Scotland’s last civil shipyard may not be “commercially sustainable” in the longer term, the Competition and Markets Authority.

The Competition and Markets Authority has warned about the potential risks of state control over the way ferries are built in Scotland.

They warned of the dangers of government-owned Ferguson Marine being awarded work without a competitive tender process, saying “it is unlikely to make it a commercially sustainable business” and “it may also have a negative impact on the wider industry”.

According to the report:

“In planning the procurement of further vessels, the Scottish Government should consider its role as a market maker both in relation to publicly owned, operated or controlled ferries but also on the breadth of maritime services, from shipbuilding and refurbishment through to potential customers in aquaculture, fisheries and off-shore oil and gas.

The CMA’s view is that nationalised companies should be operated on an arm’s length basis and procurement by public bodies including state owned companies (such as Caledonian Maritime Assets Ltd (CMAL)) should be conducted on a level playing field, with both private and state-owned companies able to have opportunity to engage in the market and supply vessels. The procurement of vessels for operation of ferries in Scotland may pose some additional complexities given the legal and structural separation of asset owner and operator, but these should not prevent an effective procurement exercise being conducted in future.

Awarding Ferguson Marine newly commissioned work without a competitive tender process is unlikely to make it a commercially sustainable business. It may also have a negative impact on the wider industry.”

The Scottish government took the Ferguson Marine yard into public ownership after it collapsed with debts of £49 million. The yard has been in the news recently due to issues with ferries being built there.

MV Glen Sannox was built for the Ardrossan to Isle of Arran crossing. She was originally expected to enter service early in 2018. However, construction delays led to her launch being put back to November 2017, with the ship then expected to begin operation in winter 2018/19.

In 2018, new Cabinet Secretary for Transport Michael Matheson said it had been confirmed that the ship was to be delivered in June 2019, followed by two months of crew familiarisation and sea trials. Further dispute over the contract overrun led to the shipyard going into administration and being nationalised by the Scottish Government.

A report produced after nationalisation indicates that Glen Sannox should be handed over in the last quarter of 2021 and that completing the two ferries is likely to increase the total cost to over £207M. The second vessel, Hull 802, was supposed to be delivered to CalMac in the autumn of 2018 for use on the Uig-Lochmaddy-Tarbert triangle, but that has also been delayed.

Additionally, the firm was also hoping to be able to work on the new Type 31 Frigates being built by Babcock at Rosyth but that looks to be in doubt due to current delays with the ferries. Babcock’s consortium beat a BAE-led team and another led by Atlas Elektronik UK to clinch the £1.25bn deal for five ships.

According to the Financial Times in their analysis of this news in light of Babcock consortium partners H&W and Fergusons both going into administration in recent months:

“The Babcock consortium includes Thales, as well as H&W and Ferguson. Under the original proposal, the plan was to assemble the vessels at Rosyth using blocks built by H&W and Ferguson. It remained unclear if the role of H&W and Ferguson in the consortium would be affected by their predicament.”

However, should this not be possible, it should be noted that Babcock CEO Archie Bethel insisted Babcock had won the bid on the basis of the work being done “100 per cent at Rosyth”, adding that with the exception of France’s Thales, “none of our members were risk-sharing”.

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Steve

Cue cries of Tory betrayal.

expat

Yes you can see the SNP blaming the Westminster for not getting T31 blocks ‘promised’ to Ferguson(even though it was a competitive tender so there could have never been a guarantee). Ironically its the SNP who’ve said countless times Scotland doesn’t need UK Ship orders to have a thriving ship building industry. There’s another irony that leaving the EU will allow the SNP to place government orders at the yard without being challenged under EU competition rules. I also understand that some fabrication work on these ferries was sent to China!!! Perhaps rUK yards should be crying foul, why we… Read more »

Gunbuster

Tell me something the rest of the worlds shiprepair and shipbuilders didn’t know

Ferguson was a basket case before the Scottish Govt threw money at it and it hasn’t improved since.

Sceptical Richard

How come the Fins, Dutch, French and Italians can still keep theirs going?

