Examination of Witnesses (Questions 312-319)
MR VIC EMERY AND MR IAN MCMAHON
1 APRIL 2008
Q312 Chairman: Good morning. First of all, can I welcome you to our session on Employment and Skills for the Defence Industry in Scotland. Can you introduce yourselves for the record, please?
Mr Emery: My name is Vic Emery. I am the Manager Director of a business unit in BAE Systems called Surface Fleet Solutions.
Mr McMahon: I am Ian McMahon. I am Head of Aerospace Defence and Marine for Scottish Enterprise
Q313 Chairman: Before we start with the detailed questions, would you like to make an opening statement?
Mr Emery: Not really. I am here to enlighten you to the best that I can and to inform you so that you can make your report as accurate as possible.
Mr McMahon: Similarly, I have no opening statement to make.
Q314 Chairman: We all know that the defence industry in Scotland is crucial for jobs, for prosperity in Scotland, can you tell us what Scottish Enterprise and other organisations are doing to support this industry?
Mr McMahon: Clearly we at Scottish Enterprise regard defence as an important part of the Scottish economy. Previously under our Priority Industry Agenda we had 12 priority industries, that is now 11 priority industries because as of today Aerospace, Defence and Marine is set up and established as a new priority industry within Scottish Enterprise. Previously we had an aerospace and defence priority industry and a shipbuilding and marine priority industry. That is now one specific team. What we are aiming to do is work across a broad range of activities in that sector, including areas such as the skills agenda, the supply chain agenda, research and development agenda, et cetera, et cetera, in an attempt to support Scottish businesses seeking to grow in the industry.
Q315 Chairman: Evidence from Scottish Enterprise states that there has been an upswing in Scottish employment in naval shipbuilding and a reduction in the United Kingdom, why is this?
Mr McMahon: Basically, the figures quoted in the written evidence are the ones that are available in public record, those have not been updated since 2005, therefore, from speaking to other companies independently, we are well aware that they have been taking on additional staff across a broad range of skills. That is in response to the fact that there is a relatively buoyant order book, particularly here on the Clyde and increasingly so in Rosyth, the two major companies involved in shipbuilding and the ship repair side. I suspect the reason why we are having an upswing, whereas other parts of the UK unfortunately are not, is because we are pretty good at what we do in Scotland.
Q316 Mr Davidson: Can I ask about the minimum level of work which is necessary to maintain the Scottish shipbuilding industry.
Mr Emery: I will attempt to answer that. From an engineering point of view, we would want to keep a minimum level of about 350 engineers. Below that we would get below what we would call a "critical mass" and, therefore, it would be unable to move back up again. As far as shipbuilding is concerned, there is no minimum level per se, we have to flex the workforce in order to meet the demands of the business which we have. When I came into this job in 2002 we were at about 1,800 people and there was very little work in the Govan facility and we have now built it up to 4,000, so you can flex the workforce. At the moment we are able to flex the industrial workforce.
Q317 Mr Davidson: What do you anticipate coming after the carrier, and what scale of work would be necessary to maintain the capacity?
Mr Emery: As you are aware, the Defence Industrial Strategy anticipates that after the carrier there will be a reduction in the overcall capacity in the UK. From an MoD perspective—I am saying this without reference to any export contracts which might come along—they are planning to build approximately one 5,000 tonne vessel every 12 months and that would result in a workforce across the UK of about a third of the size that it is today.
Q318 Mr Davidson: Am I right in thinking that unless there are export orders which are won, then there would be severe detraction in the industry after the carrier?
Mr Emery: There would be a re-organisation of the industry after the carrier, yes, and that was contemplated in the Defence Industrial Strategy document.
Q319 Mr Davidson: That leads me on to the question of export orders. When we had evidence from the RAND Corporation, I think it was Hans Pung was indicating that one of the difficulties in bidding for export contracts was that the work you were normally doing for the Royal Navy was so complex and so difficult that there were not very many people elsewhere in the world who would want those types of ships and that therefore required you to have to redesign and so on and so forth, which was not necessarily a problem with some of the other countries within Europe. Do you think that is a fair assessment of the export market?
Mr Emery: I think there are two influencing factors. The first one is I would not disagree with what Hans Pung has said. Traditionally, the Royal Navy has had specialist vehicles. They build ships for a specific role rather than for what other countries would call a multi-purpose role. The MoD does design for a specific role and that does restrict the ability to export those ships. The Royal Navy has a history of going to war and fighting and winning, so there is a lot of complexity which is built into their products that other countries do not necessarily need to have and, therefore, to re-engineer those products would be quite expensive.
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