Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 60 - 79)

MONDAY 20 MAY 2002



  60. When they appear before this Committee on 19 June, we will put all these points to them.
  (Mr Carrigan) Ron Culley, quite rightly, emphasised the strategy of the company being warship orientated, and the export orders which were referred to were seen as naval export orders, but what we continue to press the company on is commercial work. We want to get them to concede there is still a need and a desire to build commercial ships on Clydeside. We just get the impression that when they are putting in bids, particularly recently, to fill the gap, that these bids have been way out of the ball park in terms of prices, and I am referring to offshore supply vessels and the ferry ships and so forth. We just get the impression that sometimes they go through the motions without any seriousness and put in a bid which is unlikely to be up there with those who win it.

Mr Robertson

  61. Perhaps I can come on to the commercial side of things. To what extent is it possible for Clyde shipyards to compete, in your opinion, with other economies? Are you sure that BAE SYSTEMS is interested in such a development, or are they just interested in MoD work?
  (Mr Moohan) From the outside, we have continually put to the company that the world market contains commercial ships, and BAE SYSTEMS—I am not saying they monopolise the whole of the UK market—are in a position where with the resources they have, with the investment, with the skills and experience they have on Clydeside, for example, the combination of MoD skills at Scotstoun, the merchant shipbuilding skills at Govan, they can and should combine. There is no point retraining people or investing in people if you do not expand your horizons. There is a market there and if we continue to have a heavy reliance on any UK Government that they will provide work for us on a continuing basis, I think we are misinformed. That is why BAE SYSTEMS must look outward to the world market. One colleague mentioned 0.5 per cent, that is a disgrace. That highlights the lack of investment and lack of vision which we have had in the last 30 years which allowed us to get in that position. So in answer to your question, yes, we will continue to push that, along with hopefully the councillors and MPs and anyone from Government, that they should not only depend on the UK Government to provide employment but they should be using a sales team and research and development to expand the areas of commercial work.

  62. There is a suggestion there that you are not aware of BAE SYSTEMS doing that.
  (Mr Moohan) We keep pushing them.

  63. Do you think the Government has shown initiatives and encouragement towards you to develop commercial shipbuilding?
  (Mr Carrigan) There are discussions taking place in the Shipbuilding Forum which we may not be privy to, so there may well be something there. Within the Task Force there is a view that there should be more joined-up writing between government departments, between the DTI and the MoD, and we think that is quite right. The evidence to date, certainly based in the Clyde, is that there is not enough information, there is not enough joined-up writing, there is not enough support from all government departments for the Clyde to win commercial work. Having said that, we suspect that at the moment and over the past two years because BAE see themselves as a defence contractor they tend not to be too bothered about commercial work, and we think that is a mistake frankly.
  (Mr Torrence) There are two slightly different positions on the commercial side. The Clyde Task Force has written this report and, as Danny said, there needs to be joined-up thinking within the Government. Cal Mac placed two ferries with Appledor and McTay Marine in England, who then put the hulls out to Poland, so there we had the Scottish Executive subsidising Cal Mac to give the order to an English yard, to then place that in a foreign country. We do not know whether BAE are trying to price themselves out of that market, but on the bid for BP offshore vessels they were 20 per cent higher with their price. Their argument is that the exchange rate is too high, that we have to revalue the pound in effect. There was a big order for a multi-purpose barge placed with a Dutch company, 97 per cent paid for by the British Government, which went to Holland and then to Romania. It is the same thing with the oilfield support vessels, designed by a British company for a Scottish company to sell, and it went to Poland to be built and then to Norway to be fitted out. Then there was the classic disaster about three years ago when the three ferries for the Shetlands ended up being built in Finland with a £10 million subsidy from the Scottish Executive. So we are saying, yes, there are commercial ships there to be built, but we do not even know about them until we read about them in the papers. You would have thought somebody in the Scottish Executive, if they paying out £10 million for these ferries, would think, "Why are we not building them in Fergusons or BAE SYSTEMS." There does not seem to be any joined-up thinking. There is commercial work there and we want to put BAE on the line to see if their prices are too high, but somebody should think about this whole thing.
  (Mr Webster) We have continually prodded BAE SYSTEMS on their position regarding commercial work. If you look at Govan under Kvaerner a few years ago we were indeed a commercial shipyard. There are various reasons why BAE SYSTEMS either cannot or will not compete in the commercial market and one of them I believe has to be the fact there is a clash of perspectives in Govan and Scotstoun inasmuch as we come from a commercial background and Scotstoun come from a naval one. There are more overheads in the naval market, and it has been argued in some circles when we price things we carry the naval overheads into the commercial market and so we are not competitive. That is important. But we must not be negative on this, never say never in life, it is a bad thing to say. In relation to the ALSLs, the new programme director who is in charge and looks a smart kiddie is indicating that we will be looking carefully at the ALSLs,as they can quickly be converted for commercial use as ferries. So if we do the ALSLs well on the Clyde, and I believe we will just as we proved with the Brunei contract in Scotstoun, we will be trying to market the ALSLs as a dual purpose ship abroad. So it is not all negative. So what are we going to do? Keep prodding him and prodding him. Never say never.

