Government cannot intervene to safeguard Vauxhall jobs, say experts

Oliver Gill
Follow Oliver
Prime Minister Theresa May Appoints Her Cabinet
Business secretary Greg Clark is confident PSA and GM will honour their commitments to the UK (Source: Getty)

The UK government is powerless to challenge or influence PSA’s merger with the owner of Vauxhall from a legal perspective, experts have said.

The owner of Peugeot and Citroen revealed this morning it had reached an agreement with General Motors (GM) to merge European operations in a deal that values the combined business at €2.2bn (£1.9bn).

Vauxhall’s UK operations in Ellesmere Port and Luton employ 4,500 people.

This afternoon business secretary Greg Clark said the conversations he and Prime Minister Theresa May had with GM and PSA left him "cautiously optimistic" that both parties will safeguard the future of the sites.

Read more: PSA agrees to buy Vauxhall and Opel: What does it mean for UK jobs?

However, negotiations through diplomacy are the only avenue option available to the government according to Howard Cartlidge, the head of EU and competition at legal firm DWF. He said:

The legal position is pretty clear. There is no legal means at least for the UK government to intervene, even if it wanted to.

It is widely expected that the deal will be referred to the European Commission (EC) which will review the transaction in accordance with EU law.

National governments can intervene when a deal is reviewed by the EC but only when it meets strict conditions – specifically for transactions involving media and issues of national defence.

“EU Law says that national governments cannot apply their own legislation to that transaction,” said Cartlidge, who added that this was corroborated by a number of carmaker mergers, such as Tata's tie-up with Jaguar, which had already been waved through by European authorities.

Furthermore, the remit of European authorities will not address some of the key concerns of workers both in the UK and abroad. Cartlidge said:

Merger law has traditionally not had anything to do with jobs or pension deficits. That’s just not its role. Its role is to see if there is a reduction in competition as a result of the merger.

Read more: PSA agrees €2.2bn deal to buy Vauxhall owner's European operations

PSA said it hopes to generate savings of £1.5bn per year by 2026 as a result of the deal.

With cost cuts on the cards, there are concerns that plants maybe shut and jobs lost.

City sources highlighted fact that French government current has a 14 per cent shareholding in PSA, a situation may influence the thinking of where the knife will drop.


Meanwhile, experts have valued pension liabilities that need to be included in the transaction at around €3bn.

Read more: PSA will honour commitments to Vauxhall plants says business secretary

And the former chairman of the Pension Protection Fund, Lady Barbara Judge called on pensions watchdogs to scrutinise the deal. She said:

We have a pensions regulator for a reason, when there is a large pension deficit in a complex M&A process, it needs to pay attention when deals of this size and scale are going through.

“Between the regulator and the takeover panel, they must be content that acquirers are thinking thoroughly about how to ensure existing obligations can be met.”

Related articles