HC Deb 27 November 1958 vol 596 cc697-708

Motion made, and Question proposed, That this House do now adjourn.—[Colonel J. H. Harrison.]

10.10 p.m.

Mr. Frederick Willey (Sunderland, North)

I wish to raise the subject of the future prospects of the British shipbuilding industry. On the surface, there does not seem to be very much to worry about. Output is being maintained and the order book shows between five or six million tons. However, if we look a little further, there is a good deal to cause concern.

If we look at the employment figures, the industry is now employing 15,000 less than it did 12 months ago. There are no vv about 13,000 men unemployed in the industry. Most of the unemployed are in ship-repairing, but it is significant that they have not been absorbed by the shipbuilding industry. If we look at the shipbuilding localities, we find that local unemployment is already beginning to show.

Looking at the order book itself, we find that particular yards, at any rate, are now facing difficulties. I know of two yards on the Wear which are already apprehensive. A third of the yards which provide dry cargo vessels will lay their last keel next year. Half of the 40 or so specialist firms have made their last launch this year, and the remainder will launch their last vessel next year unless they receive further orders.

Looking beyond the shipbuilding industry at shipping itself, we have to recognise that freights are now running at an index of about 66 as compared with 189 a couple of years ago. Moreover, these freight rates are 20 points less than the rate obtaining at the last crisis in 1954. We have to recognise that the depression in world shipping has persisted now for 18 months without any sign of recovery.

More important still, the trade recession is only part of the cause. If we look at the volume of the world mercantile marine, we find that whereas it was 69 million tons pre-war, it is now 110 million tons, without paying regard to the "moth-ball" fleet of 14 million tons of the United States. Indeed, the United States has not only a subsidised fleet but it has also the "Panlibhonco" fleet, which has already reached 15 million tons. All of us who are concerned with shipping and shipbuilding are concerned also about United States policy with regard to shipping and its effect upon shipbuilding.

This situation calls now for some Government action. That Government action must be not only domestic it ought to be international, too. I suggest that we should consider what action we can take within the N.A.T.O. Powers. The longer we procrastinate, the weaker becomes our negotiating position.

To turn to shipbuilding, the complacent notion that the order book was shortening and our competitive position would thereby be improved has gone. We realise that we now face a remarkable situation in world shipbuildng. Quite true, there has been some slackening of output from the Japanese yards, but this year, surprising though it may seem, world shipbuilding will attain a record output. The industry is catering for a boom which no longer exists and has not existed for 18 months.

The figures are certainly a cause of real concern. The capacity of world shipbuilding before the war was about 3 million tons. In 1950 it was 3½ million tons. This year it is more than likely that the world's shipyards will turn out 9 million tons. In other words, they will be turning out new shipping at the rate of 10 years' replacement. We all know that the replacement rate for shipping remains at about 25 years. It is clear, therefore, that world capacity has considerably outrun demand.

Against this background we have to recognise that the record of British yards is disappointing and their position is becoming increasingly disturbing. To take the percentage of world output, whereas in 1948 British yards built over half the new shipping in the world, last year the percentage fell to 17 per cent. If we consider world tonnage for export, whereas in 1948 we were producing 41 per cent., a percentage which later increased to over half, last year that percentage dropped to 7 per cent.

Mr. Cyril Osborne (Louth)

As this is very interesting, would the hon. Gentleman break the figures down for cargo and liners?

Mr. Willey

No. I am concerned with the general position of the shipbuilding industry.

Mr. Osborne

As a whole?

Mr. Willey

Yes. I will return to the question of the importance of the export market to British shipbuilding.

Looking at our main competitors, we must recognise that Japan in 1950 completed 350,000 tons and last year completed nearly 2½ million tons. Germany in 1950 completed just over 150,000 tons and last year completed 1¼ million tons. British shipbuilding faces an entirely new competitive position in world shipbuilding.

On top of this, we are facing competition from countries which have considerable new capacity. The new element which has entered into competition in world shipbuilding comparatively recently is that of price. Japan is now charging 130 to 140 dollars for the same tonnage for which only a year ago it was charging 250 to 290 dollars. Not only are we now being out-competed by the Japanese, but more recently we have been out-competed by both the Germans and the Dutch.

I said to the hon. Member for Louth (Mr. Osborne) that I would deal with the importance of the export market to British shipbuilding. We have been accustomed to export one-third of the new shipping completed in British yards, but of the tonnage being constructed in British yards, only 10 per cent. is for export. In the light of the new price competition, we have now to face considerable British orders going abroad. I remember well enough the significance in 1938 when, for the first time, Britain became a net importer of shipping. The disastrous thing is that that has happened again. If we turn to the Lloyds' Returns for the third quarter of this year, we find that whereas we have under construction for export a quarter of a million tons of shipping, British shipowners have under construction abroad 377,000 tons. In other words, we have become once again a net importer of tonnage. This is a serious matter and we have to face up to it.

We should pay attention to the fact that the American Maritime Commission, which is charged with the responsibility of investigating shipbuilding abroad, has come to the very distressing conclusion, to quote the Commission's Report, that: The United Kingdom has been eliminated as a competing shipbuilding centre and it is not foreseeable that it will become a serious contender in the near future. That is the view of an American Commission to which we must pay regard. It means that at any rate we must have serious concern for the British shipbuilding industry.