Mr Weir

  64. Given what you have been saying and given that the Ministry of Defence and the DTI have both made clear that the yards cannot exist solely on defence contracts, (a) how do you see the future in commercial and (b) given the three yard strategy—and we heard what you said about Barrow earlier—do you see the three yard strategy fitting into commercial shipbuilding of the type now required?
  (Mr Carrigan) I think three yards can live on defence work. Customers or clients are not going to tell you that you are guaranteed work for life, they are looking for value for money. It is probably true to say that not every shipyard would remain open based on MoD work over the next 30 years, but over the next ten years perhaps. Certainly BAE SYSTEMS on Clydeside could live for a considerable period of time on MoD work. But the three shipyard strategy is one that has been tested within the Task Force. There was a sub-committee which looked at it and I believe it can work, provided of course the employer plays ball. The employer says they will invest £75 million on Clydeside and we have to make sure they follow through with that. The Task Force Report and the strategy were all predicated on a number of assumptions, one of which is investment, the other of which is interchangeability between the yards, and the third one is continuous MoD work coming into the yards. As I said earlier—and I do not want to use clichés—we do not want to see all our eggs in one basket, we want to make sure that we are still in the commercial shipbuilding arena because there will be opportunities there. Even changes in Government have implications for defence procurement—hopefully not but these things happen!

Mr Duncan

  65. Why not!
  (Mr Moohan) Chairman, I do not think we should forget lightly the fact that UK shipbuilding was near a state of collapse and we can ill afford to lose another yard. BAE SYSTEMS really should be broadcasting the type of work it does to the European and world markets, that we are a viable, going concern in relation to not only MoD work of an export nature but that we can handle commercial work. The UK Government, I would suggest, has an obligation to support BAE SYSTEMS heavily in relation to expanding within the European market. Subsidies have played a big part within merchant shipbuilding over the last 30 years; no matter whether it was done fairly or unfairly it played a big part in destroying merchant shipbuilding, it played a big part in the UK yards failing to win orders. Really if we are now on a level playing field I believe that we have the skills factor of the naval requirement and the merchant shipbuilding factor to compete with anybody within the European market and the world market. At least we have the opportunity to win our fair share of orders. I believe that.
  (Mr Scullion) We would say that, wouldn't we, because obviously we are anxious to get the work into the yards for our members, but it is not just us saying that. I made reference earlier to the Scottish Enterprise submission and Ron said it again today, from his experience and from looking at foreign competitors, such as Blohm & Voss and the Task Force visited there and saw examples of commercial shipbuilding sitting very comfortably alongside naval work. That is not something which is beyond the ken of BAE SYSTEMS to achieve as well but it is all dependent on the strategy being in place, and that is also dependent on getting the work in the first place and that depends on getting the necessary investment. But running hand in glove with that as well is the need to have an overall shipbuilding tzar in place as well—I am not scared to use the term "tzar"! I think he is very, very important for us to be able to co-ordinate all the government departments which have an interest, on import-export regulations, to ensure our shipbuilding industry is cutting to the chase to make it more effective in overseas markets. If we are going to do that, then perhaps we can go on to a level playing field with competitors in Germany and elsewhere.
  (Mr Dolan) To answer the question which was asked, the three yard strategy could not work commercially because Barrow cannot do nuclear licence work and build commercial ships, so it could not work. Further, we keep hearing this word "export", I have been in Scotstoun for 20 years and I have built two ships for Malaysia and three for Brunei and they were ordered five years ago, they keep telling me they are in the market for export ships again for Malaysia, but they have just stripped Scotstoun of every machine capable of doing any export work. So how BAE SYSTEMS can say to anybody that Scotstoun is going to be an export centre of excellence is beyond me. Unless they show commitment to the actual investment I have read about here, there is nothing in there. The new door they have put in? That was storm damage from the year before. A crane? I went through the yard this morning to try to find it, it must be hiding somewhere in a corner. Have you ever seen the size of a 300-foot crane?

