Shipbuilding in the UK, depending on who you ask, is either at the cusp of a renaissance or doomed. So I asked someone in the know.
Paul Sweeney is a Scottish Labour politician and has been the Member of Parliament for Glasgow North East since 2017. More importantly in this context, he was formerly employed by BAE in Glasgow. Paul has worked with the APPG for Shipbuilding which has begun an inquiry into the Government’s National Shipbuilding Strategy, taking evidence from a range of maritime security stakeholders and industry.
This article forms part of our effort to encourage debate around defence as part of a ‘Views on Defence’ series, a look at the opinions of experts, major political parties and other organisations in the UK in the run up to the Modernising Defence Programme defence review being released.
I messaged Paul to discuss the prospect of yards around the UK beginning steady and sustainable production of new vessels using future programmes as a basis, the hope of new facilities on the Clyde, the build and service prospects of the Type 31e and the prospect of potentially increasing the escort fleet.
“The greatest flaw to have plagued British naval shipbuilding since the 1980s is the issue of small batch classes of escort vessels, especially when subject to competitive tendering. Contrast that with the United States, which has been building the Arleigh Burke class since the 1980s.
In the UK small batch numbers and a lack of certainty over production locations have militated against efficiency curves from long production runs and created feast and famine deadweights on shipyards which bleed skills and knowledge.”
The picture below shows HMS Forth in build at Govan. The vessel which the Royal Navy “did not want or need” was ordered at an inflated price simply to keep the workforce employed between the end of the carrier build and the start of the Type 26 Frigate build, highlighting why small batch ordering is a problem.
Last year, a report backed up this argument up. The report claimed that delays in the construction of the Type 26 Frigate have had a negative impact on the development of the workforce on the Clyde. Titled ‘Restoring the Fleet: Naval Procurement and the National Shipbuilding Strategy’, it states that:
“It is clear to us that the delays in the construction of the Type 26 have had a negative impact on the development of the workforce on the Clyde. Apprenticeships are not being offered at the necessary rate, and those currently undertaking apprenticeships are having their skills training disrupted. Furthermore, workers are being required to move from Scotland to Barrow in order for them to undertake meaningful work.
We welcome the efforts made by the trades unions and BAE to retain the workforce during this period of uncertainty, but remain deeply concerned by warnings that further delay could be catastrophic for the skills base.”
What can be done about this?
Paul pointed out that the aspiration for shipbuilding in the UK according to officials, would be to have two main yards for warships. The first being the Clyde with its Type 26 frigates and an eventual replacement for the Type 45 destroyers. He said:
“The Ministry of Defence want to get to a position where there is a constant rolling production line of Type 26/Type 45 successor and a second production line of Type 31e – building both lines permanently. As older ships leave service or are sold abroad, new vessels enter service.”
The second assembly site, now somewhat up in the air given recent news, would focus on building Type 31e, from components produced around the UK. The process to build the Type 31e frigates was suspended earlier in the week.
It is understood that issues existed around whether or not the bidders were able to meet the £250 million per ship requirement, causing the programme to be restarted putting the original in service date of 2023 for the first ship in question.
The programme is being restarted due to ‘insufficient compliant bids’, the MoD are also stressing that the frigate ‘has not been cancelled’.
A Ministry of Defence spokesman insisted that the project would still be going ahead, hinting that industry will have to refine their bids to meet the price tag:
“There have been no changes in our plans to procure a first batch of five new Type 31e frigates to grow our Royal Navy. We still want the first ship delivered by 2023 and are confident that industry will meet the challenge of providing them for the price tag we’ve set. This is an early contract in a wider procurement process, and we will incorporate the lessons learned and begin again as soon as possible so the programme can continue at pace.”
What does this mean for industry and the fleet?
Sweeney pointed out that there is a big opportunity to recapitalise the Clyde and press for the Modern Dock Hall at Scotstoun as part of the Batch 2 contract.
Paul pointed out that BAE had two investment options for its Clyde shipyards. A £100m option for more limited infrastructure improvement, and a larger £200m option to consolidate on one site, the Frigate Factory at Scotstoun. He went on to say that the latter is still possible with Batch 2 Type 26 and Type 45 follow on work.
“There is a big opportunity to recapitalise the Clyde and press for the Modern Dock Hall at Scotstoun as part of the Batch 2 contract.”
He also, very interestingly, added:
“The Royal Navy’s requirement is for a 19 Frigate and Destroyer fleet and indeed the aspiration is to grow it back up towards 24 with the Type 31e. Unfortunately there nothing in the public domain, yet, but take it from me that is the intent from the people who buy ships for the Royal Navy. The Shipbuilding APPG aims to publish its full report in September.”
Referring to the relatively small, batch orders that are a staple of British naval shipbuilding, he said:
“It undermines business cases for investment in world class shipyard infrastructure and plant. This ‘Airbus-style’ vision of the MOD to essentially build Type 26 along with a derivative for Type 45 successor continuously on the Clyde in parallel with a continuous production of Type 31e at another UK shipyard is therefore a potentially revolutionary opportunity for British shipyards to move to the upper quartile of naval shipbuilders globally.”
The National Shipbuilding Strategy made the recommendation that the MoD replace the ships once they reach their first refit period, rather than extending their time in service thorough costly refits, meaning that Type 31es could be sold while still relatively new and replaced with more modern incrementally upgraded examples all while clawing back some of the money used to build them with overseas sales.
The idea behind this being that ships have a 15 year life span, rather than the 30 or so they usually would, meaning they are sold on at mid-life refit time. Doing this would maintain relatively constant production of the Type 31e, similar to the Arleigh Burke class in the United States which has now been in build for decades with each batch being superior to the last.