Fedaykin

You will find that yards across Europe are all struggling, for that matter the same goes for those in South Korea as it stands.

Levi Goldsteinberg

State subsidees at any cost

Fedaykin

Plenty of blame to Spread around, Scottish Government making a politically driven decision to buy vessels before the specification and design had been entirely nailed down with the customer. Dire project management from the yards new owners prior to nationalisation including ignoring experienced yard workers about what build strategy would work. Poor build quality (just look at the bow bulb for example) from a workforce that has a level of enthusiasm no doubt driven by expecting a P45 at any time! Now two unfinished vessels exposed to the salty elements unfinished as the people brought into rescue the situation are… Read more »

andy reeves

it just reinforces the folly of putting all the eggs in one basket BAE yards are cosseted by the taxpayer while real shipbuilders are left like scrapyard dogs looking for a morsel to keep them going.

Paul T

I was curious when you mentioned the Bow Bulb,i found a pic of the Ship at Launch and enlarged it – yep it didn’t look too clever id agree.

Sean

My understanding is that a large reason why Ferguson went under was the Scottish Government’s foolhardy decision to demand ferries with an unproven fuel system so that they could flaunt their green credentials.
But as per usual whoever the Scottish Government’s competence is called into question they start banging on about independence to drown out the criticism.

Andrew

Sean, it’s not just their incompetence….. everything that the SNP does whilst it’s in government, isn’t for the national interest….. it’s for the SNP’s interest…. every decision has got to in some way produce another few yes voters for the next independence referendum, whenever that will be….

andy reeves

BECAUSE THE BAE YARDS HAVE BEEN GIVEN THE MONOPOLY ON SHIPBUILDING ON THE CLYDE

700 Glengarried Men

Mixed feelings about this I agree that’s it’s right to try to hold on to shipbuilding skills in the UK and ships ordered by UK governments including Scotland should be built in UK yards using British made steel. The issue here is trying to dodge procurement rules by building experimental designs that are not thought out, designed to use LNG and diesel when there is no LNG infrastructure on the routes proposed. I would like to believe Ferguson marine can build decent ships given a chance, and credible design. Maybe it’s a culture thing but British craftsmen used to have… Read more »

andy reeves

credible yards are key to maintaining the shipbuilding skills and apprenticeships

andy reeves

i still think its possible to restore a lot of the shipbuilding industry nowadays with modular building, modules can be manufactured away from shipyards and transported for assembly as the carriers were. its political willpower and not a fixation with bae AND THE Clyde

Gunbuster

Its a fallacy that you can build a ship with 100% home made steel.
There are so many grades, strengths and types it is simple not economically possible to make it all yourself.

Whilst general everyday steel plate is not for the most part UK made lots of high quality “exotic” steel is made in the UK. The UK is one of the top producers in the world for high grade/strength steel. Yes we don’t make a lot of it but it is a niche market and the UK steel makers are well ensconced in that niche.

Steve

I am yet to hear one decent arguement on why ships in 2020 need to be built in the UK. In the 1920s it made sense, as you could mass produce war ships in the time of war, but in 2020 that idea is ancinet history, they are just too complex and expensive to mass produce anymore, plus they rely heavily on parts/equipment from overseas so aren’t fully domestic anymore anyway. We for sure need repair yards but that should be owned and operated by the navy itself, so it doesn’t have to spread contracts to win PMs their seats.… Read more »

expat

Your correct there new industries that would provide better jobs and less competition from low wage economies. The space industry is one area that Scotland could be directing its investment towards.

Darren

We need to buy Indian and Chinese cheaper Rockets and their associated cheaper systems and let them run the UK space program too, it will be cheaper, surely?

Steve

and this is exactly what we will do or we will buy from the US. when it comes to manufacturing of microchips, its all done now in China pretty much.

the whole Chinese companies getting into our telecoms network the classic example, the only reason the US don’t want it is because they want us to buy from them and allow their backdoors.

Where there might be value is using british expertise to great a viable commercial industry once the items have been created.