  Chairman: Difficult to hide.
  (Mr Dolan) I do not know where it is. BAE SYSTEMS are playing games. They are playing games with my job, they are playing games with the Government. Somebody needs to take BAE SYSTEMS to task. I seriously consider BAE SYSTEMS to be playing games. I am fed up listening to it. People lost their jobs last Tuesday because BAE SYSTEMS are playing games. There are still jobs under threat because BAE SYSTEMS are playing games. They do not want shipbuilding, in my opinion, they want all the stuff that is put into ships. BAE SYSTEMS has to be questioned seriously about their commitment to shipbuilding on the Clyde. The investment they have put in Scotstoun is nothing. I have spent better on a Saturday night.

Ann McKechin

  66. Continuing on that theme, Ron Culley said today that the £75 million proposed investment in the Clyde was really sufficient to keep the current orders and to maintain those for the next few years ahead, but it did not allow for any particular further expansion. We are talking about the fact the UK has only 1 per cent of the total shipbuilding capacity in the world, are we simply being too cautious here with only having a strategy for the next 10 years ahead which talks about investment to retain the current number of shipyards and the current number of jobs, or should we be considering an investment strategy which allows us to have a bigger share of the world market?
  (Mr Carrigan) I think we should be doing the latter. I have to say to you that it is something which can be pursued once we get out of the crisis, because we just go from one crisis to another. What the Task Force is doing is saying, for the first time, certainly in the past 20 years or so, there is an order book which takes us up to the next ten years and if we are successful, and it looks as if we will be successful, in obtaining work for the new carriers because we are in the Thales option as well as in the BAE SYSTEMS option, then that will give us an opportunity to look even beyond the ten years. But ten years in the shipbuilding environment is a lifetime for some people. I think you are absolutely correct, I think we should be doing that, but it is a question of let's get this work behind us and settle down and look at where we are going in the future.
  (Mr Webster) John and I agree on most things but not everything, obviously. He is in a different yard and hears different things. Sometimes I think I am the eternal optimistic and sometimes I think I am extremely naive but I always like to be positive. I will be proved right or wrong and maybe not in the distant future, but on investment John is concerned about Scotstoun and he wants to see visibility, but I was the person who eight months ago was rattling the cage of BAE SYSTEMS because I wanted to see bricks and mortar at Govan. In reality, to be fair, we have seen that now; considerable investment. I would expect the company to honour Scotstoun as well. Trust is a wonderful word by the way—when you give trust you do not like being let down—and I have always tended to give the company the benefit of the doubt. Why? Because it is very important for the workers to have a vision for the future and if you get let down, well, I would have plenty to say about that. On export work, the company has said they are pursuing markets vigorously, I am personally giving them the benefit of the doubt on that and I am not pessimistic on that. If you ask me the same question next April or May, I may change my view on that possibly. What will I look for next year? I will look for John to tell me there is considerable investment in Scotstoun and that Scotstoun have secured an export market. I may well be regarded as the eternal optimist but in actual fact I do think it can be delivered.
  (Mr Dolan) One of the major investments anybody can make is in people. If BAE SYSTEMS are serious about the long-term future, apprentices are the future. The number of apprentices BAE SYSTEMS are proposing for this year is shocking, it is a reduction on the last few years. If they have a ten year plan for shipbuilding on the Clyde, with the people we have lost and with the age factor we spoke about earlier on, you need to invest in apprentices, and I do not mean the graduates. With great respect, the graduates and other people who work in offices produce systems but at the end of the day you need people to put that together, to make up the product which is a ship. The problem we have at the present moment is that there are not enough apprentices, there is not enough investment in apprentices, and that is where BAE SYSTEMS have to be questioned again. We need young people, not highly educated. There are some people in here and in this locality who do not have the qualifications to be a graduate, do not have the qualifications to sit at a computer, but they are good with their hands, and they have to be given the opportunity of a job. BAE SYSTEMS should be, and will be, one of the biggest employers in the west of Scotland and they should be taking on apprentices. They should be going to schools and talking about it. They took the IT to schools but they did not take the basic skills to the schools and young people should be given an opportunity to come in and build ships.

