Annex
SUPPORT FOR THE UK SHIPBUILDING INDUSTRY
[Note: unless the context indicates otherwise,
the expression "Shipbuilding Industry" in the paper
encompasses the new-building, conversion and repair of merchant
and naval ships]
Shipbuilding Forum
In 1998 the then Industry Minister at the Department
of Trade & Industry, John Battle MP, established the Shipbuilding
Forum as a recognition both of the importance of the shipbuilding
industry and the challenging issues it would have to address to
be successful. The Forum is very broadly based, comprising representatives
of the shipbuilding, conversion and repair industries, both through
their trade association and individual key companies; the work
force through the Confederation of Shipbuilding and Engineering
Unions and others; customers (both private and public sector),
including the Chamber of Shipping; major suppliers to the industry
through their trade association, the Society of Marine Industries;
the National Training Provider (the Engineering and Marine Training
Authority), and Government Departments, including the Ministry
of Defence, Department of Transport, Local Government and the
Regions, the Scottish Executive and Northern Ireland Industrial
Development Board. This was the very first time that all the parties
crucial to the future of the industry had sat down together at
the same table.
In December 1998 the Forum submitted a report to
its members—including but not exclusively aimed at Government
Ministers—which concluded that the long-term future of the
industry depended upon its being able to improve competitiveness
and the availability of a skilled, flexible, labour force. The
Forum set itself the highly challenging targets of doubling the
number of merchant ships built over a five year period and of
increasing the turnover of the repair sector by 30 per cent over
the same period. To achieve this, the Forum's December 1998 report
made no less than 43 recommendations, principally for improved
productivity, better marketing, enhanced finance packages and
improvements in training and skills and it is important to stress
that these recommendations were aimed at all the participants,
not just Government. Ministers consider that this Forum concept
of a shared future is vital as all stakeholders must cooperate.
The Government responded positively and quickly.
Improvements were made to both of the Government's financial support
schemes, as the Forum had requested. The Shipbuilding Intervention
Fund (a grant of up to 9 per cent of the contract value) was extended
both to new categories of ships and to yards which had previously
been prohibited from applying. Additionally, an element of profit
was permitted for the first time in the grant calculations and
yards were able to keep the grant element of cost-savings derived
from productivity improvements. The Home Shipbuilding Credit Guarantee
Scheme (long term loan guarantees at fixed interest rates) was
enhanced by offering loans in US Dollars and euros, as well as
permitting floating interest rate support.
Nevertheless, it was generally recognised that subsidies
were not the answer to long-term success. The UK shipbuilding,
ship conversion and repair industries can only thrive if they
are internationally competitive. A number of steps were taken,
therefore, to measure British yards' competitiveness and then
to assist them to improve.
Netherlands Study Visit
Research undertaken by the Forum demonstrated that
Dutch yards (arguably the UK's closest competitors) had been very
much more successful than their UK counterparts and the Forum
set itself the task of determining the reason for this. As part
of this, in 1999 the Shipbuilders and Shiprepairers Association
(SSA), led a study tour to the Netherlands, part funded by DTI.
The conclusions were interesting and perhaps even a little unexpected.
There was actually no evidence of the employees working harder
or of much better yards or higher investment. Instead, the "secret"
was that the Dutch yards were more successful because of close
co-operation between yards, better marketing and extensive sub-contracting.
Following the visit the SSA set up a group to examine how the
UK industry could co-operate better.
Benchmarking
The next stage was to see what physical and organisational
improvements UK yards needed to implement. To measure their productivity
against the world's best, UK shipyards carried out in mid 2001
a benchmarking study against their international competitors,
again part funded by the Department of Trade & Industry. The
main findings were weaknesses in productivity and marketing and
these were reported back to the individual participants to give
them a base from which to measure improvements.
LINK Research Programme/Master Class
Having identified the scope for productivity and
process improvements through this study, the Department of Trade
& Industry is contributing a massive £2.8 million in
grants to a LINK Research Project led by the SSA (total cost £5.8m)
to help the industry to address where improvements are necessary.
