Examination of Witnesses (Quesitons 120-135)
MR DAVID LOCKWOOD, MR KEN MUNRO AND MR NIGEL STEWART
29 JANUARY 2008
Q120 Mr Davidson: My understanding is that inviting expressions of interest would not oblige them to put all or any of the ships out to tender but if you do have different legal advice then it would be important to be aware of that in order that we could raise that with the Government.
Mr Stewart: We will send you a note with our position on that.
Q121 Mr Davidson: Similarly the question of precedent that this might set for other ships. Again my understanding of the Government's position is that it does not create a precedent because the other MARS ships are more complex and therefore they could be quite easily described as being a different kettle of fish, so to speak. If that is not the case and you have evidence to support your position then I think it would be helpful if we could have that as well.
Mr Stewart: I think it is the definition of a warship and what is simple and what is complex.
Q122 Mr Davidson: I do not trust the European Union either but I think it would be helpful to have your position.
Mr Stewart: We will summarise our position for you.
Q123 Mr Wallace: I know you have not seen the detailed requirements of the fleet tanker, but what is the difference? If I were to go and buy a tanker as opposed to a military afloat part of that programme, what is the difference roughly?
Mr Stewart: The fleet tankers need helicopter capability, different speed; there are different requirements. There is no doubt—and that has been clarified by the MoD—that the tankers are not pure fleet tankers that you would go and buy.
Q124 Mr Wallace: So there is a physical difference?
Mr Stewart: Yes, they have war-like features.
Q125 Mr Wallace: In any other country it would be a military procurement. Do you know anyone else who buys their military auxiliary ships this way in Europe?
Mr Stewart: Not for the major countries we talked about earlier, France, Germany or Italy.
Q126 Mr Wallace: If some of the other programmes give—there is still a lot of uncertainty in the ship building programme, is Type 45 going to be eight, is it going to remain six, is the Astute submarine fleet going to be the size predicted—let us say the Astute Class gives, how interchangeable are some of those yards to say, "Well, we've got a trough, we could do a tanker." The Government still have not cleared some of these programmes. Do you anticipate troughs and if so are they in the right yards to be interchangeable to take up the slack here?
Mr Stewart: There are different types of skills, whether auxiliary or for Astute Class submarine or even for the Type 45, but a lot of those are common skills. What we have to do—certainly when the joint venture is formed—is to work with the Government beyond the short and medium term. For the next five or six years we have a good view of what the workload is. We have the future surface combatant which will be the next generation of frigates but exactly how that fits in between the carrier finishing and the FSC starting as of today we do not know. I think that is where we need to keep flexibility.
Q127 Mr Wallace: Am I right in saying that Barrow has produced in the past support ships and auxiliary ships for the Navy?
Mr Stewart: Yes
Q128 Mr Wallace: And it is currently doing Astute so if there is a slippage in the Astute programme it could go to Barrow.
Mr Stewart: Barrow has the capability to do surface ships, yes.
Chairman: We fully understand that there is no level playing field when it goes for tender over Europe because there are hidden subsidies, there is cheap labour from Poland and other countries and we do take those matters very, very seriously. If you have anything you want to write to us about we would be happy to take that on board.
Mr Davidson: Can I just ask one final question?
Chairman: Yes, I will allow you that.
Q129 Mr Davidson: I wanted to ask about intellectual property rights and whether or not being in an alliance could inhibit any of you from being able to bid for any external work in the future, given that you are part of an exercise which is pooling the intellectual property for the carrier and so on.
Mr Stewart: Specifically on the carrier it is very unlikely we are ever going to export a carrier so on that specific programme it is not a major programme. What is important on things like the future ships, future service combatants—of which we are working with the MoD as well to look at the UK design and perhaps to make it more exportable—is that we do not end up in a position where IPR is confused which actually will hinder the ability to export. On carrier I do not think it is an issue because of the nature of the programme but it is an important issue that we should clear at the start of the programme to make sure that if there are export opportunities we have clarity and no hindrance through the IPR process.
Q130 Mr Davidson: To be clear, is that in the process of being resolved at the moment? We would not want to find ourselves in a position where Scottish yards could not maybe tackle work for the Government because someone else had an involvement in the intellectual property rights.
Mr Stewart: We are at the very, very early stages of the concept design on FSC and we are having the IPR discussions now.
Q131 Mr Davidson: Is it the same for yourselves?
Mr Munro: I am afraid that is not my area of expertise; I could not add further clarification to that. I will seek a Babcock view if you require it.
Q132 Mr Davidson: It would be helpful to have that. For Thales, you are part of a multi-national group with a French parent. Are there intellectual property rights issues for yourselves that might inhibit you from going into markets where you might be competing with your French parent or other subsidiaries in the same group?
Mr Lockwood: No, it is the reverse actually. Because of the global footprint in the last year we have sold in places where we would not have done if we were just a standalone entity. There will be occasional things but in general it works the other way round.
Q133 Mr Davidson: The other point I wanted to pick up and it would be helpful if we got a note from each of you indicating is what you do for your local communities. I think that the ship building industry and the defence industry is an important one in Scotland and it is not just about jobs and so on. I think it would be helpful if we got a note indicating the extent to which you are good neighbours to your local communities since certainly some of you are in areas of multiple deprivation and can make a valuable contribution there. The final point I want to raise is about your relationship with the MoD. It has often been suggested to me that because of the location of the MoD—much of it in Bristol and down in the south west—that there is a bias in favour, conscious or unconscious, of Babcock and other people down in the south west and that the future is not secure. Indeed, it has even been suggested that 15 to 20 years out the MoD might see no future for ship building in Scotland and are quite happy to have it down on the south coast where it is easier for them to commute. Is there any evidence in your view for that cynical view of the MoD?
Mr Stewart: I think if you look at the current evidence on the aircraft carrier programme, out of the allocated work there is more allocated work in Scotland. I do not think the evidence supports that on current programmes; where we might be in 15 years I do not think we can speculate on that.
Mr Munro: We have a very good working relationship with the MoD, whether it is south or north of the UK. I do not see that becoming an aspect and it would certainly be our view that we continue regardless of where we are represented as Babcock Marine to be the prime supplier of support service to navy ships and submarines. I do not see the specific issue of the MoD.
Q134 Mr Davidson: You want to be the prime supplier of support services; you could of course do that from a number of locations and therefore the suggestion is that you could quite easily decide to relocate it down south rather than continuing to do it from Scotland.
Mr Munro: Certainly in the Scottish context we have proven to be the prime provider over the past few years and are encouraged by the MoD's response to that. It is certainly our intent to carry on beyond CVF to be service provider both north and south.
Q135 Chairman: Can I thank the witnesses for their attendance. Before I declare the meeting closed would you like to say anything in conclusion, perhaps an area we have not covered during our questioning?
Mr Stewart: No. Thank you for your time.
Chairman: Thank you very much; your evidence has been very helpful.
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