  67. Just to expand on what Mr Dolan has stated this afternoon, is the skills base in the Clyde shipyards appropriate at the moment, given the potential orders for the next 10 years? Are the training or re-training opportunities sufficient, in your estimation? What efforts are being made to encourage young people into the shipbuilding industry in competition with other industries we have been speaking about today—construction, financial services, et cetera—within Glasgow?
  (Mr Moohan) In relation to what skills are required now, I do believe we have what is required right now. I do also believe we require, as John said, re-investment in these individuals to increase the skill factor. We can outfit a ship up to 80 per cent pre-launch, and that tells a story in relation to the skills that have been combined either manual or technical in getting to that stage. I do believe that we have to continue that development and have a retraining factor. One should not be held within, for example—and it is not a demarcation issue—a manual skill, one should learn about the technical areas of the ship to assist in the building of a ship. When you do a first of class ship, you have a tendency to make mistakes, it is human nature, but during the Task Force discussion we put forward a plan that individuals should be more heavily involved not only in manual skills but in the technical factors in building a ship to help increase their skill and experience for the future. Just to go back slightly, the UK Government is cautious and will be cautious for some years because we have not broken into the merchant shipbuilding market and if we only have 1 per cent we are not a main player. To be a main player you need to take a challenge, you need to put investment behind it. Companies within UK shipbuilding will not do that alone, they will need support to break into that area.
  (Mr Carrigan) Just a quick word on skills, because I think it would be wrong, and I am sure John did not mean to give the impression, to think that we were talking about metal-bashers full-stop. There is nothing wrong with putting hulls up but there is a lot of sophisticated machinery inside these hulls and there are people who are using computers, indeed the people who are doing the hulls are using computers as well because technology moves on. That is one of the reasons why the numbers employed has declined because, quite rightly, technology changes and people move up and we have robotics involved as well. There are graduates working in the yards as well, there are people who are using computer and IT equipment all the time in their day-to-day jobs. Where does the labour force come from in the future? We certainly hope it will be an attractive proposition and if we get the order book then the company can begin to put in the training courses and encourage young people to come in. We hope that the Clyde shipyards will be seen as an attractive proposition, not one of bonnets and smoke-stacked chimneys and metal-bashing but seen as a reasonable opportunity to adapt and have a meaningful existence and a satisfactory occupation. I think that can be done and I think if the investment flows through that will be done. I certainly think the workforce have demonstrated they are interchangeable, they are flexible, and in fact we have metal-bashers, as some people would call them, who have been retrained to become electricians in this very college, and pipe fitters have changed and so on, and draughtsmen as Hughie said. So there have been a lot of changes. It is accepted you can no longer assume you are going to serve an apprenticeship and have that trade for life. You have to think of changing.

Mr Robertson

  68. I just want to make the situation clear about modern apprentices. I know, Jim, you talked about what you would like to see and I agree with you, but I am more concerned with what John said about what is happening, or is not happening as the case may be. Modern apprenticeships are very important to young people leaving school, and these are the people we are talking about, not the graduates at the higher levels and in important places, but the people who may work up to these important places but start at the bottom. Can I get this straight: are we saying that the company are not treating modern apprentices the way they should be and the training is not good enough?
  (Mr Webster) The first thing I want to say about that brochure is that it surely gets my dander up when people show these old archive films. They are great for reflecting on but they do us an injustice. We are a high-tech industry.

  There was a University of Glasgow Professor who put an article in the Herald recently[10] making out that the industry was antiquated and such like. I wish that he had got off his fat backside and come into the yard and seen the high technology. John has made the point regarding the lack of apprentices and I will discuss with John later what the numbers are, but the company has to get the finger out. I am telling you now I will speak to John tomorrow and maybe we will go and noise up the new boss who seems a reasonable guy and tell him we need more apprentices. It is the same with every company, some support that philosophically and some will not support that philosophically. Our job is to make sure we get the young ones in.

