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Statement on LG

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Andrew Davies, Minister for Economic Development and Transport
I am delighted to report that on 31st March the Welsh Assembly Government and partner organisations signed a settlement agreement with LG Electronics about the recovery of grant assistance in respect of the electronics site at Newport.  This agreement presents a great opportunity for Wales.  As part of the settlement agreement the Assembly Government will be given land and buildings independently valued at £20 million.  The undeveloped land owned by LGEW can be transferred within the next few weeks and later this year the Assembly Government will similarly receive most of the buildings which were formerly used by LPD (LG Philips Displays).  In addition LG Electronics, as the guarantor for the original assistance given to LGEW, has paid £15 million cash to the Assembly Government.  After making an allowance for Assembly Government expenditure on the services to the buildings coming in to its ownership, this brings the total net value of the recovery of assistance in current terms to £34 million.

The discussions about the recovery of assistance have been complex and the European Commission also needed to be informed and consulted since they had been notified of the original assistance package.  The European Commission was satisfied with the outcome as is the Assembly Government’s Accounting Officer .  I also believe that the package is a fair one particularly when looked at it in wider economic development context.  Of course, the Assembly’s Audit Committee will have an opportunity to look at the LG projects in the round, in due course.

We should not lose sight of the investment that was undertaken by LG Electronics Wales.  The company undertook capital investment of £230 million and at its peak some 2000 employees were employed at the Newport site.  I know that LG Electronics and LG Philips Displays regret as much as I do that  the changes in markets and global competitiveness in cathode ray tube products led them to close the tube facility at Newport.  The settlement agreement comes about because LG Electronics is aware of public sector assistance which it received and has also taken into account its wider community responsibilities.  Like us it wishes to see the site apart from the LGEW building being available for alternative economic development opportunities as soon as possible.  

Notwithstanding this very good news, I have not forgotten those who lost their jobs.  Many were helped into alternative employment by LGPD outplacement services and Team Wales, I am confident that we can help businesses fulfil the potential of this well serviced and located site.  In co-operating with the Assembly Government, LG Electronics has put us in a very good position to attract further alternative employment to the Newport area.  LGEW itself is owns and operates one of the buildings for the assembly of flat screen products. It now employs some 500 staff – 330 permanent and 170 temporary.

Comparisons will inevitably be made between the value of the package which the Assembly Government has accepted and the original assistance which the former Welsh Office decided to grant to LGEW.  The total grant package actually paid was below that offered and amounted to some £87 million broken down as follows.

Assistance £ million

Regional Selective Assistance grant 34.6
Training and Enterprise Council training grant 7.6
Land and works 10.5
Site development 12.4
Property grant 22.0

TOTAL 87.1

In this way around £45 million related to the land, infrastructure and property development and all of the assets thus supported apart from the remaining LGEW building will be given to the Assembly Government.  To be added to this is the £15 million cash.  This means that on an historic cost basis the Assembly has recovered almost 70% of the grant.  The assistance that the company has benefited from has to be set in the context of the thousands of jobs it supplied over the years it operated and the hundreds of continuing jobs at Newport.  

There was certainly a perception at the time that the former Welsh Office gave assistance to the LG projects that budgets outside the Economic Development Department needed to contribute to bring forward the appropriate package of support for the massive planned investment.  Thus it is appropriate that the assistance being returned in cash and kind will be available to support priorities across the Assembly Government.  This means £15 million immediately and up to £19 million when the land and buildings are sold for alternative economic development.  The Assembly Government has a side agreement with Newport City Council on the undeveloped land which recognises its continuing financial interest should the land remain undeveloped after December 2005.

Now that the ownership of the land and buildings is clear the Welsh Development Agency on behalf of the Assembly Government will be very actively marketing it.   As a footnote I should emphasize that this agreement on the electronics site is completely separate from what was the LG semicon site.  That is covered by a separate agreement with Hynix whereby the undeveloped land from the semiconductor development has already been given to the WDA and the semiconductor building itself continues to be actively marketed – realistically for alternative uses.  Together these arrangements mean that there is a very attractive proposition for new investment on what were the LG sites.

To conclude I welcome the amicable settlement that LG Electronics has reached with the Welsh Assembly Government.  It is unfortunate that the vision for electronics development did not work out as planned but the settlement enables all to move forward for the benefit of Newport and for Wales.