have, and that where I did not have statutory powers, I would say what I expected. When it comes to research and development, to the ownership of assets and, for today’s purposes, to national security, a long-term commitment is required, and it has been important to obtain undertakings in all those areas. I hope that the Committee will take a look at this.

In his statement, the Secretary of State said:

“GKN is a very important business, performing vital work in industries—aerospace and automotive in particular—with an expanding global market in which British innovation and excellence offer great opportunities.”

Does he understand from his regular meetings with Melrose that it is thinking of adapting its business model so that these vital interests can be kept for a longer term than they would otherwise have been? If not, would this British company consider selling first to another British company?

I am grateful to the right hon. Gentleman for his question, because I wrote and said that deliberately. I regard this company, operating in the sector that it does, as having an important long-term role. One of the reasons that there was a vigorous contest for this business was the recognition that there are immense opportunities involved. It is my purpose as Business Secretary to ensure that we reap those opportunities. That is why I requested what was in effect a change to the previous commitments that this company or any other had made, and I was able to do that on the aerospace side. As I said in response to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), it was clearly not possible to extract another commitment on the automotive business, given that the incumbent management had committed to selling it forthwith. In the spirit of what the right hon. Gentleman has said, I think that he will reflect on what has been obtained for the first time in the UK takeover—namely, a commitment to a much longer-term perspective than had been the case, including the right for the British Government to approve any subsequent purchaser of defence assets—and agree that that is a significant step forward.

I draw the House’s attention to the fact that, in the dark days before I came to this House, I spent several years in the City advising on mergers and acquisitions, and Melrose was one of the companies that I advised several times. Bearing that in mind, while there is of course a narrow range of scenarios in which the Government can intervene on a quasi-judicial basis, as the Secretary of State has already set out, will he confirm whether the Government will always ensure that we have an open globalised economy based on competition, not one in which politicians will capriciously intervene, which would be the approach of the Labour party?

That is the right approach. The UK’s reputation for being a dependable place to invest and do business is based on clear rules and principles, and we have benefited from that. We make significant investments in the UK economy, we make significant investments in overseas companies, and we hold big assets. That is important to us, and we should be a trading nation, which means that we should be open to investment as we invest in other countries. That is the heart of our approach. However, it is important to keep the regime under review, and where there are long-term interests, such as in research and development, it is right that we have introduced an ability during a takeover bid to extract indications of how a bidder would approach things. That is what we have done in this case.

It is a bleak day for British industry and British workers when a 259-year-old icon of British engineering excellence falls prey to a hostile takeover thanks to hedge funds moving in to make a quick killing. We will hold Ministers and managers to account for the promises that they have now made. Crucially, does the Secretary of State agree that the time has come for a fundamental review of our corporate takeover regime, because the idea that the British national interest can be sold down by the river by hedge funds moving in to buy 20% of a company is fundamentally wrong?

The hon. Gentleman talks about employees’ interests, and he has fulminated about the bid for a company that has an important plant in his constituency, but he has not made a single request or proposed a single safeguard to protect those interests. I do not know whether he has met the new management of GKN—I do not think he has—but my hon. Friends the Members for Filton and Bradley Stoke (Jack Lopresti) and for Redditch (Rachel Maclean) have made the effort and have discussed the important commitments that are being made, and the undertakings that I have secured will contribute to employment stability. The difference between my hon. Friends and the hon. Gentleman is that they have rolled up their sleeves and got involved, whereas he has contented himself with making slogans from the Back Benches.

The aerospace division is the jewel in GKN’s crown and is a vital part of Britain’s defence industrial base, so as a former Ministry of Defence Minister, I particularly welcome the guarantees that have been provided about the future of that part of the company. Will the Secretary of State say a little more about how he has worked closely with the MOD on that? Will he also assure us that the MOD will be a part of the six-monthly reviews?

I will indeed, and I am grateful to my right hon. Friend, who speaks with considerable authority not just as a former MOD Minister, but as an ex-serviceman. Defence considerations are important, and I work closely with the MOD, which has provided a comprehensive assessment. That is the proper basis on which those with expertise in such matters can say what is required to safeguard national security, and I promised this House that I would abide meticulously by the expert advice that I receive. I am glad that I have had access to that expertise and have made my decision based on it. Of course, when it comes to considering the future opportunities for this company, our engagement through the industrial strategy is as important in the defence sector as it in the automotive and civil aerospace sectors.

The Melrose takeover of GKN was approved by 52% to 48% after 20% of the company had been snapped up by hedge funds. The Secretary of State has heard calls from both sides of the House for those with short-term interests to be excluded from making decisions on takeovers and for the public interest test to be expanded to include questions about research and development. He has rejected those calls today, but he says that he keeps matters under review. What form will his review take, and when does he expect it to report?

On the hon. Gentleman’s first point, I have said to many colleagues in the House that when it comes to shareholdings, every purchaser in the latter stages has bought from a longer-term shareholder, who has in effect expressed a judgment on the company. This Government, previous Governments and this House have looked carefully at the rights of different classes of owners and have concluded that the hon. Gentleman’s suggestion would not be the right reform. However, he knows me well and I will of course consider the assessment of the conduct of this bid, but it would be wrong to mislead him by saying that I have formed a different view. I will take an objective view of the conduct of the bid, as will others in the House. The grounds for intervention are specified in the Enterprise Act 2002, which reflects the requirements across the European Union that every member state must apply.