  Let us be quite clear, we are not as non-progressive as is sometimes made out. I think Danny touched on it. During the mitigation of job losses we were innovative. We got steelworkers to move on and do an eighteen month course in electrical under the New Start Programme supported by the Scottish Executive. That was good. We also got the company to move between 20/30 people off the shop floor to become draughtsmen. That is good, that is progressive thinking.

  So we are not resting on our laurels. These are the things we want expanded. There is some good developments coming out but we have to develop that glass half-full mentality.

  I try and be realistic. If I can finish on apprenticeships. It is the responsibility of John and myself to get in and hammer home that message to the company. It is a logical argument and I would be expecting John and myself to get a result on that quite honestly.
  (Mr Torrence) I agree with Jamie and John on the position of apprentices. We really have to address this issue. Most of the guys in the yard are the same age as me—some are younger—and we need to bring apprentices in. You have just touched on something we have not touched on yet. Shipbuilding is a high-tech industry and we employ thousands of graduates between the three yards, and people do not believe that. We have a major problem at the moment in that we have a shortage of somewhere in the region of 80 draughtsmen, technicians, graduates, and we are employing agency draughtsmen to cover that, and we are also training 35 lads from the shop floor to cover that gap as well. One of the problems the company has got is that within, I reckon, about a year's time, when there is a down-turn after the Type 45 design is done, there will be no need for designers because of the long lead times. If Thales, the French company, get the aircraft carrier then we will be in a position where all that design staff will not be needed. What happens then? If you lose them, you lose shipbuilding, because that is a five, six, seven year programme to draw these aircraft carriers out, and if you lose that design capability you have virtually lost the whole shipbuilding industry. So there is a need to look long-term at both the manual apprentices and the designers, because for the real high-tech stuff we need them and we need somebody to address that.

Mr Sarwar

  69. We have already talked about the issue of exports. The question has been raised that the UK Government should help BAE SYSTEMS more, but honestly I believe that the UK Government has supported in full the BAE SYSTEMS to secure jobs at the Govan shipyard and jobs on the River Clyde. I do not know how much more the UK Government can do for BAE SYSTEMS. I believe the UK Government is right when they are saying at the end of the day it is the company's job to target international markets, but the Government should give these companies support to target commercial and other international orders. One thing which I am extremely concerned about is an issue which has been covered during our meetings with Geoff Hoon. We were always told that because the roll-on roll-off ferries are not vast ships, that is why we have to follow the European rules, and I am really alarmed and disturbed to hear that warship orders have now gone to Holland.[11] I just want to ask the question, have you asked for a meeting with Geoff Hoon? We will definitely be raising this issue because it is not the amount of money we are concerned with here, it is a dangerous precedent. We were told very clearly that all the warship orders will be built in the UK because we do not need to follow strict European rules. Have you raised this with the Government or ministers?

  (Mr Carrigan) The short answer is no but the long answer is yes. We want a meeting with Geoff Hoon on it. We had a meeting last week when these facts emerged and so we have not had a chance to arrange a meeting with Geoff Hoon, but it is something we intended to pursue with him.

  70. We will be happy to raise this issue with him on your behalf.
  (Mr Carrigan) It is also true to say we are also seeking further information because it has only come to light in the last seven days or so. We will be pursuing it.

  71. How competitive is the UK shipbuilding industry? What more could be done to improve competitiveness and revitalise the industry? I asked this question of the last witnesses.
  (Mr Moohan) As it has been expressed by colleagues, on a level playing field I believe we are very competitive and cost effective. That should not curtail the re-investment and retraining which is required on a continuing basis to up-date with new technology. I do, however, express a belief—and I know this has not been touched on—I have never known what defence diversification has done. I have seen the operation of it in one company, Babcocks in Forsyth, where they did the underground for the London tube and they did sub-sea platforms for the offshore industry, but beyond that I have no idea what defence diversification actually achieves on behalf of those involved in MoD work. I would have thought it would be an ideal avenue to explore the possibility of a European market in relation to the commercial aspect using that body. I do not know who sits on the board, but it is an area which I believe should be equalised to assist the UK shipbuilding within the defence industry.

