House of Commons - Defence - Written Evidence

Select Committee on Defence Written Evidence

Memorandum from the Keep Our Future Afloat Campaign

PART A: EXECUTIVE SUMMARY

"the need for freedom to operate in an uncertain world, make the sea a very attractive location from which to project power[4]"

(Defence Industrial Strategy, Ministry of Defence, December 2005)

(i) The "Keep Our Future Afloat Campaign", (KOFAC), is a trade union-led lobby Campaign that was launched in April 2004 in response to a further round of large scale job losses at the BAE SYSTEMS' owned Barrow shipyard in north west England associated with completion of HMS BULWARK. The CSEU, Amicus and GMB are the lead unions involved. The campaign seeks further investment by the UK Government in naval shipbuilding in north west England and specifically orders for a batch of four more "Astute" class submarines, a follow-on "Vanguard" class submarine class and major surface ship work for the shipyards , principally Barrow, and supplier base located in north west England.

(ii) KOFAC has considered each of the five questions posed by the Defence Select Committee[5] in the context of the Defence Industrial Strategy 2005 and offers views in relation to each of them.

(iii) The UK Submarine Industrial Base (SIB) is a unique, small volume business serving one customer, the Ministry of Defence. Affordability of the nuclear submarine fleet is a key challenge because at present "there is no new submarine programme following on behind Astute, as such Astute is really paying for the whole of the submarine build industry." [6]British nuclear submarines cost around 40% less then their American counterparts.

(iv) The SIB is fragile. Ministry of Defence, (MoD) in August 2006 stated, "we are now at a point where the supply chain is fragile and is costing significant sums to buy and support equipment that is close to obsolete. This is forcing us to take a fundamental look at the Astute class with a view to redesigning systems within the boat and the supply chain that supports those systems to reduce both initial procurement and through life costs. Our relationship with our suppliers is also a key focus for us. We need to ensure we've got the right relationships that have reward for performance at their core. This team is really a pioneer for joint working. [7]" To assist the Inquiry, we offer findings of a recent, 2003, survey of the supplier base, and refer to current supply chain work BAE SYSTEMS are undertaking.

(v) It is the submarine that carries the existing Trident missile that needs replacing, not the missile system itself. More Astute class submarines are needed to replace ageing attack submarines. KOFAC, therefore supports the replacement of the existing Vanguard class submarine fleet with a new submarine fleet to carry the existing strategic deterrent. An order to build of a batch of four more Astute submarines will help create a "level load" of work that can sustain key skills, and capabilities within the SIB, This will generate greater efficiencies, savings to the MoD and make the overall submarine programme more affordable.

(vi) KOFAC believes gaps in submarine production should not be allowed to occur. Conceptual design work on a Vanguard replacement submarine needs to start in 2007 in order to avoid a significant workload gap for designers located at Barrow shipyard, and build on embedded submarine design expertise. This conceptual design of the new boats should be concentrated in Barrow shipyard rather than elsewhere, because Barrow is the only shipyard that has experience of designing, building, integrating, testing and commissioning nuclear powered submarines.

(vii) A significant workload gap would arise and costs would increase for the SIB from a decision not to proceed with a replacement Vanguard class submarine.

(viii) Since 2003-04, considerable progress is being made in making the new build of submarines more affordable. Industry is responding within the terms of the DIS to Government's expressed desire to see "closer working between MoD and industry and within the industry". Alliance and/or joint venture arrangements should be encouraged. Regional development agencies working with sub-regional partners have a key role to play in helping the SIB supply chain invest to achieve the MoD affordability criteria by enabling businesses to make use of existing Government capital grants and other business support schemes.

(ix) There is a need to sustain and grow skills development for the civil and defence nuclear industry, and to promote the career opportunities systems integration based naval shipbuilding offers over the next decade to people of all ages. MoD and industry need to set out a long term view soon so that individuals can be encouraged to take-up apprenticeships, undergraduate, postgraduate studies and careers in the nuclear sector of the submarine industrial base. Financial incentives for individuals may be needed to help achieve this objective.

1. The Keep Our Future Afloat Campaign (KOFAC) and the Defence Industrial Strategy (DIS)

1.1 The trade union led "Keep Our Future Afloat Campaign" (KOFAC), launched in April 2004, has the support of the CSEU, Barrow Borough and Cumbria County Councils, Furness Enterprise and Northwest Regional Development Agency. In September 2004 the then Secretary of State for Defence the Rt Hon Geoff Hoon MP described the lobby as "one of the most effective defence lobbies he had come across." The Rt Hon Alun Michael MP, Minister for Industry and the Regions on 13 December 2005 indicated "this (KOFAC) type of approach by management, trade unions and the local authority is very powerful".[8] On the 27 September 2006 Lord Drayson, the Ministry of Defence Under-Secretary of State and Minister for Defence Procurement, said "you do realise you are effective", adding "no-one else is doing this type of thing".[9]

1.2 The Keep Our Future Afloat Campaign's aims are threefold, to:

— Sustain and grow jobs in naval shipbuilding in north west England.

