Conclusions and recommendations
Shipbuilding in Scotland
1. The UK has consistently built its own warships. It wants to retain the capability to design, build and maintain such warships in this country, keep the skills and industry to do so, maintain freedom of action over its own navy, and because of the sensitivities around some of the equipment involved.
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2. EU law requires major procurement contracts to be offered for open competition. Member states can use various exemptions to place contracts with preferred suppliers. One such exemption, Article 346, allows countries to exempt defence procurement on the grounds of national security. The UK has consistently excluded the construction of complex warships from open competition using Article 346. If Scotland was a separate country, then the Ministry of Defence could not use Article 346 to favour shipyards in Scotland because they would no longer be within the UK.
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3. In those instances in which the Ministry of Defence has decided not to exempt contracts on the grounds of national security, it has then been obliged to offer the contract for tender internationally. In such a situation, any shipyards in Scotland would have no preferential status and would have to bid for the contract on the same basis as other international yards.
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4. We are convinced that the MoD will not award the Type 26 contract until after the outcome of the referendum is known. If the result is a 'No' vote, we believe that the work will be carried out on the Clyde, whereas a 'Yes' vote will result in the work being carried out in Portsmouth. The sooner the referendum takes place, the sooner the decision will be made and the sooner there will be an end to the uncertainty.
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Refit and maintenance - Rosyth
5. At the moment, there are facilities in Scotland that are well placed to carry out the support work for the Queen Elizabeth Class carriers, and if successful, could guarantee work spread over fifty years. The same rules around limiting contracts to build warships within the UK on national security grounds also apply to aspects of the contract for refit and maintenance, where the UK would wish to preserve its freedom of action. The decision as to the support contract for the carriers similarly appears to be subject to the same uncertainty as that for the Type 26 frigates brought about by the referendum.
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Options for the Scottish yards
6. We remain unconvinced that the likely size of any future separate Scottish defence procurement budget would be large enough to buy any of the complex warships currently built in Scotland, nor would they have, on the evidence we have seen, a use for such warships.
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7. The UK Government, through the TOBA, committed to three ship building programmes: the Type 45 destroyers, the Queen Elizabeth Class aircraft carriers, and the Type 26 frigates. The first two have benefitted Scottish shipbuilding and the third has the potential to provide work for well over a decade to come. We are aware of the scale of the potential work available if Scotland remained in the Union.
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8. A separate Scotland might inherit assets from the Royal Navy. Inherited assets might meet the needs of the Scottish navy, in which case it would not appear to need to build any new ships. If inherited assets did not meet the needs of a possible Scottish navy, then it would be helpful to know what warships the Scottish Government have identified they would need and might wish to have built in Scotland.
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9. We urge the Scottish Government to recognise that the Royal Navy is the major customer for the Clyde shipyards but will only remain so if Scotland is part of the United Kingdom. The Scottish Government should now set out how it proposes, in the event of separation, to match the level of work provided by the Royal Navy. The workforces in Govan, Scotstoun and Rosyth need to know their futures as soon as possible.
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Submarines
10. A separate Scotland could decide it needed conventional submarines. The UK does not have any conventional submarines so it could not inherit any from the Royal Navy. Scotland could build its own submarines from scratch, after developing the skills to design and build from the start, or it could buy a pre-existing design under licence to build a proportion in Scotland. Either method would be prohibitively expensive. Any investment in buying diesel electric submarines would reduce the resources available to invest in other capabilities.
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11. The shipbuilding workforce in Scotland does not currently have the specialist skills needed to build submarines. Acquiring those skills would be a lengthy and costly process, and might create 500-600 jobs during construction and at best sustain 150 jobs over the long term.
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Exports
12. There is a range of questions about what kinds of warship a separate Scotland might try to build and export, particularly if its own navy is limited in size and is not able to match the combat effectiveness of the Royal Navy. There is a huge question mark over the viability of the Scottish yards in a separate Scotland.
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Shared procurement with the UK
13. A separate Scotland could be expected to develop its own foreign and defence policies. The SNP is explicitly committed to developing a divergent foreign and defence policy, including the eviction of Trident at great expense and inconvenience for the UK and its NATO allies, and the establishment of different criteria for involvement in overseas deployments. This is hardly the best way to persuade the UK to enter into any joint procurement.
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