Darren

The same with building ships then.

expat

Darren your not getting my argument, your obviously very passionate about UK shipbuilding which is great. And for the record so am I. But I see the UK focus should be on high tech. The Carriers, T45, T26 and Astutes are great examples all highly regarded around the world. The Sir Richard Attenborough also looks cutting edge. We should invest in things that others can’t easily compete and continue to invest so we stay ahead of the pack and then let the rest of the world squabble over the low value work. We should not waste money and effort trying… Read more »

Darren

I’m not disagreeing with you. Our biggest problem has been attitude, policy and investment in people, facilities, knowing the market and planning for all of the above.

Darren

What is low value??? No one see value in the bricks and mortar yet want the returns then some!!! Will se value in electrical wires and boxes that go into a supossed low value building that can gain 200K in months (big houses). We have a weird way of looking at things. Why is shipbuilding low value when it employs many and is hi-tech? Why does Germany, Netherlands, USA, Canada, Japan, South Korea, France, Italy, Denmark, Norway, Australia etc (all higher cost Countries than the UK) and many only a little lower in wage costs, still value it? Can they… Read more »

Darren

Give me a reason why ships need to be built abroad.

Darren

The 1920s reason does not make sense as treaties in the early 20s came about precisely because the UK was producing superior designs.

Meirion X

So what happens when the Far East steel industry grinds to a hult with a Virus?

Meirion X

I mean halt! Bring back the edit function Please!

Steve

The UK steel industry was undercut by so many countries across Asia and Americas (how can you compete with countries that have zero health in safety records and zero environmental concerns), the odds of all these markets grinding to a halt is tiny and the odds of it happening without also the UK being hit are zero. Should we buy from more reputable countries to encourage change, for sure, but the damage is long gone and the end users (me and you) ultimately buy the cheapest items over the same item home built but more expensive (not that this is… Read more »

Lee1

Actually the exact opposite is generally true. We make lots of low grade cheap steel in the UK we gave up most of our specialist steel production in order to concentrate on low grade. This is why we have had to import steel for our Navy ships.

The problem with making low grade steel is that it is not hard to make so emerging economies can make it too and they can make it for a lot less which is why our steel industry is failing.

Darren

Clydbridge, Dalzell, Appleby-Frodingham. All steel plate up until recently came from these areas. It’s only the steel crisis that led to mothballing for a while has meant buying from abroad. A tiny percentage for the carriers came from abroad and it was not plate.

Darren

Cumbuslang.

Darren

Yep. Most of the Carriers steel came from the UK and only a tiny part from non UK makers. All pipe plate and section etc came from the UK.

expat

I’ve read that the LNG propulsion system is not unique and several ships have already been built in Scandinavian yards, the experimental design seems to be a bit of red herring to me.

Darren

It was new to Ferguson’s? That aside, they do not have modern panel lines or even modern cutting and plate prep lines, though that (cutting prep etc) should not take place in the shipyard nowadays.

Lee1

Britain does not make much of the specialist steels needed. So how do we buy British if Britain chose not to make such materials? You also can not just build civilian ships in the UK without a tender process that proves they were the fair choice. That would bring all sorts of issues with international trade.

Darren

We have to look at energy costs and tax back from that and re-investment conditions from tax payer (and also UK market bought ships) contracts to make us properly competitive.

Lee1

The UK market does not need many civilian ships. that is part of the issue. Most cruise lines are not UK owned anymore so are going abroad fro their ships. Other countries have cheaper labour or more efficient processes.

700 Glengarried Men

Scotland still uses a high number of medium sized ferry boats to service its island communities. There is also UK ferries to Ireland, Jersey, France Isle of Man etc, there is a surprising amount of vessels needed for the UK market. I

Lee1

High number is relative. How many new ferries are needed in Scotland per year? Not many if any for many years. The Ireland route is served by stenna who are not British. The channel ferries are mostly non UK companies.

Ferries last a long time before being replaced. To be competitive they need to be exported and we just can not compete on price or quality.

For high tech military ships we are world class but cheap mass produced ships… No.

Meirion X

UK is too relent on Far East imports, we will soon find out the effects of the dependently,
over the next few weeks!

Darren

If it’s like anything that come from these far east Countries, I don’t not want to gamble my life on them. They are cheap as you say, poor quality and dangerous.