— Secure full utilisation of the unique naval ship and submarine building assets found in the north west of England's naval shipbuilding industrial base—the shipyard at Barrow and a supply chain of 1,700 companies.

— Sustain the naval ship/submarine design capability, which is located in Barrow—600 designers comprising 60% of UK total capability.

KOFAC sets out to influence the policy of Government, its Agencies, leading companies in the defence industry and trade union policy. KOFAC sought to influence the Defence Industrial Strategy throughout 2005.

1.3 KOFAC welcomed the Defence Industrial Strategy (2005), [10]in particular its commitment to the submarine industrial base contained within paragraphs B2.26 to B2.28 which states "for the foreseeable future the UK will retain all those capabilities unique to submarines and their nuclear steam raising plant, to enable their design, development, build, support, operation and decommissioning". KOFAC notes that "the Astute programme is really paying for the submarine build industry"11 and UK needs "to find a way of making it affordable with industry", in line with the Defence Industrial Strategy".11

1.4 KOFAC also supports the Government view that "a minimum nuclear deterrent ... is likely to remain a necessary element of our security".[11] KOFAC notes that "introduction of any new submarine would probably be planned for around 2024".[12]

1.5 KOFAC considers Government should place orders to sustain the design, build, test and commissioning capability of the UK submarine industrial base at its current level, in particular Government should continue to support the significant cost reduction initiatives being achieved by BAE SYSTEMS at Barrow and MoD "to reduce both initial procurement and through life costs".[13]

2. The UK Submarine Industrial Base (SIB)

2.1 The UK submarine industrial base (SIB) is a unique UK Defence Industry, it is a small volume business delivering to one customer, the UK Ministry of Defence. There are only orders for three Astute class submarines, these are currently being assembled at Barrow in Furness. The Major gap in design and production work between Vanguard class completion and the start of the "Astute" programme created major challenges for the SIB. KOFAC's understanding of the key characteristics of the industry[14], [15] are as follows:

(i) An estimated total employment in the UK SIB in the region of 5,000 personnel.

(ii) It depends on one buyer, namely, the UK Government which buys nuclear-powered submarines for the Royal Navy.

(iii) It produces one product, which cannot be exported, namely, nuclear-powered submarines and has exited from the conventional submarine market (after the Upholder class). Nuclear-powered submarines are highly specialised and technically complex weapons systems which require special skills and facilities for aspects of design and construction. They differ from surface warships in that they are designed to operate for long periods underwater at great depths, at speed, and quietly, with a range of weapons whilst providing a safe environment for the crew living close to a nuclear reactor.

(iv) There is only one UK firm with the experience and facilities for designing, building, testing and commissioning nuclear-powered submarines, namely, BAE SYSTEMS Submarines Limited based at Barrow-in-Furness (see Appendix A) where 3,310 people are employed. Barrow is the only UK nuclear site licensed for the construction, test and commissioning of nuclear powered submarines. Plymouth has the DML dockyard available for refit of nuclear powered submarines—3,800 people are employed there. It is conceivable that demand for, and cost of, refits will reduce as "Astute" submarines are introduced into the fleet. Faslane is the operational base.

(v) The nuclear requirement imposes major barriers to new entry, competition, and until recently, international collaboration (Electric Boat/BAE recently partnered on production improvements for "Astute"). It also creates some highly-specialised resource requirements, especially in the construction (BAE SYSTEMS, Barrow), power plant (Rolls-Royce Marine Power, Derby) and refitting and refueling stages (Devonport Management Limited) of the procurement cycle.

(ix) UK submarine expertise includes world leaders in the supply of naval electric propulsion; staff trained and specialised in naval ship and submarine building; weapons handling and discharge, submerged systems ejectors and countermeasures; the UK's only supplier of high pressure seamless cylinders; rubber lining for battery compartments; copper based alloy castings to naval standards; electrical and fibre optic cables; design and manufacture of propeller thrust bearings; design of autopilot systems; sensors and systems for vibration monitoring; prime contractor and design authority for dehumidification systems; low weight, low fatigue stealthy structures; sonar reflective tiles; design and installation of chilled water plant; structural design and analysis; waste shredders; submarine hull penetrations; nuclear radiation shielding; naval shock-rated switchgear; and hydrodynamics, stealth and signatures. Manufacture and design of many of these components require skills unique the SIB that it is critical to retain in the UK. These include mechanical engineering, hydrodynamics and safety simulation staff, research, software, design and development staff, specialist moulds teams; welding and test engineers; clean assembly and radioactive teams; tile preparation teams; Fitters and adjusters; sub hull penetrator assemblers.

