Statement on the Clyde shipbuilding industry

BxkLwojCcAEFvPfPaul Sweeney and Johann Lamont met with GMB and Unite conveners at BAE Systems Scotstoun Shipyard, and have issued the following statement.


The leader of the Scottish Labour Party, Kezia Dugdale, and I met with the Unite and GMB trade union conveners at Scotstoun shipyard last Tuesday to discuss the issues raised in the press over the weekend in relation to future naval shipbuilding workload and, specifically, the potential impact of any interim workload shortfall on the workforce at BAE Systems’ Govan and Scotstoun shipyards on the Clyde, prior to the commencement of manufacture on the Type 26 Global Combat Ship programme. Our meeting was productive, with all pertinent facts established.

The beginning of the manufacturing phase of the Type 26 Global Combat Ship (GCS) programme was moved from May 2016 to Quarter 4 of 2017 in the Strategic Defence and Security Review (SDSR) of November 2015. This was confirmed in an announcement to the UK Parliament by the Minister of State for Defence Procurement on 22 March 2016, with the extension of the demonstration phase of the Type 26 programme to June 2017, primarily in order to further mature the design.

To compensate for this real terms delay of 18 months in production starting on Type 26, the Ministry of Defence has announced a further two River Class (Batch 2) Offshore Patrol Vessels (OPVs) will be constructed, in addition to the three River Class (Batch 2) OPVs already in build at Govan – OPVs 4 and 5 are currently scheduled to cut steel in November 2016 and August 2017 respectively.

Despite this additional OPV order, the Trade Union conveners remain concerned that these interim orders may remain insufficient to absorb the entire extent of the labour shortfall that will occur, until production on the Type 26 programme reaches a steady state build ‘drumbeat’ by ship 3 of the 8 ship programme, thus potentially rendering a significant element of the current workforce underutilised during the intervening period.

149203_10150124876447576_3646266_nThe Trade Union conveners are therefore seeking assurances under Part 7, Section 23 of the 2009 Terms of Business Agreement (TOBA) signed between BAE Systems and the Ministry of Defence and in effect until 2024, that any additional workload shortfall will constitute a ‘Key Industrial Capability (KIC) Trigger’ event. If a KIC Trigger event is initiated, this would oblige BAE Systems and the MOD to work collaboratively to identify mitigation measures to prevent the identified forward workload shortfall, in order to sustain the UK’s Key Industrial Capability in complex naval shipbuilding.

This Key Industrial Capability is defined in the TOBA as the capability to undertake, within the UK, the design, build and integration (including complex systems integration) of a complex warship of up to 5,000 tonnes deep displacement at an interval of one shipbuild every 12 months and a design interval of every six years. Mitigation measures to sustain the core workforce required to deliver this capability may include seeking export opportunities, bringing forward allocation of construction contracts for non-critical path and high maturity design elements of future MOD surface shipbuild and submarine programmes, and secondment or temporary transfer of employees across other UK sites to assist with MOD or other relevant contracts.

Failure to effectively mitigate a workload shortfall would, under the terms of the TOBA, oblige the MOD to undertake direct payments to BAE Systems in order to sustain the Assumed man-hour capability of the core workforce for ramp up to steady state build on the Type 26 programme. Any identified workload shortfall should therefore not result in any further round of compulsory redundancies to a workforce that has already undergone significant rationalisation from November 2013 onwards, in order to establish the core workforce of the correct size to deliver the Key Industrial Capability, as determined by BAE Systems and the Ministry of Defence.

The Trade Union conveners also expressed concern over the ongoing National Shipbuilding Strategy, commissioned by the Treasury in January 2016, led by Sir John Parker and due to report later this year. They are concerned that the purpose and scope of this strategy is possibly designed to eventually reduce the Clyde’s position as the definitive centre of excellence for the design, build and integration of complex warships within the UK, by designating other shipyards such as Appledore in Devon and Cammell Laird in Birkenhead as additional complex warship yards, with a potential result of sub-contracting the steel fabrication of the forward and aft blocks of the Type 26 to those shipyards, in a similar manner to the Aircraft Carrier Alliance multi-site build strategy.