Lee1

South Korea produces very high quality ships..

If cars are anything to go by, I would bet any south Korean car (they are excellent) would out perform any UK produced car on reliability…

Darren.

I said far east in general. But I know a family friend who works on plateforms and rigs all around the world (started in the North Sea) and had experience off some Spouth Korean workmanship. This backed up by the chief guy who knew the Woolston VT’s shipyard like the back of his hand. Lives in Warsash was resposible for many firsts in UK shipbuilding and told me about some practices that would not be allowed in the UK when he visited South Korean shipyards. South Korea is one of the better Countries, with I hope Japan being the best… Read more »

Darren

On that note. What UK car maker are we implying. If it’s Vauxhaul, only 30% of the car is made here in general. What components are you saying are unreliable??? My Brothers astra estate was not good, but all the component that let it down were imported.

Lee1

Land rover… Jaguar, Aston Martin….

Vauxhall’s are trash, I once saw one spontaneously explode on a driveway. We have had lots of them and they have always been pretty terrible. My father has been mechanic his whole life and hates them.

Darren

No ship is really mass produced. With offline robotic methods mass production may only benefit buying the material which is a small part of the costs.

Darren

Irrelevant. Many cruise ships for the UK market and UK lines but foreign owned are built in countries that do not own that line or have that market. That is the point in building FSSS and all other military ships here with a condition being investment to make us competitive and efficient. Pure warshipbuilding in the past did not require this. Cheaper labour rates is not a reason or excuse anymore either. The UK still needs ships. Ask an expensive Country like Germany how they do it. Scale of 1 to 20, the UK being 10, Germany was 17 in… Read more »

Lee1

German yards have been constantly kept up to date with modern technology and skills. They also have much less antagonistic unions that work with companies as much as they do with workers. Their government also does not allow their industries to be sold off which is a great help and their government is also much better in relation to internal business.

Darren

So may be it’s something for the UK to address?!

Darren

Britain did make the material until the steel depression in which subsidised countries were… subsidised or helped. Sometimes in life being sh*t can help undermine the competent honest group. Is this right and fair??? No!

Lee1

You are wrong. Britain made a conscious choice to move to commodity steel as it was the easiest and cheapest to make. We could make it in large quantities and sell it for a reasonable price. However it was also easy for others to start making which they did and which drove the price down to a point where it struggles to make money for UK producers any longer. It was short sighted quick gains for long term problems as is usual in this country. Those that made their money got out rich while leaving the mess for future generations.

Darren

Britain did not make a conscious choice, Britain had a balanced choice. The 2007 banking recession changed much in which it became obvious that UK governments loved service industries like financial. This still needs to change. We all know about the short terms gains and needing a longer term strategy. What are we to do, moan or act as a Country? Now, we have Liberty Steel as one example. They are into steel plate, section, pipe, wire specialist etc in the UK, we have to wait about Britisgh Steel and also Tata in the UK.

Lee1

Yes it did. No idea why you mention 2007… It was way way earlier than that.

Darren

Yes Britain does. What special steel, this special mythical BS flat thin steel as for the Type 26’s that mysteriously Australia will supplying for it’s own T 26 ships?

Lee1

The thin plate steel for the UKs type 26s is coming from abroad as it can not be sourced in the UK. In fact 65% of the steel for the type 26 comes from abroad due to not being able to get it in the UK…

Darren

You actually believe that cobblers!

expat

So as I’ve said before, you ‘gift’ a yard an order and it could be seen as a subsidy excluding it other commercial competitions then its an endless cycle of the government having to prop up the yard or it will fold. That doesn’t mean UK yards have to compete on cost alone, a competitive tender can have a number of measurement criteria such as delivery time, quality, best fit to requirements etc. I run a few competitive tenders an almost every time not selected the lowest bid because it did not meet the other criteria.

Darren

Just looking up the cost to build the new Super Liners of the late 1920s and 30s. Guess who built the biggest, with only loans that were paid back and also the cheapest with a labour force that produced more per ton than anyone else in the World?! Why do we sell ourselves so short all the times?