2.2 A survey we commissioned at the end of December 2003[19] highlighted some of the challenges facing the UK SIB. It revealed that a number of companies were concerned about an insufficient workload to justify future investment and retention of key skills. They forsaw reduced opportunity for sales; and a lack of opportunity to maintain and grow the company's submarine expertise. These concerns could re-emerge if further submarine orders do not materialise soon.

2.3 The survey also showed that companies would likely respond to order gaps in a variety of ways, including reducing workload in the short-term, reallocating resources and downsizing, looking for other work, seeking other naval work, re-focusing on other non-MoD work. They would consider moving, re-deployment, redundancy and re-training or mothballing facilities.

2.4 The survey also asked companies for solutions which UK MoD could offer to help them with the challenges they face. These included:

(i) Order Astute submarines 4-6.

(ii) Buy British.

(iii) Provide other contracts for maintenance and order additional systems (eg for Trafalgar and Vanguard refits).

(iv) Continue to fund development programmes which maintain capability.

(v) Provide information on future MoD plans.

2.5 On skills, looking ahead over the next 10 years, 20% of companies anticipated problems in attracting skilled labour for their submarine business[20]. Firms planned a variety of policies to overcome any skilled labour problems. Their responses were typical of solutions likely to be used by private enterprise firms and included:

— Increase the training of apprentices and graduates and other bespoke training developments.

— In-house re-training and "upskilling" of existing staff.

— Employ and train to our level.

2.6 The companies felt MoD might help firms with their skilled labour problems by agreeing a long-term design and build programme (a number of firms supported this policy), supporting the UK defence industrial base and supporting UK submarine research and development (R&D). [21]

2.7 KOFAC considers that many of the points raised at the end of 2003 are just as relevant today in the context of the need for new boat orders.

2.8 In summary, in 2006 key risks to future UK submarine programmes include:

— Unexpected failure or withdrawal of key suppliers.

— Perceived fragility of the supply chain due to changes in submarine procurement strategy, eg slower drumbeat.

— The impact of earlier delays to boats 1 to 3 of the "Astute" class.

— Global market influences.

— Concerns over affordability.

2.9 BAE SYSTEMS are continually working with partners in the supplier chain to identify "supplier sustainability solutions" and adopt new ways of working that will help MoD with their initiative for "transforming submarine support"[22] and achieving the affordability identified in the Defence Industrial Strategy. Detailed studies of the fragility of the supplier base identified that over 50% of suppliers regard their equipment supply as bespoke for the UK SIB, over 52% considered any future single boat procurement strategies would have a negative impact on their business. Other work has categorised equipment by status to better define that which is critical equipment/materials that would require extensive development to replace, and that which is critical equipment/material that could impact boat integration. The introduction of modularization and new facilities for integration such as the Barrow "Warspite" facility enable extensive and earlier completion of key parts of the submarines prior to module insertion on the boats. Some suppliers have set up facilities in Barrow to help deliver key components in a more effective way. Seacon Phoenix from USA have partnered two local companies to assemble, deliver and help install specialist hull penetrators. More recently BAESYSTEMS "Wavelength" of October 2006 reports, "an industry/MoD `rainbow team' has exceeded expectations ... as part of a design for cost reduction contract ... the boat 4 combat system team has demonstrated the potential to avoid tens off millions of pounds of cost".[23]

3. The level of investment needed to sustain essential infrastructure and core skills in the UK Submarine Construction Industry

3.1 KOFAC considers that the level of investment needed to sustain essential infrastructure and core skills should be as follows:

— A batch of four more Astute submarines to be ordered in a 2007-08 timeframe. The First Sea Lord has told the House of Commons Defence Select Committee that "We need to keep building Astutes because once I have got these my worries about accountability will go".

— A "drumbeat" sustained at one attack submarine delivered every 22 months, as at present.

— A "like for like" replacement for each of the existing Vanguard class submarines with significant work commencing in 2007 in order to sustain key design skills.

3.2 Industry should continue investment in cost reduction and productivity improvements, building upon the achievements made at Barrow since 2003 (see Appendix B).

3.3 There needs to be sustained development of core skills, in investment in the universities (as we describe in section 7), and in MoD to support the industry. MoD in August 2006 observed "it is difficult to find design engineers in the MoD with a deep specialism in submarines." [24]More new graduates and young entrants through apprenticeships need to be attracted into the industry along with fiscal and promotional initiatives to encourage them to consider a career in the industry. BAE SYSTEMS' involvement with schools and in education in the Barrow area may be a model to be replicated by key partners in the SIB.

