Examination of Witnesses (Quesitons 100-119)
MR DAVID LOCKWOOD, MR KEN MUNRO AND MR NIGEL STEWART
29 JANUARY 2008
Q100 Mr Davidson: Can I clarify that that is what you wish to see?
Mr Stewart: We take on the best apprentices and the best candidates we can from the local area. We do not discriminate between areas.
Mr Munro: I think it is worthwhile adding to that that the standards required for modern apprenticeship are very high and not everybody is going to be able to achieve that. I think our education system is looking at that now; I do not know how widespread it is, but certainly more and more colleges are engaging the secondary school system and bringing pupils in who are perhaps more vocationally minded and bringing them through some vocational programmes rather than necessarily the academic programmes. I believe that will help. It might not help all these kids reach an apprentice standard but it will certainly help in terms of semi-skilled jobs, lesser skilled jobs.
Q101 Chairman: In your view can anything more be done by local government or Scottish Enterprise to encourage more apprenticeship from the local area, but particularly from deprived areas?
Mr Munro: Certainly in Fife we have a stakeholder group which is facilitated by Scottish Enterprise Fife which engages all the public sector agencies, including secondary school representatives and college representatives and we are now talking about going into the latter stages of primary school and advertising engineering as a career. I think we have as much involvement as we can. At government level I am not sure how formal the programme is of extensively increasing vocational skills in that manner. I am not sure how organised it is or if it is being done more ad hoc on a basis of local education authorities. I am not entirely sure, but if there is an area to support I think that would be it.
Q102 Mr Devine: Moving onto the future, I think we are reassured about the security certainly into the middle of the next decade. You have a lot of expertise and skills, you are investing a lot in apprenticeship which we obviously appreciate and are very supportive of. Are you looking at other world markets? Are you looking for business in other places? You have a worldwide reputation; you are clearly looking at world markets. Is there a country of five million people that is building aircraft carriers anywhere else in the world that you know of? With your knowledge and expertise do you know of any other country of around the five million mark that is investing in the way that you have presented here today?
Mr Munro: I would not be able to put my finger on another country of this size that has this particular opportunity.
Q103 Mr Devine: What markets are you looking to in the future after the aircraft carriers?
Mr Munro: Babcock Marine is a naval support organisation and that is its prime core business at Rosyth and at Babcock's yard in Devonport. We are already operating in commercial areas. With the emphasis on transferable skills we have taken that high level of skill and exported it certainly to commercial markets mostly within the British market, not outside the British commercial market currently, certainly not extensively. We will continue to try to work wherever there are similar opportunities, particularly at Rosyth, for bespoke complex engineering products and that is what we believe the ship refitting skills enable us to do and we will carry on looking at that.
Mr Stewart: For us there are two specific areas where we are looking for growth, firstly a more aggressive stance in the export market for both building ships from the UK and looking at technology transfer and skills where there is a market in other countries. Secondly to look at developing our long term and through life support business both in the UK and in export markets. Those are the two areas we are looking at.
Q104 Mr Wallace: Who else in Europe has a naval dockyard capability and capacity similar to the United Kingdom? Is it just France?
Mr Lockwood: France clearly can build submarines but not nuclear submarines and aircraft carriers.
Mr Stewart: The Italians.
Mr Lockwood: Germany is quite an aggressive export ship builder.
Q105 Mr Wallace: In getting those export contracts how supportive and useful is it that you are part of Britain? Whilst DESO was out there helping to get skills transfers or direct exports, how useful is that?
Mr Stewart: Very useful; it is critical really. A lot of defence export contracts are government to government type relationships, certainly on the naval side. The Royal Navy is seen as the leading navy in the world and looking at the kinds of ships and the products they take, government support is very, very important to us on the export side.
Q106 Mr Wallace: One of the things the Government did very well was the US/UK defence trade treaty. Will that be benefit directly to you if that is ratified by the Senate?
Mr Lockwood: I think the devil is in the detail. It is impossible to say until we know what is ratified.
Q107 Mr Wallace: It would certainly help Scottish defence if it is as it says on the tin, if it does allow you that export licence to the United States.
Mr Lockwood: We could go so far off agenda as to be untrue, but it also then depends how much you then get tied up in terms of third party export markets thereafter.
Q108 Mr Wallace: Defence electronics, which is about half the Scottish defence industry, really needs those exports and getting a foot in the door is very important.
Mr Lockwood: There is no doubt DESO has played an important role for our exports.
Q109 Mr Davidson: One of the things you have alluded to in the past is the question of an independent Scotland and so on. When you mention these other yards in France and Germany and Italy, if the Scottish yards were competing for Royal Navy work from a position of an independent Scotland and they were competing presumably on exactly the same basis as the French and the Germans and Italians, would we be in such a secure position for both Rosyth and the Clyde? Is there the possibility of being undercut? There is often an assumption that we will automatically get this sort of work, but if you were posed directly against the French would we be getting necessarily the same amount of work as you are getting at the moment?