The old management was British, the new management is British, and the Secretary of State appears to have secured guarantees from the new management that it will do certain things that the old management had not guaranteed. Does that not imply that those who are working for the new GKN should sleep slightly more soundly in their beds?

My hon. Friend puts it well and succinctly. Any takeover bid will obviously involve some anxiety for employees with long service, but whether or not the bid had succeeded, this was always going to be a period of change for GKN employees. As a result of the commitments that have been given, they can have more certainty about a confident future than would otherwise have been the case.

On the hon. Gentleman’s first point, the commitment to five years is the longest that has ever been given and was not something that Melrose was willing to offer the Business, Energy and Industrial Strategy Committee. In fact, the further undertakings that have been entered into on defence matters, which are of course in the aerospace division, go beyond that period.

I mentioned in reply to my hon. Friend the Member for Redditch (Rachel Maclean) that Airbus’s chief executive has not repeated the reports that were made previously. I have discussed the matter with Melrose and its intention is to develop a relationship that it hopes will prosper in the future.

Given that this is the first time that the process has been used, the Secretary of State has rightly focused on the legal undertakings that he has been able to extract from Melrose. Will he speak a bit more widely about the general discussions that he has had about the future role of GKN’s assets in his industrial strategy?

I have been very clear in my discussions with both sides during the bid. It is important to have equal treatment when taking a quasi-judicial decision. GKN has an important role to play in our industrial strategy in two important sectors. GKN will be part of an aerospace sector round table later this week, and I expect it to live up both to its responsibilities and to the opportunities in this most exciting of sectors.

Takeovers are a good thing where they are likely to enhance value, but it is clear that this highly leveraged takeover by Melrose is likely simply to load GKN with £8 billion of debt. We know what will happen, as we have learned the lessons of history: the company will be broken up and sold off piecemeal to recoup the debt raised by Melrose to create false value.

We have also seen a lukewarm commitment on R&D. GKN’s current R&D is at only half to two thirds that of its main competitors. Why did the Minister not seek a more ambitious undertaking that the takeover will enhance value and increase GKN’s R&D spending target to that of its main international competitors? I echo the sentiments of other Members on the need to amend our shareholder takeover rules to ensure that short-term interests of people with no industrial knowledge or understanding of companies are not permitted to distort the interest of stakeholders in the long-term value of this company.

For the first time in British corporate history, we have secured a commitment to spend, as a minimum, what the incumbent is already spending on research and development—that should be welcomed. Obviously, the reports of accounts and the disclosures that will need to be made to the markets will shine a light on the debt, but it is striking that it has been suggested today that £150 million was accounted for by unpaid suppliers’ bills at the end of the last quarter—I gather that is in the filings that have been released today—so I imagine the hon. Gentleman will want to study very closely with a beady eye the reports of accounts as they are published in the months ahead.

I am reminded of the Cadbury experience when it was taken over by Kraft. Undertakings were given about the factory in Bristol, which was sold off almost before the ink was dry on the deal. GKN is a company of national strategic importance not just to defence but to the wider economy and, indeed, to the Government’s much-vaunted industrial strategy. GKN should play a big part in that future.

If GKN were a German company in Germany or a French company in France this kind of speculative takeover would be prevented one way or another. One way to prevent it would be to have substantial stateholdings in such companies, and France, in particular, has done that over many years to make sure French companies remain French. Will the Government not look to France and Germany for the best way forward?

Kraft’s takeover of Cadbury is exactly why we changed the rules so we can now have binding undertakings that are legally enforceable, unlike the situation that prevailed when the hon. Gentleman was in government. When it comes to the German system, in fact there is a substantial record of German companies being taken over.

Vodafone.

Yes, Vodafone’s takeover of Mannesmann is a classic case. KUKA, a German robotics company, has been taken over recently, as has Kabel Deutschland. There is a substantial record of takeovers in Germany. We have to operate the same public interest tests. What we have now is an ability to inquire into the intentions for the medium and long term, and to obtain legally binding commitments on that. I hope the hon. Member for Luton North (Kelvin Hopkins) would welcome that, because many of his constituents will benefit from it.

I greatly enjoyed the Secretary of State’s answer to the hon. Member for Luton North (Kelvin Hopkins), and I hope he will not take offence if I say that the hon. Member for Luton North was not himself in government—he looked rather shocked, nay affronted, by any suggestion that at any time in his career he might have been. The hon. Member for Luton North is a career Back Bencher and is immensely proud of the fact.

Workers at GKN’s Luton plant in my constituency are world leaders in ice protection systems for flight-deck windows and fast-jet canopies, and I believe they will share my dismay that the assurances the Secretary of State has put in place amount to little more than the new management picking up the phone and informing him before it does things that damage our national security and national interest. Is not the reality of the quasi-judicial nature of the decision-making process that he and future Secretaries of State will always veer on the side of caution, rather than face the prospect of being challenged in court when a takeover goes through?

I am sure it is an unaccountable oversight that the hon. Member for Luton North (Kelvin Hopkins) has never served in government.

For the constituents of the hon. Member for Luton South (Mr Shuker), during the takeover bid, the incumbent management criticised the commitment to hold the aerospace division for five years. Given that a majority of the company was to be sold as part of the incumbent management’s plans, it is fair to observe that it is not clear there would be any greater stability—I put it as mildly as that—if the incumbent management had continued, rather than the new management that shareholders chose to manage the company.