3.4 The core skills base at Barrow of 3,310 people includes 1,275 management and support staff, 1,302 trades people and 600 designers. Employment has reduced to the 3,000 mark over recent years such that it has, in many disciplines, fallen to levels that are critically low. Any further reductions could result in capability being lost from the SIB. DIS recognises the fragility of the design skills base, which account for 600 jobs at Barrow. Fragility also applies in a number of key production areas. The Select Committee may wish to seek further evidence on these points from SIB industry representatives.

3.5 Britain's existing nuclear powered submarine fleet is modest in size and ageing (see Table 1), [25]the attack submarine fleet especially so, and it will need replacing in the next few years. The expected operational life of an attack submarine is around 30 years. Submarines produced in the 1980's will reach retirement age and begin to leave service in 2010. The Vanguard class submarines incorporate 1980's/1990's technology. Delivery of a replacement for the Vanguard class into Royal Navy service by 2024, [26]when HMS Vanguard will be 31 years old will enable the UK's strategic deterrent to be carried in a 21st century submarine that is safer, quieter and more efficient operationally than its predecessor.

3.6 KOFAC understands that design work on the "first of class" "Astute" submarine is complete. Current design work relates to improving affordability and reducing costs for boats 2, 3 and 4 of the Astute class. That design work will be largely completed by mid 2007. KOFAC forsees a need, over the next six months, to identify new design work in order to ensure critically important design skills are retained in the UK. KOFAC welcomed the Government announcement that £20 million would be invested in 2006 and 2007 in the field of nuclear propulsion. [27]

3.7 It is a well known fact in the naval shipbuilding and submarine building industry that naval architects specializing in submarine design work can temporarily be transferred to design work or sophisticated large naval ships. However, the same cannot be said of naval ship designers. Submarine designers therefore need continuity of work a point recognized in UK and in USA. Ronald O'Rourke of the USA's Congressional Research Service said "unless a major submarine design project is begun the design and engineering base will begin to atrophy through departure of experienced personnel. Rebuilding a design and engineering base would be time consuming, adding time and cost to the task of the next submarine design effort whenever it might begin." The UK's difficulties, delays and cost over-runs in early design of the Astute class submarine were a direct result of the UK design and engineering base having atrophied for lack of work. [28]If order gaps occur, individuals will leave the industry, and not return, making it then difficult and costly to resume design work. [29]

4. The potential consequences of a gap in the submarine building programme for long term viability of the domestic manufacturing and skills base

4.1 KOFAC recommends that a start on conceptual design of the Vanguard class replacement submarine should start early in 2007 to avoid any risk that skills atrophy from the industrial base's design capability at Barrow.

4.2 DIS (page 74) highlighted the fact that "UK military shipbuilding requires a highly skilled workforce can be confident in an enduring and stable career path". It also observed (page 74) that "when shipyards lay off workers, 70% of them leave the industry for good and are unavailable for hire by their former employer".[30]

4.3 KOFAC endorses the view expressed by Rand to UK MoD that "starting new submarine programmes after gaps in submarine production at Barrow will incur substantial costs and risks".[31]

4.4 Rand pointed out that if there is no follow-on to the Vanguard class production of the remaining Astute-class boats may have to be stretched (ie built at a slower drumbeat), and the start of any successor attack submarine programme accelerated. Rand went on to say "smoothing out the demand on submarine production resources would allow the industrial base to operate at peak efficiency and could reduce production costs by 5 to 10% per boat, thereby contributing to affordability",[32] a view KOFAC supports.

4.5 To ensure that the United Kingdom's nuclear submarine industrial base is sustained and operates efficiently KOFAC believe that MoD need to:

— Decide as soon as possible whether there will be a next generation SSBN class and when it will be designed and built. This decision is needed to inform any further actions to sustain the design base and schedule remaining Astute production to maximise efficiency. If the Vanguard class is not to be replaced, then planning should begin for an early follow-on SSN class if the submarine design base is to be sustained.

— Plan on annual investments to sustain a core of submarine specific design resources. A core of 600 designers, engineers, and draughtsmen would require annual funding to permit the core to participate in meaningful work such as "spiral development" of Astute class and continuous conceptual design development of future classes of submarine.

— Explore whether collaboration between BAE SYSTEMS' Barrow-in-Furness shipyard and the contractors employing engineers and draughting teams for in-service support is advantageous.

— Decide on the timing of construction for the next Astute-class contract. Currently the drumbeat is at 22 months. KOFAC considers this contract should be a multi-ship contract for four boats rather than one boat in order to give forward visibility of orders, encourage investment by the supply chain in facilities and training.

