Portsmouth, the Clyde and BAe – The Correct Decision.

Warning: this blog will not please my friends, relatives (and many fellow Pompey fans) in Hampshire. Sorry.

The realities in the case of UK shipbuilding appear to be these:

In the business case:

  • Commercial shipbuilding is now overwhelmingly concentrated in the Far East, where their yards operate on a completely different costbase to those in the west. The only exceptions are for specialist ships: for example, some passenger ships (where Germany has a market lead) and fishing vessels (made in Spain).
  • This leaves ships commissioned by the government as the sole core product available to UK yards. Of these, civilian vessels (e.g., public service ferries) are subject to EU procurement law, and must be put out to tender on a Europe-wide basis. Warships, however, are exempt from this requirement, and can be awarded by a government to its domestic yards.
  • The result for the UK is that its shipbuilding orders cannot support more than two yards. Currently there are three (Govan, Scotstoun, and Portsmouth.)
  • In choosing two out of three, there would need to be a very strong business case to locate these some 450 miles apart. There is none: in fact, between them, Govan and Scotstoun have the greater range of capacity, skills and integration.

In the local economic impact case:

  • Unemployment in Hampshire in September 2013 stood at 7.7% . In Glasgow, in 2012 it was 12%  (Both ILO count.) This means that on the one hand, Glasgow needs the work more and on the other Hampshire has a greater need for workers and skills in the labour market.
  • Portsmouth is better placed to absorb job losses than Glasgow. The south Hampshire area is a world centre for the small boat and yacht building and maintenance industry, with more marina capacity and employment in the Harbour, the Hamble and further afield at Cowes IOW than in the whole of Scotland.
  • This is in addition to naval repair work pledged to replace the shipbuilding orders in the current review. There is therefore much greater demand for some of the transferable shipbuilding skills than in Glasgow, where the leisure and small boat industry is miniscule.
  • Outside of the re-employment of redundant staff in the maritime sector, regeneration and creation of new employment is likely to be quicker in Portsmouth. In particular, the release of MoD land and other measures[1] is likely to create jobs at a greater rate than any similar proposal in Glasgow, where investment in riparian land near to the yards is already stalled, for example between Finnieston and Glasgow Harbour.

So, to the politics.

  • It actually appears that the politics are in line with the business case and the local economic impact case – for now. We can have our suspicions as to how much the Scottish Independence Referendum influenced the outcome, but two circumstances must be borne in mind. The first is that independence is not a popular cause, with the latest polls showing support stuck at a historic low of 25%[2] so the incentive to try to buy the Scottish vote is reduced or even redundant. The second is that BAE and the UK government knew that they would be damned either way, and so did the right thing – and followed the business case. In which case, the politics follow the decision, rather than vice versa.
  • For the Coalition Government, it means having to be able to convince the people in marginal constituencies: Portsmouth South (LibDem with personal problems) and North (Tory won off Labour in 2010) that the measures taken will guarantee a future for the workers affected. They will also need to make a convincing case that the decision was not taken on grounds of Referendum weakness. So far Mike Hancock’s posturing suggests that this sentiment will play a large role.
  • In Scotland, it is irrefutable that had the Referendum already been held and had resulted in a Yes vote, BAe would have decided to have consolidated shipbuilding in Portsmouth rather than on the Clyde. The two Glasgow yards would have been asset-stripped and liquidated.
  • The timing of the contracts means that this will still be an option on 19th September 2014. If there is a Yes vote, the Scottish Government must have a contingency in place to replace the Type 26 work. The  Scottish Government has begun to talk in terms of diversification, and the Deputy First Minister has – inevitably –  compared Scotland with Norway. In reality there are three directions in which to diversify.

 

  1. Convert production to alternative larger vessels: this option is only possible if costbase can be slashed to that of the Far East.
  2. Convert production to medium-sized vessels: this would necessarily be for niche markets, all of which are currently filled by other producers (ferries in Germany, superyachts in the Netherlands, fishing boats in Spain.)
  3. Convert production to small and leisure craft: Scotland is too far from key markets (south of England, Mediterranean etc.) and the existing industry in Scotland is too small to compete with existing players.

As can be seen none of these are promising, and it is difficult to see what the Scottish Government’s contingency might be in the light of the market conditions outlined above. But without one, independence will be the death of shipbuilding on the Clyde.

Note: some of this is informed by my MSc thesis, which examined the small boat sectors in Southeast Hants and the West of Scotland. And both my father and my brother worked in the volume lifeboat industry in Gosport; they lost their jobs in the 1980s.

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One thought on “Portsmouth, the Clyde and BAe – The Correct Decision.

  1. An interesting treatise but perhaps with one fundamental flaw – and that is the tactical and military considerations. It makes no sense to concentrate the elements of production in one location. To concentrate warship building on the Clyde would mean that in the event of an attack on these shores a potential aggressor would only need to focus on a specific geographic location to completely decimate capacity and production.

    The counter argument to that is of course the lead in time in construction but as my father in law who built the last Ark Royal tells me, we could build ships in half the time we do if the yards were just allowed to get on with it.

    The independence factor cannot also be discounted, and whilst we may predict a ‘no’ vote this time, there is nothing to say that the issue will not re-surface in a few years time. It is interesting to note that the ‘yes’ campaigns defence paper recommends the construction of the Danish designed frigates under licence for the new Scottish Navy thus leaving the remainder of the UK without build capacity as the Clyde yards would naturally focus on building the William Wallace or the Alex Salmond or whatever they want to call their new ‘fleet’

    Britain has over many decades abrogated her defence capacity, increasingly producing great innovations but being unable or perhaps unwilling to invest the capital in maximising those assets. This is just another step in the journey that started with the cancellation of the TSR2.

    Reply

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