ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(76)102
Vol.1976/9006

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COMMÎSSION
OFTHE
EUROPEAN COMMUNSïlES
SecretariotCOM(76)102Final.
Brussels,12March.1976.
CONFIDENTIAL
COMMUNICATION TOTIECOUNCIL
I Reconversion Loan Application No.195 »
pursuanttoArticle56.2a.oftheECSC
Treaty,on"behalfofCourtauldsLimited.,
UnitedKingdom.
COÎIÎ76)102final.

Ii:ESSENTIAL HIFORIIATION
Applicant :
Beneficiary :
Project :
Location :Courtaulds Limited ,18Hanover Sq.,London W1A2BB
Same
(a)spinning factory anddyehouse expansion ;
00weaving factory .
(a)Spennymoor ,Co.Durham ;
00Belmont ,Co.Durham .
Theprojects areboth situated maSpecial Development
Area within theNorthern Economic Planning Region .
Investment : Fixed
£'000Working
Capital
£'000Total
Investment
£'000
(a) 6,750 1,450 8,200
00 11,300 2,750 14,050
18,050 4,200 22,250
Loan Requested £5*5 million (+S,6mua )
Job Creation Spennymoor Belmont Total
Maie 712 459 1,171
Female 34 17 51
746 476 1,222
ECSC Jobs : 900-975
III ADMISSIBILITY
Both projects aresituated inaSpecial Development Area within the
Northern Economic Planning Region oftheUnited Kingdom .During 1973
and1974 coalmining closures andmergers resulted intheloss ofsome
3,270 jobs atpits located inthetravel -to-work areas ofCourtaulds *
new investments .
Itislikely that bytheendofthedecade atleast 2,800 steelmaking
jobs will belost when BSCfinally endiron andsteelmaking atHartlepool
inthe same area .
TheCourtaulds' application iseligible forECSC aid ,therefore ,onthe
grounds ofboth existing andfuture redundancies inthecoal andsteel
industries .

-3-
IVPROJECTS
(a)Spenn.ymoor
PhasesIandIIoftheworstedspinningplant(onstreamsince1971
and1972respectively )areoperatingatfullproduction,anditisnow
proposedtoincreasethesitecapacityfrom219to319tonnesperweek,
thenewfacilitiesto"beusedexclusivelyfortheproductionoftwo-ply
CourtelleNeochromeyarns.Theprojectinvolvestheconstruction ofan
autonomousfactoryadjacenttotheexistingplant,plustheexpansion
ofpresentdyehousecapacityfrom45"to70tonnesperweek.
Cashflowprojectionsfortheinvestment showarateofreturnof
about20%aftertaxwhichissatisfactory .This,together,withthe
successfuloperationoftheexistingplantandthesubstantial newjob
opportunities ,justifytheECSCsupportingtheproject.
(b)Belmont
Theproposalistoestablishaweavingfactorywhichwillinitially
producesheeting,dressfabricsandcorduroy,mainlyfortheEuropean
market,whichrequiresspecialclothwidthsandpiecelengths.Tothis
end192no.153"loomsand96no.130"looms,havebeenorderedto
permitCourtauldstomeetthespecificrequirements oftheirContinental
customers.Theloomswill/supplyupto5,000yardsoffabricwithouta
break,inthewidthsthatthecuttersnowdemand.Atleast75%
productionisplannedtobeexported.Whentotallyoperational ,the
plantwillbeabletoproduce35millionsquareyardsperannum.The
initiallyplannedproductionisabout20millionsquareyardsperannum.
Anewfactoryofsome300,000squarefeet,tohousethenew
productionfacilities,isnearingcompletion.Theloomsandother
equipmentarebeingdelivered,andwillbeinstalledduring1975/7
Asaresultoftheweakmarketdemandandconsequentpostponement
ofcompletion,thecostoftheprojecthasescalatedandtheoriginal
cashflowforecastsyieldarateofreturnofonlyabout12%aftertax.
Iftheplantisnotbroughtintofullproductionuntil19771"k*10
returntotheinvestment couldboevenlower.
OntheotherhandCourtauldsisalreadycommittedtothebulkof
theexpenditure andconsequently canbeexpectedtobringtheplant
intoproductionevenatalowlevelofprofitability .Also,thevertical
integrationoftheCompanyplacesitinarelativelyfavourableposition
tooperatetheplantinanunfavourable market.
VMARKETASPECTS
Whiletheconsequences ofrecentdifficulties intextilesmarketsare
currentlyaffectingthetradeofU.K.producers,Courtauldsconsiders
thatthejustification fortheBelmontandSpennymoorinvestmentsremains
valid,althoughplantdeliveriesfortheBelmontfactoryhavebeen
deferredbysome12-18months.
/.