5. The implications of the rationalisation of the UK Shipbuilding Industry for the construction, maintenance and affordability of a possible successor to the Vanguard Class Submarine

5.1 The DIS[33] proposed negotiation with key companies in the submarine supply chain to form a single industrial entity (DIS para 2.73). Since the DIS was published Ministers have announced (Hansard, 25 July 2006, Column 1544W) that, "given the number of industrial players in the submarine domain, consolidation to one entity may not be possible, other solutions such as an alliance or joint venture are being examined. MoD is considering a number of possible options with industry ... negotiation is underway." KOFAC welcomes this latest policy statement, and supports the idea of an alliance or joint venture as a way forward.

5.2 KOFAC considers this approach will help achieve DIS objective for MoD and industry to "demonstrate an ability todrive down and control costs of nuclear submarine programmes"[34] (DIS para B2.63). Key partners should, under the new arrangements "play to their strengths" rather than seek to compete for work or offer new designs, not based on proven technology.

5.3 Co-operation is already underway between MoD, Rolls Royce, BAE SYSTEMS and DML on certain aspects of the submarine programme, as outlined in paragraph 2.8. Considerable progress has been made in making the submarine industry more affordable and sustainable. Examples include:

— Current design work at Barrow introducing spiral or incremental developments that help reduce costs and include commercial off-the-shelf technologies where appropriate in boats 2, 3 and 4 of the "Astute" class.

— Use of reactors that do not need refueling through a submarine's life, which will help save substantial sums of the MoD budget currently spent on refit work (see para 2.1 , earlier).

— Continuing annual cost base reduction/cost base challenge initiatives designed to address duplication/affordability and operational improvements which lead to reduced costs as outlined in Appendix B.

5.4 KOFAC urges MoD to concentrate lead design work on future Astute follow on boats and Vanguard class replacement submarines at Barrow in order to take advantage of the embedded expertise in actual design, build, test and commissioning, a capability that is not available anywhere else, in any other company, in the UK.

6. The linkage between the Government's Defence Industrial Strategy and the decision on retention, replacement or abolition of the UK's Trident System

6.1 DIS (2005) "endorsed, but has not yet committed funding for a 24-month SSN drumbeat," (paragraph B2.56) recognised "in the short term key design effort is focused on improving the whole life costs in the Astute design, in areas that have direct benefit to subsequent classes" (para B2.62), such as a Vanguard class replacement boat, and ensures "options for successor to the Vanguard class ... are kept open" (paragraph B2.63).

6.2 A decision to retain and replace the UK's Trident submarine is seen by KOFAC as essential, in order to maintain the effectiveness of the Trident missile deterrent which we understand has a long life span. It is also essential in order to sustain the SIB workforce and critically important skills.

6.3 Rand have advised MoD "if the UK wishes to retain a submarine based strategic nuclear deterrent, design of a follow-on SSBN class would have to begin immediately".[35]

6.4 Abolition of the UK's Trident system would create a significant workload gap for submarine design and production skills. Rand informed MoD that "alternative work, such as conceptual design, spiral design, and unmanned undersea vehicle design could not by themselves adequately sustain a submarine design core, [36]adding, [37]"If there is no follow-on to the Vanguard class, Astute class boats may have to be built to a slower drumbeat and the start of a follow-on submarine accelerated ...".

6.5 KOFAC considers gaps in submarine production are not something that should be favoured because they would result in:

— Loss of embedded expertise from the industry.

— Lower productivity.

— Difficulty in maintaining certification of key production personnel.

6.6 Level loading of the future submarine programme is essential as part of the DIS's Comprehensive Long Term MoD Shipbuilding strategy to make more efficient use of shipyard facilities and workforce skills. KOFAC therefore endorses Rand's view that,

"To sustain and make most efficient use of the submarine production base, an 18-month (or, at most, 24-month) drumbeat should be employed, with no additional break between the third and fourth boats of the class (ie the last boat under the current contract and the first under the next)".

7. The extent to which nuclear expertise in the Civil Nuclear Industry and Higher Education Sector underpins the UK knowledge and skills base in the Military Nuclear Field

7.1 Only around 7,000 people are employed in the nuclear defence sector, although there are around 56,000 people employed in the UK civil and defence nuclear sector as a whole. [38]The number employed on nuclear propulsion is quite small. Skills shortages are emerging in safety case/radiological protection and in MoD where on the design authority side (in August 2006) they are "over 15% undermanned", because "it is difficult to find engineers with a deep specialism in submarines." [39]

