Type 26 Frigate exports worth £6bn to British economy

Work on ships based on BAE’s Type 26 Frigate being built in Australia and Canada has been estimated to be worth around £6bn to the British economy.

During an Oral evidence session gathering information for the inquiry ‘Defence in Scotland: Military shipbuilding’, the following exchange was made.

Members of Parliament present: Pete Wishart (Chair); Andrew Bowie; Deidre Brock; Wendy Chamberlain; Sally-Ann Hart; John Lamont; Douglas Ross.

Witnesses: Ian Waddell, General Secretary, Confederation of Shipbuilding and Engineering Unions; Kevin Craven, Chief Executive Officer, ADS Group; and Richard Powell OBE, Chairman of the Maritime Defence and Security Group Council, Society of Maritime Industries.

So here’s the section to note.

Deidre Brock: “You mentioned that you do not make as much money and there is not as much benefit financially to Scotland or to the UK as with those ships being built here. Can you give us an estimate of how much less money? Say these are being built in—”

Kevin Craven: “Richard may be better placed to answer that one.”

Deidre Brock: “Mr Powell, thank you.”

Richard Powell: “BAE did a study on this very subject and it has all the detail. My understanding is that it was in the order of £6 billion for the Type 26 programme that was added to the UK. You will need to get the detail from BAE, but that is a significant sum. That is a class of 32 ships around the world, which is a very significant number but that shows the potential and benefit.

The points have been made here about this creating a new environment. We spoke about collaboration on a national scale earlier but when you start to then move into international collaboration—because there is a lot of components of the ships that are similar, there are elements to it—you then come on to what the First Sea Lord talks about, interchangeability and a greater operational output. It is not just about building the ships. It is about what capability do you deliver. Then you move into a whole new realm of operational capability, which is important. It is a broader consideration that gives you that fighting edge. That comes back to Ian’s point about the first role of Government being security of the realm. It is all linked together, so it is much broader.”

Deidre Brock: “The ones that are being built in Australia are worth £6 billion currently.”

Richard Powell: “It is the overall benefit to the UK from the entire programme of 32 ships. It is in that order, yes.”

Deidre Brock: “If they were built here what would it be?”

Richard Powell: “You would have to go to BAE for that. However, they were never going to be built in the UK. That is not the way it was designed.”

Deidre Brock: “Yes, I understand. All right.”

Richard Powell: “A lot of countries do not have the capability to build their own ships, sophisticated ships. These are very sophisticated warships. These are the high end for navies who are going to use them. That is why a country wants to have an indigenous capability and why it has to build them in their own countries. It is that balance of transferring all the technical capabilities and sharing the best practice. Again, only 30% of the value is in the shipbuilding itself. It is the other 70% that we are really interested in and lots of common systems put in the supply chain for these ships as well.”

To what extent does the UK benefit from exporting military ships (or parts of them) and/or their design licences?

While, for example, the Type 26 Frigate-based vessels ordered by Australia and Canada will not be built on the Clyde it is important to remember that there is still a benefit not only in reduced unit costs in the longer term but there is also a benefit to companies around Scotland and the wider UK making components for these vessels. Export success is also important to the Ministry of Defence; competitive companies, winning export work, enable overheads to be spread, reducing the unit cost to the Department.

In short, I’m getting at the idea that a company only building eight components for the British Type 26 fleet could now be building up to thirty-two components for the British, Canadian and Australian fleets. Export orders benefit the supply chain here in Scotland immensely.

The exports have turned the Type 26 Frigate from an eight-ship class to, essentially, a thirty-two ship class [18].

While it is fair to say that there will be significant local supply chain involvement in Canada and Australia, it should be noted that the businesses based in Scotland will have the advantage of retaining intellectual property and the fully trained people, putting them in prime position to compete for the work, even overseas. In addition, the export of ships and their components is beneficial for the cost related to maintenance and supply lines when it comes to operating the finished vessels.

What I mean by that is that the increased number of units, be they ships or components of ships, in service with navies worldwide makes it far more economical for the company building the components to retain repair and refurbishment facilities for those components here in Scotland, sustaining jobs and sustaining the ability of naval forces to cost effectively repair or replace those components should the need arise.