  72. Recently Forum membership has been expanded and it has established a high level steering group. What do you think about the performance of the Shipbuilding Forum? Do you think more could be done?
  (Mr Carrigan) To be perfectly frank, we have not seen much from the Shipbuilding Forum. I have to say that. I am the secretary of the Confed in Scotland and we have not had that much feed-back from it. Some of our national officers are on it and I think the meetings have been quite infrequent. One of the action points we have is to pursue that with the national officers and try and make sure they meet more often and they are transparent in the information coming back. It is in the Forum where these issues of competitiveness can be pursued with vigour because the ministers attend that as well and that is a good thing. If I can throw my tuppence-worth in on the question, are we competitive, I think the answer must be no. If the criteria is have we won orders faced with competition, we have not won orders. I was reading something last week where it said we won six commercial ships in a five year period, whereas Holland won something like 180; the figures might be out but the back-drop is there. Some of us have been to Holland, others have been to Germany, to look at their processes, and as Robert Crawford said earlier we are not competitive but it is not because we are not inherently bad at what we do, it is just we have not had the same amount of investment as they have had in Holland or Germany. As Jimmy said, given a level playing field, we think we can compete with anyone in Europe.
  (Mr Webster) I certainly would not criticise the Shipbuilding Forum, I am sure their intentions are good but in actual fact it is our problem, we could be more competitive. It lies in our hands, whether we like it or not. To be logical, the way forward is to learn and we had better learn from those who are better than us, and that is quite clearly from countries like Holland. New technology and processes. I am not saying we had better start to use them because we already do, but we need to embrace them big-time. There is no looking back. We either look at those who are better and learn from them and become better ourselves or we do not. We need to become more flexible and more mobile. The challenge is ours. There are no favours now. Apart from the fact I am trying to keep Govan open, I am not for crying too much to the Government on this, I am for us getting into the company and making sure we get about doing our business of making ships better. There is a lot of knowledge in the ranks and the people who do most of the talking do not always know the answers. The challenge is there for us. It is processes, it is technology, it is innovative ideas. That is how we are going to succeed. I do not think you need to be a rocket scientist to work that out. We cannot ask the Government to solve all our problems, because they will not.

Mr Joyce

  73. Just on the point John made about defence diversification, the general view, as I understand it of defence economists, is that you can generate lots of jobs through diversification but the jobs tend to crop up in different places, so there could be a negative side to diversification as well in that the parts of the country which can generate new jobs are the parts of the country where jobs already exist plentifully, and those who are currently engaged in defence-related work can lose out potentially. That is why, generally speaking, you have to be fairly cautious about this. Defence diversification is needed of course but it is a fairly modest effort up to now. So there is a potential downside to diversification. You may well be aware of that but it is certainly a cautionary note when you are talking about how to diversify away from defence-orientated work.
  (Mr Torrence) On the competitive side, Chairman, I think it was a lad from the Scottish Enterprise who said what we need is investment. One of the really obvious things which is missing on the Clyde is the opportunity to build ships under cover. We are in a place where it rains most of the time. If you go to Germany or anywhere else, the things are built under cover. I do not know how you do it but Meyrwerft in Germany built a massive shed to build cruise liners in and then built a canal to take the ships into the river paid for by the local authority and the German Government. Can we have that? We need some people to work under cover so we can build these ships in a decent way.

Mr Weir

  74. On that last point, there has been a lot of talk about subsidies, hidden or otherwise, within the shipbuilding industry throughout the world, and we have heard a lot about investigations into this but nothing much comes of it. Do you feel there are subsidies elsewhere which are damaging the industry here? Do you have examples of it? On the German yards, are there subsidies which have been made by the central German Government or is that money which has been used following reunification which allowed them to invest in eastern yards?
  (Mr Torrence) Meyrwerft is in West Germany and whether it was done by a local or a national subsidy, I have no idea, but the shipyard did not spend the money on it. The classic story is about Italian shipyards. The Italian steel industry is nationalised and if you deliver the steel late to the shipyard there is a price penalty, so the steel is never delivered on time. A civil servant told me that. Somebody should investigate these things.