7.2 Unless action is taken nuclear education will not be robust or flexible enough to support the industry and its growth. Only 22 of the UK's 130 universities include a nuclear element to their courses, and nuclear education in the UK has recently been described as being "in a very fragile state", with "those" (students) "experiencing nuclear education constitute a woefully small percentage".[40] Unless action is taken nuclear education will not be robust or flexible enough to support the civil or defence segments of the industry and its growth, particularly if UK proceeds to build new electricity generating capacity. At undergraduate level only taster courses are offered. This reflects the "low demand" for specialist university training and lack of nuclear related job opportunities in the UK in recent years. The 13 universities offering post-graduate studies cater for 320 students per year, however, only 72 are on 100% nuclear courses. At undergraduate level around 360 students take courses with more than a 5% nuclear content. The Royal Navy deliver 11 courses a year, training around 500 students. HMS Sultan (the Royal Navy college), universities of Birmingham, Surrey, and in the north west of England Lancaster, Liverpool and Manchester, are some of the core universities offering postgraduate "nuclear" studies.

7.3 The future supply of graduates for the civil and defence nuclear industry is likely to be drawn from mechanical, electrical, electronics, chemical, civil, physics and chemistry degree courses. In 2001, there was a supply of 13,250 students taking these courses.

7.4 The challenges therefore facing the civil and defence nuclear industry as a whole are to:

— Promote the profile of the nuclear sector to young people by increasing the apprentice intake and attracting them into the sector from the pool of engineering and physics university students at a time when such subjects are less popular.

— Underpin essential learning pathways to develop the skills needs of the civil and defence nuclear industry and Support the educational institutions, especially those in the north west in delivering graduates.

— Reduce indecision about future investment in new civil nuclear industry and in the nuclear submarine industry.

— Address the problem of pay which is often a "lure to leave".

— Address competition for control and instrumentation engineering skills and safety case writing skills and competition for numerate graduates from insurance and financial services companies.

8. The economic characteristics of Barrow-in-Furness

8.1 Barrow-in-Furness is the home of the UK's nuclear submarine systems integration facility, it employs 3,310 people directly and accounts for 9.7% of the 34,181 person workforce in the Travel to Work Area. The Barrow "Travel to Work Area" contains a population of 97,000 people. The main town is Barrow-in-Furness (population 72,000). The labour market is one of the most defence dependant, and isolated in the UK. The next nearest towns are 47 and 34 miles away. The Northwest Regional Economic Strategy identifies Barrow as being the one area where there is a concentration of worklessness remote from the engines of growth (city regions) in the northwest. Barrow is ranked 29th most deprived District Council area in England. [41]Employment at Barrow shipyard fell from 14,250 in 1990 to 5,800 in 1995, and to below 3,000 in June 2004. It now stands at 3,200, and constitutes the largest manufacturing employer in the Travel to Work Area. The next largest is GlaxoSmithKline with 570 employees. The real level of unemployment in Furness is high, with Sheffield Hallam University citing the rate as being 18.6%. Job vacancies levels are low—the current figure being 305 (July 2006). New job creation rates in Furness average 533 jobs per year, in 2005, 507.5 jobs were created through the work of the Furness Enterprise Partnership. [42]

8.2 Barrow is one of England's most "business deprived districts" and the most deprived in north west England. It has acute levels of worklessness, 60% higher than the England average. [43]

8.3 BAE SYSTEMS contributes significantly to the Barrow and Furness economy. The total annual wage bill is around £77 million. Average managerial wage is £45,000. Average skilled tradesperson wage is £20,000. The workforce is relatively young, but experienced, 76% (2,387) of employees being under the age of 45. The multiplier effect of the shipyard is high, and it is one of the largest contributors to Cumbria's Gross Value Added (GVA).

8.4 Given that "Astute" class submarine design work is largely completed, any decisions to delay further "Astute" class boat orders or to abandon a Vanguard class replacement submarine or delay it by several years could put at risk a significant number of well paid jobs in design, administration and skilled trades which would be difficult to replace in a relatively short period of time. It is highly likely any replacement jobs would be on a lower salary in another sector.

8.5 KOFAC considers that the economic "wellbeing" of the Furness area still depends to a large extent on sustaining the nuclear submarine building industry in the Barrow shipyard. In 2003 PA Management Consultants concluded "our research has shown that the value of one additional ("submarine") boat, employing 2,000-3,000 people for 18-24 months is worth more to Barrow than any combination of diversification possibilities".[44]

8.7 KOFAC therefore advocates MoD should smooth out demand on submarine production resources to enable the industrial base to operate at peak efficiency, ie a drumbeat of 18-22 months for Astute submarines and a 36 month drumbeat for Vanguard replacement boats.

APPENDIX A

BARROW'S COMPETITIVE EDGE AS A SUBMARINE CENTRE OF EXCELLENCE[45]

A.1 Barrow's competitive edge can be considered in terms of the strengths and weaknesses associated with the shipyard and its specific skill base.

