Select Committee on Work and Pensions Minutes of Evidence

Memorandum submitted by the Scotland Office (SHP 9)

Post-Devolution Developments

The interest of Scots in shipbuilding was again galvanised in 1999 when the industry was rocked by the Kvaerner Group's decision to exit shipbuilding, which put the Govan yard up for sale. The prompt action taken by the then Minister for Business & Industry at the Scottish Office, Lord Macdonald of Tradeston, in setting up the Kvaerner Task Force help support the determination of the workforce and their communities in securing a sale of the yard and lift the immediate threat to shipbuilding at Govan. Following the delivery of the Devolution settlement the Scotland Office's most immediate involvement with shipbuilding was taken forward by the then Secretary of State, Dr John Reid, in partnership with the Scottish Executive, to assist negotiations with interested parties, culminating in the sale of the land to Clydeport plc and the transfer of operations and employees to BAE SYSTEMS.

This partnership with the Executive has become the pattern for Government support in Scotland. The Executive are able to support and identify the particular needs of Scottish business, including shipbuilding, alongside the Scotland Office's responsibility to represent those issues where relevant on matters reserved to Westminster.

Fluctuating Fortunes

In 2000, shipbuilding on the Clyde comprised 4 yards: BAE SYSTEMS Marine at Govan and Scotstoun on the Upper Clyde; Ferguson Shipbuilders at Port Glasgow on the Lower Clyde; and Ailsa-Troon at Troon on the Firth of Clyde. Although shipbuilding was fiercely competitive in the commercial and naval markets there had been some success. Ferguson's secured orders with Western Ferries and Northlink for Ro-Ro's as well as an order for a tug supply vessel for Stirling Shipping. However at Troon there was more disappointing news when Cathelco announced that its Ailsa-Troon yard would close. On the Upper Clyde yards although the BAE SYSTEMS facilities benefited from the transfer of work to complete the eight landing craft utilities and the news that two of the three Type 45 destroyers, also for the MoD, would be built on the Clyde there remained a significant gap in the order book. In 2001 the sweetness of the MOD's decision to extend the Type 45 order to six ships, with a significant involvement for the Upper Clyde yards in a workshare arrangement with Vosper Thornycroft, was tempered by the bitter news that BAE SYSTEMS considered and announced that around 1,000 redundancies were necessary to address the gap in the order book and their internal overcapacity.

Clyde Shipyards Task Force

The Scottish Executive Minister for Enterprise & Lifelong Learning, Wendy Alexander, called an exploratory meeting with the key stakeholders to investigate the options and scope for action. The Minister of State Mr George Foulkes and the Minister for Energy and Industry at the DTI, Brian Wilson represented the Government on the Clyde Shipyards Task Force which was formed in August 2001. The Department has already provided your Committee with a supply of copies of the final report which was handed over on 4 February 2002. In addition to the 29 recommendations identified for action by the Task Force partners and for consideration by other Departments there were some key outcomes. Importantly, the number of redundancies required had been reduced to 450 by a range of measures including voluntary redundancies, redeployment, retraining and a redistribution of workloads as well as the award of the contract for two Landing Ships Logistics from MoD. The 2 Employee Support Centres which were established were also seen as a vital support to those employees still likely to be affected by redundancy.

Scotland Office Activity

On the recommendations themselves, a key area of support in which our Department is able to support the Upper Clyde yards in realising its future success is in relation to Recommendation 5. In taking forward the recommendation, advice was sought from the Ministry of Defence, who agreed to a continuing liaison so that Scotland Office Ministers can lend support at the right time to achieve maximum effect. Officials in the Department have established arrangements with both the MOD's Defence Exports Services Organisation (DESO) and BAE SYSTEMS Export Shipbuilding to identify key export targets and opportunities and track progress to maximise the Secretary of State and Minister of States opportunity to promote Clydeside's interests. It should be recognised here that BAE SYSTEMS' Export Shipbuilding achievements were awarded the Queens Award for Enterprise in the International Trade category in April 2002.


Mr Foulkes believes that the foundations for success are now there. On the Upper Clyde the work for BAE SYSTEMS' Clyde yards on six type 45 Destroyers, the award of two Landing Ships Logistics and completion of the batch of smaller Landing Craft Utility, are part of the biggest warship programme for many years, and should secure work throughout the decade. For the first time in generations this has given both yards a firm footing on which to plan for the future. Alongside last year's addition of a new Fisheries Research Vessel for DEFRA for Ferguson's puts the whole of the Clyde on a much healthier footing.

17 May 2002

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