Diageo closures could cost local economy millions - Swinney

Published on Wednesday 2 September 2009 16:16

THE closure of an iconic Scotch whisky's bottling plant may cause its local economy to lose £15.5 million a year, it was revealed today.

Finance Secretary John Swinney told MSPs a study was carried out on the impact of Diageo's plan to close its Johnnie Walker bottling plant in Kilmarnock and the Port Dundas grain distillery in Glasgow.

Drinks giant Diageo announced at the start of July that it wants to shut the bottling plant, threatening the jobs of 700 workers.

A further 200 workers may lose their job at the Glasgow distillery.

Mr Swinney said the as-yet unpublished study, which was carried out for East Ayrshire Council and Scottish Enterprise, also estimated that the cost to the public sector for every job lost may be as much as 20,000 a year.

"These are very telling figures and demonstrate the scale of Diageo's contribution to these communities and the devastating effects their actions would have on them," he told MSPs.

"Nine hundred job losses in the west of Scotland, particularly in the current economic climate, represent a body blow, not only to the individuals likely to be affected but to the wider community and local economies."

The Scottish Government is considering holding a whisky industry summit, Mr Swinney added.

The GMB trade union had contacted ministers in the wake of Diageo's proposals and the subsequent announcement from Whyte and Mackay that it plans to shed 83 jobs in Scotland.

The Finance Secretary said ministers are considering how a solution "can most successfully and usefully be taken forward with a range of interested parties".

Diageo announced its plan to shut the two sites in July, after MSPs at the Scottish Parliament started their summer recess.

Today, as some workers from the company looked on from the public gallery, Mr Swinney updated Holyrood on the campaign to try to save the jobs.

He said the fact that Diageo had not approached either the Scottish Government or Scottish Enterprise before it made its announcement is a "matter of real regret".

Mr Swinney added: "Nobody from Government or the unions or the elected representatives at the council or Parliament level had any prior warning of changes in employment."

Alternative proposals were agreed last week by a task force, which has brought together trade unions, local authorities, Scottish Enterprise and politicians.

If adopted, the proposals may see production continue in the Glasgow distillery, together with a new plant created in Kilmarnock.

Mr Swinney said the task force was established to "develop a single response which is in the best interests of Scotland".

And he said: "I will be meeting Diageo tomorrow to consider how we take these proposals forward.

"Our work in trying to reverse Diageo's decisions has nothing to do with trying to tell a successful, global company how to run its business.

"The issue has been, and will continue to be, about safeguarding those economically fragile communities at risk in the west of Scotland.

"The 900 jobs in the west of Scotland are real, existing jobs which matter not only to the individuals and their families but also to the wider community."

Diageo has claimed it will "offset" the redundancies by creating 400 jobs at its packaging plant in Fife.

But Mr Swinney said: "The issue is not playing one part of the country off against the other.

"I believe Diageo has a responsibility to those communities who have contributed so much to the company profits over generations – communities who have fully supported the success of the world-renowned Johnnie Walker brand."

Labour MSP John Park said Diageo workers had endured an "avoidable summer of uncertainty" because of the company's actions.

Diageo has "damaged that reputation and the relationship with the unions with the decision that it took at the beginning of the summer, and the way that decision was handled", he said.

Mr Park called on the Finance Secretary to "actively encourage" all businesses to engage with unions before similarly big decisions are taken.

For the Tories, Derek Brownlee MSP asked if public funds will be made available, and on what criteria any funding would be assessed.

Mr Swinney told him that clear rules exist to govern public spending and added: "Public funds will have to be used to pick up the pieces.

"What I'm trying to do in this instance is to encourage a private company to work with the Government to avoid a situation where public funds will have to be used extensively to pick up the pieces of industrial change, which in the words of Mr Park has been entirely avoidable."

Liberal Democrat MSP Robert Brown called for an assurance that Port Dundas and Kilmarnock will be given equal importance in talks.

Parliament also heard from Fife MSPs who said they are worried Diageo may cut back investment there if its closure plans change in the west of Scotland.

Mr Swinney said: "I've heard that point made and it's not a point I accept or agree with."

He told MSPs he will push for a full debate on Diageo's proposals in Holyrood.

Afterwards a spokesman for Diageo said: "Given the importance of our proposed restructuring to the people involved and to our business in Scotland, we understand the need for our proposals and the issues which surround them being debated at the highest possible levels within the Scottish Government and Scottish Parliament.

"However while the debate contributes to the ongoing discussion on our proposals, the key element for Diageo remains the receipt of a detailed response from the Scottish Government task force on their alternative proposals for Kilmarnock and Port Dundas and the resulting implications for Leven.

"We understand this will be available this week.

"Our overall priority remains the ongoing consultation with our employees and supporting them during this difficult time."