Mr Duncan

  75. Gentlemen, one of the critical aspects to this whole industry as far as I can see is the split between the domestic defence procurement and balancing that with securing foreign orders. First of all, what do you see as being the future for Clydeside in securing foreign investment, particularly given, Mr Moohan, you have very honestly said in your submission that we cannot properly rely on any UK Government, due to the changing nature of the world arena. How do we secure the foreign investment which will, if you like, innoculate us against that fickle market?
  (Mr Moohan) Chairman, it will be extremely difficult. John Dolan touched on it ten minutes ago, I think. It took Yarrows 12 or 15 years to break into the export market and that was quite an achievement. It will be very difficult to continue that, Peter. I do believe that if we within the UK wish to retain the small UK shipbuilding we have left, we have to have a combination of not only MoD skills, experience and quality product, we also require a combination of the merchant shipbuilding side, to enable us to compete in either market. Customers look at the UK now and say, "There was a time 40 years ago when they built all the ships—the QE II, the Queen Mary in 1934." Nobody looks at the UK now and says, "That's the place for this type of merchant shipbuilding, that is the type of place for a type of destroyer or aircraft carriers." Nobody looks at the UK in that sort of way now and it will take some time for us to grow and get the customer to believe in us once again, and it will take an attitude not only by the employer but by the Government and by the workforce. They know they are on a survival course right now. Their course is job security, they believe in it and that is how they have achieved it up to date, and that is how to protect Clydeside. That is why I come back to the partnership. If BAE SYSTEMS have a partnership with Clydeside, hopefully with Barrow coming alongside, and if we have UK support, we can make inroads into the European and world markets. It will take time, it will be difficult but it can be done.

  76. Can I make one suggestion. Danny, you said very honestly that the whole industry had gone from crisis to crisis—I think that was the way you put it—in the last 20 years but there is stability projected forward for the next 10 years or so. You reflected on the fact that BAE were tendering in an uncompetitive manner, they were not endeavouring perhaps to secure every possible foreign order they could get, or every non-defence order they could possibly get. Can I put it to you that perhaps by the end of that ten year period, we will be in another crisis situation but there will not be time to secure the foreign orders, so we will be out looking for an urgent defence procurement order in a bid to solve that crisis in the industry?
  (Mr Carrigan) That could well happen. We hope it does not. The point you are making is a strategic one but if you look at the chronology of the MoD orders, the aircraft carriers come out to 2005, and it will take some years before they are completed, so I think it is over 10 years and not just for 10 years. I think the key to it all is a mix of work. We keep saying that BAE SYSTEMS see themselves as a defence contractor full-stop, and 90 per cent of the defence capacity is dominated by BAE SYSTEMS. They want to corner that market, that is what they are interested in, and on occasions they will build and export a naval ship. We want to see them having a broader folio, a broader mix of ships, with commercial ships, not just UK commercial but foreign commercial, as well as defence orders. We very much look forward to you grilling the company on that on 15 June or whenever it is.[12] To be honest with you, they are the only ones who can answer on their strategy. We like to have opinions but at the end of the day it is their business strategy which we try and influence. They are the key people and we certainly push this with them all the time and they tell us they are doing X, Y and Z, but sometimes we wonder if they are actually doing X, Y and Z. As we said earlier, it looks as if they are going through the motions when it comes to commercial ships in the UK.

Mr Lyons

  77. On collaboration, the Task Force Report said there was potential for that across UK yards. Has there been any development in that area or is it too soon to say? It is something which would be beneficial to the Clyde if there were collaboration?
  (Mr Carrigan) If my memory serves me right, that emanates from the fact that Ron and a number of the Task Force went over to Germany and there is much more national collaboration and industry collaboration there. That is certainly the case in Holland as well. Not to go off on a tangent, in Holland and Germany they will bid for an order on a national basis, on a joint venture, a multi-company venture, and they will perhaps do the hulls in one area and the fitting out in another, so there will be specialisms developed. That has not happened here yet. That is what BAE SYSTEMS strategy is about with the three yards. To pick up the point, with Vosper Thorneycroft coming in as partners in the Type 45 order, that is likely to develop, and it is something we are pushing on the MoD. We do not want companies spending a fortune competing against one another and taking a long lead time to do that, we want them to collaborate, still guaranteeing value for money for the taxpayer. That is something, as I said earlier, that the Task Force are wanting to look at. There is a lot of room for improvements, there is a lot of room for collaboration, there is a lot of room for partnerships, and I think it is too early to say if it is going to be successful, but it is something we are pushing on the company.
  (Mr Webster) I would be very interested to see how you get on on 15 June—