Mr Stewart: That is a difficult question. Most of those countries will not compete the warships outside of their own country so when would we have the opportunity to build carriers or frigates for France, Italy or Germany? We do not.
Q110 Mr Devine: One of the reasons for the adverse publicity was about the MARS fleet tankers. John Nolan, one of your shop stewards, was quoted as saying that if the tankers are on time Scotland will not have the capacity to build these tankers. Is that correct?
Mr Stewart: MARS is a complex programme and there are three different types of ship. The first batch of ships is what is known as the fleet tankers and certainly for the first two—possibly three—fleet tankers, they will be required to be built at the same time as the peak work load is going through on carrier and we would not have the capacity to build those. The important thing for us is life after carrier and not life during carrier, keeping flexibility to make sure if later ships are required to sustain sovereign capability. We think that is really important.
Q111 Mr Devine: Can I go back to the point I made earlier on? Why were you not aggressively making these points when these attacks were made a few weeks ago? Why were you not as a company saying that what was being said was absolute nonsense? Why did you not explain the reality of the situation in a couple of sentences?
Mr Stewart: As I said, we have gone back to the whole of the workforce with a notice from the managing director and we are trying not to communicate all the political issues through the media and we have a very open dialogue on a number of issues with the MoD, but I agree that it is not helpful for the workforce.
Q112 Chairman: What level of work is necessary to sustain Scottish skills within the industry?
Mr Stewart: Again it depends what level of skills. Under the work we have done on the terms of business agreement then the minimum level of ship we seek to sustain within the UK sovereign capability for design, build and integration is a ship a year and probably a new design every five years. That is the kind of level in the business agreement.
Q113 Chairman: If there was a big loss of expertise in the UK ship building industry, what effect would that have and would the industry recover?
Mr Stewart: Our business is a high level technology business. The products that we produce—the Type 45 destroyer, the aircraft carrier, the frigate—are complex products so it is very important that we continue, and always continue, to invest in skills and training. You cannot build the type of product we have got with an unskilled workforce.
Q114 Chairman: Do you believe that the defence industry in the UK is investing enough in training and skills to keep this level of expertise or should the Government be doing more?
Mr Stewart: There are two things there. The level of training and skills depends on the stability of the forward order book; training and skills is directly related to the forward order book. If we have a long term view of stability then yes, there is always more support we can get but also there is an onus on us as businesses to invest in the long term as well. The reason we have been able to take the levels of apprentices we have done over the last five years is because of the certainty of the Type 45 programme and very strong commitments on the carrier programme. I think it is all to do with stability of forward load that allow the development.
Q115 Mr Davidson: I wonder if I could just go back to the MARS programme. As I understand the position you are prepared to see some of the cruder elements of the MARS programme go abroad if you are full up, as it were, but you are anxious lest that set a precedent for other elements of the MARS programme. The Government, as I understand it, has indicated that in its view it does not set a precedent. Can you clarify why you still have your anxieties because we will subsequently be meeting relevant people from the MoD and the Government?
Mr Stewart: I think there are two issues that UK Industry had on the MARS programme. It is right, if we cannot build them in the UK because of the clash with CVF that is one instance, but as I said before we need to look at life after carrier in the long term as well. We thought it was potentially premature to make the announcement before we have actually got the long term workload and we have the carrier on contract and we understand what we may need after carrier. I think when you get into the precedent that could be set, European law is very complex. At the moment the complex auxiliaries will potentially be used as part of the core programme in the UK but will we set any precedent with what has happened on the fleet tankers? We do not know and I think it is a very complex position where we are treading on new ground in some of the European law.
Q116 Mr Davidson: Many people in the European Union and the European Court of Justice are a bad lot and I accept that. My understanding of the Government's position was that even if they invited expressions of interest that would not preclude them from placing some of the orders with yourselves in the event of a trough. Do you have any legal advice that would contradict that view?
Mr Stewart: Not specifically. Again I think it all depends on what stage of the tendering process. The tender has been put out for the first four with options of two for the fleet tankers but they have not gone out to tender for the other two classes of ship.
Q117 Mr Davidson: My understanding is that they have not gone out to tender, they have invited expressions of interest.
Mr Stewart: Yes.
Q118 Mr Davidson: My understanding is that inviting expressions of interest does not commit the Government to go out to tender. Is that your understanding also?
Mr Stewart: I would need to seek absolute clarification.
Q119 Mr Davidson: I think it would be helpful to clarify this.
Mr Stewart: I can write to you.
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