-4-
Thegrouphasacurrentcapitalexpenditure programmeofsome£300
million,whichisnotbeingactivelydecelerated ,althoughconstruction
delaysarenotbeingresisted.Theresultisthatcompleteimplementation
ofthep-'ograjimiewillbedeferredbyabouttwoyears.Courtauldsassess
thepresentmarketopportunities atabout60foofthatforecastbefore
thepresentrecession,butdonotconsiderthisindicativeofa
permanenttrend.
Themachineryandprocessestoboemployedatbothnewplantsareof
sufficientflexibilitytopermitrapidproductchangesifnecessaryto
respondtomarketrequirements .
Specifically :
(a)Spennymoor
Thenewinvestmentisintendedtoincreaseproductionofworsted
spunacrylicyarnfrom219to319tonnesperweek,orabout15,000tonnes
peryear.ThisisinthecontextofanestimatedtotalEECmarlcetof
200,000tonsperyear.In1973and1974importsfromSouthKorea,
TaiwanandJapantotalled6fo-7$&ofthismarket,andtotalimportsin
1974werenotmorethan12%.
Itisexpectedthatsuchyarnsrillbocubjecttoquotarestrictions
underbilaterala^jreencntotobenegotiatedwithSouthKoreaandJapan.
AunilateraldecisionhasbeentakentorectrictimportsfronTaivranunder
ILXJUcgu.lati:a Ho1849oftheConnicsionof18July1975*
(b)Belmont
Thepresentproductionplanisforwovensheetings,dressfabrics
andanewfinecorduroy.Theplannedvolumeinrelationtothe
estimated EECtotalmarketisasfollows:
PlannedBelmont Estimated EEC
. •Production Market
(millionm^)(millionm)
Sheeting 4.2 900
Dressfabrics 5«1' 550
Corduroy 11.8 150
Withtheexceptionofcorduroy,therefore,at8foitisclearthatthe
plannedBelmontproductionconstitutes ■averysmallproportionoftotal
marketconsumption .
This'mix'can,however,bereadilyadjustedinresponsetoshiftsin
productdemand.Forexample,bythetimetheplantiscommissioned ,it
maybethatthenewcorduroywillhaveestablished anexpanding
positioninthefashionmarketsuchthatitwouldjustifyBelmontbeing
usedexclusivelyforthisfabric.
C

VIRE-EMPLOYÏÎENT ASPECTS
InSouth-East Durham,wheretheBelmontandSpennymoorsitesarelocated,
maleunemployment ismorethantwicethenationalaverage,andthearea
isclassedasaSpecialDevelopment Area.Duringthelastdecadesome
7,000miningjobshave"beenlost,andonlyfivecollieriesnowremain
operational (eighthavingbeenclosedsincei960).
2,000steel-making jobswerelostintheearly1970'sandwhilethe
plannedclosureofironandsteelmakinginHartlepoolhasnowbeenpost­
poneduntil1978,the2,800jobsinvolvedwillalmostcertainlybelost
atsomenot-toodistantdate.Theneedisurgenttocreateemployment
inadvanceofthemassredundancies whichwillthenoccur.
Itisestimatedthatsome5»000-6,000newjobsarenecessaryoverthe
nextfiveyearsorso,ifthepresenthighunemployment isnottoriseto
anunprecedented andveryseverelevel.
ItisinthiscontextthattheUnitedKingdomgovernment wolcomedand
encouragedCourtaulds' proposalstoexpandtheiroperationsinSouth-East
Durham.
Specifically :
(a")Spennvmoor
Withinthearmediotjely surroundingareaofthisdevelopment ,three
collierieswereclosedin1973and1974itfiththetotallossof1,235
jobs.Courtaulds 1projectwillcreate712maleemploymentopportunities .
Workerswillbetakenoningroupsofabout20atatimeoverthe
recruitmentperiod,inordertophaseintheirtrainingwiththeexisting
productionoperationsatSpennymoor,where1,400ex-minersarealready
employed
(b)Belmont
During1973and1974theNationalCoalBoardclosedfouroftheirpitsinthearea(MorrisonBusty,ITettlesworth,' UsworthandKibblesworth ).
andalsotheLambtonpreparationplant.Inaddition,mergersledto
furtherjoblosses,sothatthetotaleffectonemploymentwastheloss
of2,035jobs.
WhenCourtaulds *weavingfactoryisworkingonafull3-shiftbasis,
itwillemploy459maleworkers.
VIIFHTMCIAL ASPECTS
CourtauldsLimitedisamongtheworld'slargestman-madefibre
manufacturers .Theirworldsalesin1974-75totalled£1,134million,
ofwhichexportsaccountedfor£285million.
Theyareapubliccompany,quotedontheStockExchange;theauthorized
sharecapitalofthecompanyis£71million,whichhasbeenfully
subscribed .

XYI/93/75--
ofthegroup'stotal,profitsbeforetaxof£126million,fibres,
textilesendrelatedactivitiesaccountedfor73/°,thetotalprofit
fromthesesectors "being£91*2million,ascomparedwith£103million
(88fo)in1973-74.Profitsinthepackagingfieldwerealmostdouble
thosefor1973-74;84$ofpackagingproductionwasexported,where
theabsenceofgovernmentpricecontrolshadasignificanteffect.
Thisfreedomisnotsharedbythetextileoperations .
VIII.CONCLUSIONS
(a)TheCommission,afterexaminingthisloanapplicationconsiders
thattherequestmeetstheeligibility requirements ofArticle
56,§2(a)oftheECSCTreaty,andthattheproposedinvestment
iseconomically sound.Inconsequence ,theCommissionhas
approvedtheopeningofacreditforamaximumsumof£5.5million
(+9,67,m.EUA)oritsequivalentvalue,infavourofCourtauldsLtd.
Foramaximumamountof9.6"]millionSUAtheloanshallbenefit
fromareductionofinterestof3percentagepointsforthefirst
five-years.
Disbursement oftheinterestrebateshallbedeferreduntilthe
•'borrowerhassatisfiedtheCommissionthat50%ofthejobcreation
hasbeenreachedineachplant.
(b)TheCommissioninvitestheCounciltogiveitsassenttothis
decision. ,
9
CourtauldshasalsoaskedtheCommissiontoconsiderfinancingfora'
weftinsertionplantatWorkington.' However,inviewofthesmallsize
oftheinvestmentandthepilotnatureofthisplant,ithasbeenagreed
withtheCompanynottofinancethisprojectatthistimebuttore­
considertheproposalwhenamajorexpansionofthuplantiscontemplated .