A.2 Barrow's strengths as a Submarine Centre of Excellence are:

— Senior management personal commitment to the Astute programme in the long-term by relocating into the local area.

— Senior level visibility of, and buy-in to, Submarine Centre of Excellence concept with BAE SYSTEMS.

— Committed management ream vertically integrated up to Prime Contract Office.

— Clarity of strategy, market, role, focus associated with Centre of Excellence role.

— Potential Astute workload of six-nine boats, with the last production possibly extending through to 2020.

— Unique and strong submarine capability: people; processes; facilities.

— Value for money: it is believed by BAE SYSTEMS that Astute will deliver two thirds of a US boat capability at 40% of the cost.

A.3 In addition to their proven strengths in overall submarine and surface ship design and build, Barrow has particular capabilities and skills that are not readily available elsewhere in the UK. These include in particular:

— Design of a highly complex, high tech product:

— Systems Engineering.

— Nuclear.

— Noise and vibration.

— Modular design.

— Large, complex fabrications and structures.

— Complex spatial layouts and routings.

— Advanced propulsion systems.

— Combat systems.

— Production:

— Large, complex metal forming, fabrication and assembly.

— High integrity (nuclear) pipe work.

— Military and commercial outfitting.

— Complex test and commissioning.

— Design and physical integration of highly complex, "through boat/ship" systems and availability of the SMITE facility.

— Complex programme management.

APPENDIX B

PRODUCTIVITY IMPROVEMENTS 2006 AT BAE SYSTEMS, BARROW

COST BASE REDUCTION/COST BASE CHALLENGE 2006

Duplication/Affordability/Operational Improvements aim to reduce overhead and direct man hours:

Overhead further reduce the overheads before the end of 2006.

Direct costs a reduction in the remaining costs to go in terms of man-hours and materials.

LEAN MANUFACTURE

Across whole production process using "Value Stream Mapping". New layouts and key manufacturing principles are being deployed to reduce material and people movement, to shorten lead times and produce the product more efficiently. Enhanced quality inspection methods are being developed to increase efficiency by creation of a portable inspection system that allows QC inspectors to input direct to their database whilst on the boat rather than a paper then PC based system in use at the moment.

LEAN DESIGN

Design for cost—initially looking at part count and labour reduction. Pilot workshops have shown that low innovation ideas could reduce the cost of certain equipment by a significant amount not including the ripple effect created by removing the need to purchase, store, install, test and commission items on the boat. It has become clear that potential major savings could be achieved if certain requirements can be successfully challenged and modified.

LEAN OFFICE

Pilot project in staff areas using "value stream mapping". The project is being used to increase efficiency in staff areas and to develop a staff process improvement methodology for expansion into other areas.

ORGANISATIONAL DEVELOPMENT

The behavioral change program started in mid 2004 continues to embed real change. The project continues to align processes and systems with a set of Submarines values and competencies. Projects include continued development of organisation strategy and objective deployment, supported by the all employee bonus and hard wired changes to the PDR process. We also see the maturity of an innovative employee involvement scheme "PRIDE" which will be the core driver for continuous improvement and engagement in Submarines, the development of a strategic leadership development programme as well as a continuation of the Trade Union partnership work.

APPENDIX C

RAND OBSERVATIONS ON THE NUCLEAR SUBMARINE DESIGN SKILLS BASE

"Gaps in design and production can lead to the departure of experience personnel to other industries and to the erosion of defence system production skills."

"The submarine design base is rapidly eroding. Demand for the design and engineering resources is declining as the design of the first of class nears completion. The number required will be fewer than that needed to sustain a viable nuclear submarine design base."

"To sustain the United Kingdom's nuclear submarine design expertise, some minimum core of professionals must continuously work in that area. The number requires varies with the domain of expertise. The total number required across all domains is approximately 200. The workforce could drop below this critical level in the near future without a new design programme."

There are options for sustaining the 200-person submarine design core, the ideal way would be to soon commence the design effort for a new class of submarines. No decision have been made regarding any programmes beyond the Astute class. The current Vanguard SSBN class could begin retiring as early as 2018. Design of a follow-on SSBN class would have to start approximately 15 years prior to the desired in-service date for the replacement submarines. The design for a follow-on class would have to begin immediately. The Astute-class design would have to begin some 10 years in advance of delivery of the first of class."

"There may still be a period of time when the design core is inadequate in at least some of the specialties required to sustain expertise. How might the design core be sustained through periods of slack demand? There are several possibilities:

— Evolution of the Astute design as more boats are built to take advantage of new technologies.

— Continuous work on conceptual designs for new submarine classes, whether or not those classes are ever built.