This prospect may also be related to the splitting of the original 13 ship Type 26 programme into two programmes in the November 2015 SDSR: the 8 ship Type 26 GCS anti-submarine frigate programme and a new 5 ship ‘Type 31’ General Purpose Frigate (GPFF) programme, which is now at the concept stage. The Trade Unions therefore seek an immediate clarification on the scope and intent of the National Shipbuilding Strategy and, more specifically, the MOD’s intended role for BAE Systems’ Clyde shipyards in the design, build and integration of the new GPFF programme. The key opportunity of the GPFF light frigate in providing a stable pipeline of engineering design work in Glasgow and a better value platform for maximising the export potential of British naval shipbuilding may be jeopardised if the programme is not concentrated in a single centre of excellence, where there is optimised capability and stabilised capacity.

The conveners of Unite and GMB have also expressed concern that the proposed facility investment of c. £100m at the Govan and Scotstoun shipyards, ostensibly confirmed by BAE Systems in May 2015, has been effectively diluted to a ‘do nothing’ option. This proposed investment included:

  • Construction of a new Outfit Hall (with integrated office accommodation and amenities), Paint Cell, extension of the Ship Block & Outfit Hall and Steelwork Fabrication Hall extension, levelling of No.1 berth and a new Transfer Quay at Govan;
  • Strengthening of the Deep Water Berth quayside, gate replacement on Dry Dock No. 2, sonar pit engineering of Dry Dock No. 3 and sonar pit re-engineering of Dry Dock No. 2 at Scotstoun.

The proposed capital works at both shipyards outlined above were already a dilution of the proposed c. £200-300m fully integrated Modern Dock Hall or ‘Frigate Factory’ facility to be constructed at Scotstoun, in anticipation of which the eastern half of the Scotstoun shipyard was demolished during late 2014 and early 2015 and is now derelict. To now observe no further commitment to capital investment in the secondary option to optimise the Clyde’s shipbuilding infrastructure to be ‘upper quartile’ in global shipbuilding benchmarks, risks undermining the long-term competitive position of these shipyards in terms of modern working practices, delivery of a 12-month Type 26 shipbuild drumbeat, which is now likely to slip to an 18-month drumbeat as suggested by the announcement of the National Shipbuilding Strategy, and the cost-effective operational efficiency to win future export orders on commercial terms.

Clarification on the status of the proposed facility investment by the MOD is therefore sought as a matter of urgency. It may also be opportune to identify what scope the Scottish Government can offer in terms of co-investment with the MOD to augment delivery of this vision of a world-class shipbuilding infrastructure on the Clyde, in line with previous commitments they have made to support such capital investment projects.

12045635_1119614878063674_3314123665893364645_oThe Labour Party’s teams at both Holyrood and Westminster will seek to advocate all of the issues raised by the conveners of the Unite and GMB Trade Unions at Scotstoun and Govan shipyards without delay. While the conveners stress that no direct threat of redundancies has been made, and the future of naval shipbuilding at Govan and Scotstoun shipyards remains fundamentally secure with the Type 26 programme, the concerns raised by the conveners are nonetheless acute.

It is absolutely critical that we undertake all necessary action to sustain the Clyde as the UK’s undisputed centre of excellence for complex warship design, build and integration. This can only be achieved if the Ministry of Defence is committed to doing everything it can to mitigate a possible workload shortfall during the ramp up of the Type 26 programme and upholds the fundamental TOBA commitment to maintain the workforce, provides clarity on the Clyde’s role in longer-term shipbuild programmes such as the GPFF as part of the National Shipbuilding Strategy, and undertakes the necessary capital investment that was originally agreed as pivotal to delivering world class shipyard infrastructure to realise the full potential of our world class shipbuilders.

Paul Sweeney, Scottish Labour Parliamentary Candidate, West of Scotland Region and Council Member of the Institute of Engineers and Shipbuilders in Scotland

Johann Lamont, Scottish Labour Parliamentary Candidate, Glasgow Pollok

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