LINK combines academic studies with practical, short-term,
productivity improvements. The academic studies are aimed at improvements
right through the design, procurement and manufacturing processes
and are what industry itself has said that it wants from academics.
On the immediate improvements, the shipbuilding industry has introduced
the "Master Class", a concept derived from the automotive
and aerospace industries, whereby acknowledged industry experts
will visit and inspect a yard, recommend immediate improvements
and, crucially, embed this ability in the yard so that continuous
improvement can be achieved. For, however much the UK industry
improves itself, it is aiming at a moving target as our competitors
are improving as well. We must get better, faster!
Marketing
Another joint SSA/DTI programme is aimed at the other
weakness that has been identified both by the Dutch study tour
and the benchmarking study—Marketing. UK yards turn out
world-class ships. But they are too modest and do not go out and
tell the world what we can do. Again, the DTI is working with
the SSA, by providing a grant of £176,000, 50 per cent of
total costs, towards a three year marketing project, also launched
in June 2001, aimed at generating new orders to match the increased
production that the LINK project is expected to generate.
Excellent progress has been made on both the LINK
and marketing projects over the six months since they were launched.
The take-up to Master Class has been very good: over 30 Master
Classes have either been completed or are on order. Concerning
the R&D part of LINK, several major projects are currently
under way, including studies into concurrent engineering and the
supply chain. It must be stressed that these projects are all
led by industry, rather than academia, and it is expected that
they will yield real, tangible benefits for the industry.
As regards the marketing project, this has for the
first time provided new-building yards with a professional marketing
resource. The two marketeers have identified a great volume of
potential business of which the industry had previously been unaware.
Skills and Training
The Government fully recognises the importance to
the industry of a strong skills base. The Shipbuilding Forum has
identified the need for substantial improvements, at both commercial
and naval yards, notably in the areas of trade up-skilling and
project management. Government is working closely with the industry
and Engineering and Marine Training Agency to remedy the weaknesses
in skills identified by the Forum. EMTA are currently pursuing
several projects across the UK. These include the creation of
a national skills database to identify more precisely the skills
available in the sector and from this, to identify skill shortages,
as well as a project to develop a marine-specific academic qualification.
A Pilot Scheme has been started in Hull to analyse the skills
requirements of the individual shipyards there and to produce
individual company training plans based upon that needs analysis.
Initially, 145 employees will be trained in a range of disciplines
ranging from craft skills (eg welding) to project management,
not forgetting of course health and safety. The project will then
move on to promote shipyards and engineering as a career in schools
to ensure that the future skills needs of the industry can be
satisfied. If successful, there is every chance the scheme will
be replicated across the other shipbuilding areas of the UK.
Marine Export Partnership
Exports are crucial to increasingly inter-dependent
international industries such as shipbuilding, marine equipment
and the increasingly important leisure boating industries and
mention should be made of the Marine Export Partnership, which
the Department of Trade & Industry launched in March 2001.
This initiative seeks to strengthen the promotion of the British
marine industries—including the shipbuilding, conversion
and repair industries—to overseas markets. It is supported
by Trade Partners UK, which brings together the trade promotional
work of the DTI and the Foreign and Commonwealth Office, and is
led by the three major trade associations: SSA, the Society of
Maritime Industries (previously known as the British Marine Equipment
Council) and the British Marine Federation, representing the leisure
boating market. Government is providing funding support of over
£100,000 over the first 18 months of the project.
The Marine Export Partnership will help develop and
nurture partnerships both between the different marine sectors
themselves and between the industry and the Government. It is
a clear demonstration of the importance the Government attaches
to the UK marine industries and it is hoped that it will lead
to increased exports for the shipbuilding industry.
Ministry of Defence
Naval orders for warships and support vessels are
placed according to military requirements and strict value-for-money
criteria but at the same time, this Government has embarked upon
the largest programme of naval shipbuilding for many years. All
fighting vessels are built in the UK so this programme has benefited
UK yards considerably and will continue to do so for a good number
of years.
Department of Trade and Industry
May 2002
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