Select Committee on Work and Pensions Minutes of Evidence



  [Note: unless the context indicates otherwise, the expression "Shipbuilding Industry" in the paper encompasses the new-building, conversion and repair of merchant and naval ships]

Shipbuilding Forum

In 1998 the then Industry Minister at the Department of Trade & Industry, John Battle MP, established the Shipbuilding Forum as a recognition both of the importance of the shipbuilding industry and the challenging issues it would have to address to be successful. The Forum is very broadly based, comprising representatives of the shipbuilding, conversion and repair industries, both through their trade association and individual key companies; the work force through the Confederation of Shipbuilding and Engineering Unions and others; customers (both private and public sector), including the Chamber of Shipping; major suppliers to the industry through their trade association, the Society of Marine Industries; the National Training Provider (the Engineering and Marine Training Authority), and Government Departments, including the Ministry of Defence, Department of Transport, Local Government and the Regions, the Scottish Executive and Northern Ireland Industrial Development Board. This was the very first time that all the parties crucial to the future of the industry had sat down together at the same table.

In December 1998 the Forum submitted a report to its members—including but not exclusively aimed at Government Ministers—which concluded that the long-term future of the industry depended upon its being able to improve competitiveness and the availability of a skilled, flexible, labour force. The Forum set itself the highly challenging targets of doubling the number of merchant ships built over a five year period and of increasing the turnover of the repair sector by 30 per cent over the same period. To achieve this, the Forum's December 1998 report made no less than 43 recommendations, principally for improved productivity, better marketing, enhanced finance packages and improvements in training and skills and it is important to stress that these recommendations were aimed at all the participants, not just Government. Ministers consider that this Forum concept of a shared future is vital as all stakeholders must cooperate.

The Government responded positively and quickly. Improvements were made to both of the Government's financial support schemes, as the Forum had requested. The Shipbuilding Intervention Fund (a grant of up to 9 per cent of the contract value) was extended both to new categories of ships and to yards which had previously been prohibited from applying. Additionally, an element of profit was permitted for the first time in the grant calculations and yards were able to keep the grant element of cost-savings derived from productivity improvements. The Home Shipbuilding Credit Guarantee Scheme (long term loan guarantees at fixed interest rates) was enhanced by offering loans in US Dollars and euros, as well as permitting floating interest rate support.

Nevertheless, it was generally recognised that subsidies were not the answer to long-term success. The UK shipbuilding, ship conversion and repair industries can only thrive if they are internationally competitive. A number of steps were taken, therefore, to measure British yards' competitiveness and then to assist them to improve.

Netherlands Study Visit

Research undertaken by the Forum demonstrated that Dutch yards (arguably the UK's closest competitors) had been very much more successful than their UK counterparts and the Forum set itself the task of determining the reason for this. As part of this, in 1999 the Shipbuilders and Shiprepairers Association (SSA), led a study tour to the Netherlands, part funded by DTI. The conclusions were interesting and perhaps even a little unexpected. There was actually no evidence of the employees working harder or of much better yards or higher investment. Instead, the "secret" was that the Dutch yards were more successful because of close co-operation between yards, better marketing and extensive sub-contracting. Following the visit the SSA set up a group to examine how the UK industry could co-operate better.


The next stage was to see what physical and organisational improvements UK yards needed to implement. To measure their productivity against the world's best, UK shipyards carried out in mid 2001 a benchmarking study against their international competitors, again part funded by the Department of Trade & Industry. The main findings were weaknesses in productivity and marketing and these were reported back to the individual participants to give them a base from which to measure improvements.

LINK Research Programme/Master Class

Having identified the scope for productivity and process improvements through this study, the Department of Trade & Industry is contributing a massive £2.8 million in grants to a LINK Research Project led by the SSA (total cost £5.8m) to help the industry to address where improvements are necessary.

LINK combines academic studies with practical, short-term, productivity improvements. The academic studies are aimed at improvements right through the design, procurement and manufacturing processes and are what industry itself has said that it wants from academics. On the immediate improvements, the shipbuilding industry has introduced the "Master Class", a concept derived from the automotive and aerospace industries, whereby acknowledged industry experts will visit and inspect a yard, recommend immediate improvements and, crucially, embed this ability in the yard so that continuous improvement can be achieved. For, however much the UK industry improves itself, it is aiming at a moving target as our competitors are improving as well. We must get better, faster!


Another joint SSA/DTI programme is aimed at the other weakness that has been identified both by the Dutch study tour and the benchmarking study—Marketing. UK yards turn out world-class ships. But they are too modest and do not go out and tell the world what we can do. Again, the DTI is working with the SSA, by providing a grant of £176,000, 50 per cent of total costs, towards a three year marketing project, also launched in June 2001, aimed at generating new orders to match the increased production that the LINK project is expected to generate.

Excellent progress has been made on both the LINK and marketing projects over the six months since they were launched. The take-up to Master Class has been very good: over 30 Master Classes have either been completed or are on order. Concerning the R&D part of LINK, several major projects are currently under way, including studies into concurrent engineering and the supply chain. It must be stressed that these projects are all led by industry, rather than academia, and it is expected that they will yield real, tangible benefits for the industry.

As regards the marketing project, this has for the first time provided new-building yards with a professional marketing resource. The two marketeers have identified a great volume of potential business of which the industry had previously been unaware.

Skills and Training

The Government fully recognises the importance to the industry of a strong skills base. The Shipbuilding Forum has identified the need for substantial improvements, at both commercial and naval yards, notably in the areas of trade up-skilling and project management. Government is working closely with the industry and Engineering and Marine Training Agency to remedy the weaknesses in skills identified by the Forum. EMTA are currently pursuing several projects across the UK. These include the creation of a national skills database to identify more precisely the skills available in the sector and from this, to identify skill shortages, as well as a project to develop a marine-specific academic qualification. A Pilot Scheme has been started in Hull to analyse the skills requirements of the individual shipyards there and to produce individual company training plans based upon that needs analysis. Initially, 145 employees will be trained in a range of disciplines ranging from craft skills (eg welding) to project management, not forgetting of course health and safety. The project will then move on to promote shipyards and engineering as a career in schools to ensure that the future skills needs of the industry can be satisfied. If successful, there is every chance the scheme will be replicated across the other shipbuilding areas of the UK.

Marine Export Partnership

Exports are crucial to increasingly inter-dependent international industries such as shipbuilding, marine equipment and the increasingly important leisure boating industries and mention should be made of the Marine Export Partnership, which the Department of Trade & Industry launched in March 2001. This initiative seeks to strengthen the promotion of the British marine industries—including the shipbuilding, conversion and repair industries—to overseas markets. It is supported by Trade Partners UK, which brings together the trade promotional work of the DTI and the Foreign and Commonwealth Office, and is led by the three major trade associations: SSA, the Society of Maritime Industries (previously known as the British Marine Equipment Council) and the British Marine Federation, representing the leisure boating market. Government is providing funding support of over £100,000 over the first 18 months of the project.

The Marine Export Partnership will help develop and nurture partnerships both between the different marine sectors themselves and between the industry and the Government. It is a clear demonstration of the importance the Government attaches to the UK marine industries and it is hoped that it will lead to increased exports for the shipbuilding industry.

Ministry of Defence

Naval orders for warships and support vessels are placed according to military requirements and strict value-for-money criteria but at the same time, this Government has embarked upon the largest programme of naval shipbuilding for many years. All fighting vessels are built in the UK so this programme has benefited UK yards considerably and will continue to do so for a good number of years.

Department of Trade and Industry

May 2002

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