“This new approach to standardising and rationalising production for the Royal Navy, if formally adopted as policy, will realise huge efficiencies that will be a platform for a globally competitive industry and drive both growth in the Royal Navy fleet and export success, particularly if the Type 31e fleet is first proven with relatively short periods of service with the Royal Navy before being sold on in their prime to overseas navies as newer vessels in the class enter service.”
This would provide a tangible means to meet the aspiration of continuously producing two standard classes of ships for the Royal Navy, allowing for a more sustainable condition for the UK shipbuilding industry.
What about the Fleet Solid Support Ships?
The Government’s procurement plans for up to three new support ships for the Royal Fleet Auxiliary are facing opposition from defence analysts, Labour, the SNP trade unions and many others.
“This model should be further extended to maintaining big ship construction of vessels with a beam larger than 20m at Rosyth dockyard, by ensuring a continuous production run after the Queen Elizabeth class is complete by building the new Royal Fleet Auxiliary Fleet Solid Support ships and then the successor to the Albion class there”, Sweeney advised.
According to a briefing paper in the House of Commons library released earlier in the month, the programme is currently in the Assessment Phase with the competition expected to be formally launched towards the end of 2018 and a contract signed in 2020. The MoD says the contract will be for two ships with an option for a third.
The briefing paper states:
“The Government intends to compete the contract internationally. Labour, the SNP and the shipbuilding trade unions argue the contract should be restricted to UK shipyards to support the shipbuilding industry, secure jobs and retain skills.
They argue the proposed ships are ‘warships’ and as such, the Government can use the Article 346 exemption to exclude the contract from EU procurement rules on national security grounds.
The Government disagrees, defining warships as ‘destroyers, frigates and aircraft carriers’, and says all other surface vessels should be subject to open competition.”
Two major unions, GMB and the Confederation of Shipbuilding and Engineering Unions (CSEU), have published reports outlining why they believe the ships should be classified as warships and why they should be competed domestically. Their arguments can be summarised as:
- The FSS should be seen as warships. They are armed and take part in counter-piracy and counter-narcotic missions;
- The Government’s commitment to revitalising domestic naval shipbuilding (as espoused in the National Shipbuilding Strategy) will only be achievable with a steady stream of orders;
- Building the FSS in the UK will help protect the UK shipbuilding industry, protect jobs and retain skills: GMB estimates up to 6,500 jobs could be created or secured, including 1,805 shipyard jobs;
- Rosyth shipyard will have a gap between the completion of HMS Prince of Wales (the second aircraft carrier) in 2019 and the expected refit of HMS Queen Elizabeth (the first aircraft carrier) in 2030, and FSS work could keep the shipyard operational in between these dates;
- The UK will financially benefit from returns to the Treasury in the form of taxes and national insurance contributions and lower welfare payments: GMB estimates £285m of the estimated £1bn contract could be returned to taxpayers this way; CSEU estimates 20% of the contract cost could be returned to the Treasury;
- The Government should factor in the revenue that could be returned to the Treasury when scoring bids between domestic suppliers and foreign competitors;
- There isn’t a level playing field as, the CSEU argues, “many foreign yards are either state owned, or receive significant direct or indirect subsidy… UK yards do not benefit in this way and are therefore at an unfair disadvantage.”
The TUC has also assessed the Article 346 exemption argument and argues the Government “has the sole right to determine” what its essential national security interests are. The TUC claims “other European nations have used the exemption to place orders for similar support ships with their own shipyards since the Directive was introduced.”
What is Article 346?
EU law requires most government contracts to be procured via an open, competitive process. The main EU legislation in the defence domain is the Defence and Security Directive 2009/81/EC, transposed into UK law by Defence and Security Public Contracts Regulations 2011.13
However, Article 346 of the Treaty on the Functioning of the European Union (TFEU) provides for an exemption to the procurement rules where a country considers it to be necessary for national security reasons: “any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material”. Article 346 refers to a list drawn up in 1958 by the Council of Ministers of products to which the provisions
December this year will see the formal issue of documentation inviting bids for the design and build contract and in 2020, the contract for design and build is to be awarded.
Paul also explained that building the new Royal Fleet Auxiliary Fleet Solid Support ships and then the successor to the Albion class in Rosyth would be of huge benefit to UK shipbuilding and allow for at least four primary shipbuilding sites. This would also allow for industry that would become sustainable.
“This would maintain a competitive full spectrum of naval shipbuilding capability centred on at least four sites in the UK: the Clyde specialising in the most complex capital ships Type 26 and Type 45 successor along with the principal surface ship design engineering centre in the UK, another UK shipyard specialising in the less complex Type 31e vessels, big ship final assembly at Rosyth in collaboration with other UK shipyards and nuclear submarine design and build at Barrow-in-Furness.”
However, Paul also expressed concern at the way large projects like this are funded:
“Underpinning all of this we also need to urgently need to address the absurd Treasury rules on financing large scale capital programmes like Type 26, liberating them from arbitrary in-year spend limits and patiently financing them in the same way commercial shipyards would or how other large public capital projects like Crossrail and HS2 are financed.
This would be a further revolutionary step in driving efficiency and competitiveness into British naval shipbuilding and also open up opportunities for a renaissance of commercial shipbuilding activity too. We must grasp this vital opportunity to reinvigorate this iconic British industry.”
We can only hope that the aspirations laid out by Mr Sweeney, about the new approach that could be taken by the MoD, will lead to the future of British shipbuilding marching towards a steady drumbeat of orders. New thinking is becoming imperative, a fact demonstrated with the recent mismanagement of Type 31e by the Government.
The UK needs a better way to effectively sustain its shipbuilding industry, let’s hope we’re heading in that direction.