— Design of unmanned undersea vehicles."

"These options could be exercised simultaneously. However, taken together, they could not by themselves adequately sustain a submarine design core."

"Collaboration with the United States or another submarine-producing country should also be considered. Design work on each country's submarine programmes could help sustain the other's design core."

"A core of 200 designers, engineers, and draughtsmen would require annual funding of perhaps £15 million."

Source: Rand Europe 2005, Volume 1 of The UK's Nuclear Submarine Industrial Base: Sustaining Design and Production Resources.

Table 1

ROYAL NAVY SUBMARINE FLEET AGEING AND JUSTIFICATION FOR MORE BOATS TO CREATE FLEET OF 8 MODERN SUBMARINES (based on Parliamentary Answer of 26 January 2005 and Keep Our Future Afloat Research*)Mr Ingram: The Royal Navy has four Vanguard class (SSBN) and 11 Swiftsure and Trafalgar class (SSN) submarines in service. Based on their in service dates the age of each boat in 2005 is as follows:

Submarine

Age
in
Years
2005

Age
in
Years
2009*

Age
in
Years
2011*

Age
in
Years
2013*

Age
in
Years
2015*

Age
in
Years
2017*

Age
in
Years
2019*

Expected
Ship payoff Date
Source:
Hansard 7 Jan 2004
Col 414 W
Design life
Assumptions
For SSN and
SSBN Submarines
with source

SSBNs

HMS Vanguard 12 16 18 20 22 24 26 30

HMS Victorious 10 14 16 18 20 22 24 30

HMS Vigilant 9 13 15 17 19 21 23 30

HMS Vengeance 6 10 12 14 16 18 20 30

SSNs

HMS Sovereign 31 35 37 39 41 43 45 2006 32 :Hansard

HMS Superb 29 34 36 38 40 42 44 2008 32 : Hansard

HMS Sceptre 27 31 33 35 37 39 41 2010 32: Hansard

HMS Spartan 26 30 32 34 36 38 40 2006 27: Hansard

HMS Trafalgar 22 26 28 30 32 34 36 33 US Navy
CRS-26***

HMS Turbulent 21 25 27 29 31 33 35 30-33

HMS Tireless 20 24 26 28 30 32 34 30-33

HMS Torbay 18 22 24 26 28 30 32 30-33

HMS Trenchant 16 20 22 24 26 28 30 30-33

HMS Talent 15 19 21 23 25 27 29 30-33

HMS Triumph 14 18 20 22 24 26 28 30-33

ASTUTE SSNs

HMS Astute** 0 1 3 5 7 9 11

HMS Ambush** 0 0 1 3 5 7 9

HMS Artful** 0 0 0 1 3 5 7

Boat 4** 0 0 0 0 1 3 5

Follow on boats 5 0 0 0 0 0 1 3

Notes:

Government in 2004 announced they would sustain a fleet of eight rather than 10 SSN submarines, originally proposed in the Strategic Defence Review.

The UK Government have said any decision on replacing Vanguard class would need to be made in the next Parliament, (2005-09).

**assumption made a new boat is delivered into service every 24 months.

***USA Congressional Research Service Report:CRS-26 , 8 November 2004, "Navy attack submarine force level goal and procurement rate : background and issues for congress".

5 October 2006

4 Page 68, para B.2.2, Defence Industrial Strategy, Ministry of Defence, December 2005. Back

5 House of Commons Defence Select Comittee inquiry into UK manufacturing and skills base. Terms of Reference (Source: Defence Committee press release 21 July 2006). Back

6 The nuclear cluster, Rear Admiral Andrew Matthews, Director, General Nuclear, Defence Logistics Organisation in DLO, the Nuclear Cluster, August 2006, UK Ministry of Defence. Back

7 The nuclear cluster, Rear Admiral Andrew Matthews, Director, General Nuclear, Defence Logistics Organisation in DLO, the Nuclear Cluster, August 2006, UK Ministry of Defence. Back

8 Meeting with Keep Our Future Afloat delegation, London, 13/12/05. Back

9 Lord Drayson in visit to Keep Our Future Afloat stand G2 at Labour Party Conference, 27/9/06. Back

10 Defence Industrial Strategy, UK Ministry of Defence, 2005. Back

11 Delivering Security in a Changing World, Cmnd 6041, December 2003, para 3.11. Back

12 The Nuclear Cluster, Defence Logistics Organisation, UK Ministry of Defence, August 2006. Back

13 The Nuclear Cluster, Defence Logistics Organisation, UK Ministry of Defence, August 2006. Back

14 The UK Submarine Industrial Base, a report to Furness Enterprise Limited, Centre for Defence Economics, University of York (December 2003). Back