  Chairman: 19 June.
  (Mr Webster)—whether you are impressed or unimpressed with the company. I heard much made of how long it took Scotstoun to break into that market. It is true but somebody has to break into a market sometimes. Let's not forget they did very well in that because what they gave to Malaysia and Brunei are getting rave reports. Why on the basis of that should you not be optimistic? I am going to stick my neck out because I want to and say I do not share the pessimism on the export market. I am saying—and I may be left with big, big egg on my face next year—we will secure that work in the export market and then we can move forward. The company in our recent meetings have echoed the great optimism of securing it. I told you, I am trusting in that and banking on them to deliver on it. I do not think we are totally flying a kite here but let's wait and see.
  (Mr Dolan) On collaboration, if there had been collaboration between British shipyards we would not have sent the hulls to Holland.
  (Mr Torrence) This subject came up when we were talking to Geoff Hoon when we were arguing about roll-on roll-off ferries. At that particular time there was only BAE, Fergusons, Vospers, Swan Hunter, Harland & Wolff and Cammell Laird. We said to the Defence Secretary, "Why don't you call these yards together and sit down and share out the work?" He said, "That's socialism, son, you are never going to get that"! That is what he should have done.

  Mr Robertson: Are you saying he used the "S" word!

Mr Sarwar

  78. It has been a very difficult time for the workforce over the last three years with the uncertainty, some days they thought they had a job and the next day they thought they did not, and I still sometimes dream about Jimmy Webster shouting at me, "At least the politicians can be honest with us. You are hiding something from us." What is the morale like now amongst the workforce?
  (Mr Webster) Mixed, I would say. Obviously we are still going through the last stages of redundancies. That is difficult and very, very painful. Even after that, you must have a vision; you simply must have a vision beyond that. You will not take people forward if you languish in self-pity. People are somewhat confused but I like to think, and I am sure that John shares this view that in the black days and we had plenty of black days in Govan in the last few years that the worst times are behind us. We looked forward to the ALSLs, to the Type 45s, to export work and the carrier contract. What more can I say? That is what we are looking forward to, that is what we were going for. If that is flying a kite, suit yourself, that is what we were going for.
  (Mr Dolan) I believe some of what Jamie says but the short-term morale is very low. It has to be. We still do not know whether the redundancies are finished or not. We have a meeting at the end of this month but we hope the company will be honest with us and give us a clear view about the short-term. The long-term future of shipbuilding, I believe, is boom time over the next ten years, but right now we do not know if we have a job at the end of the month, and that is a fact, because the company has not come clean and told us. There are still 330 jobs under threat, 150 people have lost their jobs compulsorily, 220 have left voluntarily. The workforce have moved masses on this, doing perhaps different jobs. There were about 250, 300 jobs saved that way. There are still 330 jobs under threat as we sit here at the moment. These people do not know whether they have a job tomorrow. Shipyard workers are resilient, to say the least, they will be there and they will be back but at the present moment it is pretty low.

  79. Can you tell us, if BAE SYSTEMS was more generous, could we have avoided these redundancies?
  (Mr Dolan) To be fair to the company, they have worked hard. Their old contract being up in Barrow has certainly been a blessing to us, it has kept people employed for the last 18 months, given the trade unions and the company opportunities to try and mitigate job losses further. I believe the company has tried hard but we have just reached the point of no return at the present moment. Not generous, but if they had maybe cut their prices in bids and won some orders, we could be working a bit more at the moment. That is the only criticism as far as that is concerned.
  (Mr Webster) It is quite ironic, and I am sure John will agree with me, despite the fact there are 330 jobs at risk we do have a couple of irons in the fire which should transpire over the next few weeks. At the moment we will say the least said easiest mended on that front. Also ironically, at the end of the year we will be recruiting on the Clyde. It seems strange, does it not, but if the ALSLs pick up, we will be recruiting.

10   Professor Chengi Kuo of Strathclyde University, The Herald, 5 and 11 February 2002. Back

11   See Q53. Back

12   Wednesday 19 June 2002. Back

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