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”.
Cue cries of Tory betrayal.
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 they not offered that work.
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.
How come the Fins, Dutch, French and Italians can still keep theirs going?
You will find that yards across Europe are all struggling, for that matter the same goes for those in South Korea as it stands.
State subsidees at any cost
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 locked into arguments with the customer! Finally Scottish Government not wishing to lose face by cancelling the contract and starting again due to the sunk cost fallacy!
Meanwhile the unsubsidised and privately owned Pentland Ferries recently took delivery of a brand new low fuel consumption Ferry MV Alfred from a yard in Vietnam for a fraction of the cost…
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.
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.
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….
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 pride in the quality of their workmanship and Brittish made was a byword for quality.
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.
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.
Yes as a maritime nation we need a strong navy, but by propping up unprofitable yards we are spending money on things that don’t bring any military strength. I am all for the government boosting jobs in the economy but it should be done in sustainable industries not ones that have no chance once the government funding stops.
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.
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?
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.
The same with building ships then.
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 to complete in saturated markets. Its not about cheaper its about what provides the best/highest paid work for the UK. We will inevitably import some things, we have to, we can’t do everything but need to exporting a higher value.
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.
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 build a hull cheaper? We were cheaper years ago when it was difficult to build ships, technology has changed to our benefit. Trust me.
Give me a reason why ships need to be built abroad.
The 1920s reason does not make sense as treaties in the early 20s came about precisely because the UK was producing superior designs.
So what happens when the Far East steel industry grinds to a hult with a Virus?
I mean halt! Bring back the edit function Please!
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 an option as that option happened 30-40 years ago and it killed the local options).
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.
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.
Cumbuslang.
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.
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.
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.
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.
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.
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.
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
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.
UK is too relent on Far East imports, we will soon find out the effects of the dependently,
over the next few weeks!
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.
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…
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 quality and who have far higher labour wage rates than the UK with South Korea being about the same as the UK now.
My dad had no issues with his first KIA but a good few with his latest one. So it’s swings and round abouts. The same as people who say don’t bother buying a Mercedes nowadays.
At the end of the day, UK steel making and shipbuilding in the UK does not make my cost of living higher. But losing this can have a huge effect on our Country.
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.
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.
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.
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 labour rates. We need to get on top of our productivity rates and that needs investment. It can be done.
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.
So may be it’s something for the UK to address?!
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!
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.
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.
Yes it did. No idea why you mention 2007… It was way way earlier than that.
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?
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…
You actually believe that cobblers!
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.
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?