In case I am thought to be unduly pessimistic, I immediately call in aid the Financial Times, which recently stated that unless they"— that is, British shipbuilders— can obtain new orders soon unemployment may occur in some areas. We must recognise that at the moment cancellations are running at a rate three times that of new orders. We must realise that many of these orders are subject to immediate or early cancellation and that the very substantial order book could evaporate if this position continues.

I concede at once that the British shipbuilding industry has twice since the war faced a position such as this. We faced difficulties in 1949 and in 1954, but surely we cannot anticipate another Korea. We cannot anticipate another Suez. In fact, the disturbing feature is that the international crises during the past 18 months have not affected the freight rates, because the position is very different now. We now have a surplus of both shipping and shipbuilding capacity.

In this situation, it seems to me that the Government are unduly complacent and almost indifferent. I discharge the Civil Lord from any such stricture. I realise that he is interested and concerned about shipbuilding—he has been visiting the yards on the Clyde. I am talking, however, of the attitude of the Government at large. Again I call in aid the Financial Times, which recently said: The Government in its distribution of industry policy will have to examine very carefully the employment prospects of the shipbuilding trade over the next few years. What sign have we that that is being done? Development Area policy must mature if alternative employment is to be provided. If alternative work is to be provided in the yards, these are matters which must be thought out beforehand.

To turn to the industry itself, I say no more about shipping than that everybody in this House would recognise that some initiative from the Government in the international sphere is called for. It also calls for examination of the various requests that have been made for domestic action. If we turn from shipping to shipbuilding, we get the same indifference.

I have repeatedly made a modest proposal. I have asked for no more than a fact-finding committee. The Civil Lord will say again that there is the Shipbuilding Advisory Committee, but that is not enough. I am asking for a high-powered committee because I am sure that if its report was published it would create the climate in which the Government would be bound to take effective action. I very much wonder, however, whether the time is not becoming rather late for such an approach. We might as well consider whether we should not have a Reorganisation Commission to examine and take effective action about the difficulties that confront the industry.

This is an assembling industry, depending largely on management and on labour. Here is an industry with high labour costs. I should have liked such an examination of the problems of the industry. Let us make a new approach to the industry and consider such matters as value engineering, lay-out, reorganisation on a wider scale in the individual yards and standardisation. I am not being dogmatic about these things. I realise that equally important with standardisation is the question of operating costs, but let us have this examined. Let us see whether we can get batch production and longer runs. Let us also examine demarcation, a problem about which both sides of industry realise that something must be done. There is the difficulty of each side of the industry taking effective action. I would like such a committee to consider this matter.

I would like a greater incentive and initiative to be given to research. I join my hon. colleague the Member for Sunderland, South (Mr. P. Williams) in recognising the importance of a new form of propulsion. This might change the prospects for shipbuilding. It is a very sorry thing that we lost the lead on the diesel engine. We have the lead at the moment on the gas turbine.

I should like to see more resources being given to the promotion of gas turbine propulsion. I also support the hon. Member for Sunderland, South on nuclear propulsion. These are matters to which we must give the same drive that we give to aircraft industry to ensure that British shipbuilding maintains its position in the world.

We have also to consider immediate short-term remedies. I appreciate the visit of the noble lord, Lord Selkirk, to the Tyne, but his statement was disappointing. I should like the Admiralty to be pressed by an independent committee so that we could be sure that it was taking whatever steps are open to it to help maintain work in our repairing yards.

I notice that the managing director of Fairfields raised the point of aid to the industry. I have been waiting for it to be raised. I make no excuse about the industry asking for aid. I believe in a measure of national planning, and aid for industry is an aspect of planning. If we consider aid, we have to consider in advance the forms of aid and whether they should be accompanied by different forms of scrapping redundant shipping, the building of a reserve fleet and the like. All these are questions which should be considered now. There are also more urgent questions of providing long repayment loans. Aid has been given to the aircraft industry for large civil aircraft. This is not a purely constituency point when I say that I regard shipbuilding as being as important to Britain as the British aircraft industry.

Mr. Paul Williams (Sunderland, South)

Does not the recent statement about the Export Credits Guarantee Department cover the point which the hon. Member is making?

Mr. Willey

I hope so, but I have in mind the effect of the Japanese terms to shipowners. We should consider how we can make ourselves equally competitive. I know that the hon. Member for Sunderland, South has views about taxation and I think that all these matters should now be considered. I do not wish to be dogmatic, but I want an earnest constructive approach towards a great national industry which has been neglected before and which we hope will not be neglected again.

10.27 p.m.

Mr. Paul Williams (Sunderland, South)

The hon. Member for Sunderland, North (Mr. Willey) recommends a high-powered committee, but in detail he makes no particular recommendation. If we were to look at this matter from a partisan point of view, we could say that the hon. Member is not yet in a position to make a detailed recommendation, but it is a worrying thing that neither are we on this side of the House. The hon. Member suggested a planning committee, Although that may be all right from a long-term point of view, it does not meet our problem now.

The hon. Member also raised the question of taxation, to which I have given a certain amount of attention. That matter is out of order this evening, but that seems to me the only way in which, in practice, the Government can immediately help the home shipowning industry. I certainly intend to write to the Chancellor of the Exchequer on this point, and I hope that in due course the Admiralty will support us who are interested in shipping and in the shipbuilding industry. If I can consult with the hon. Member for Sunderland, North, not with a view to pressing for a subsidy for the industry, but with a view to asking for the removal of the burden of taxation, I think that that would be a more positive and immediate way of doing something about this problem.

I hope that my hon. Friend the Civil Lord will say something about the Export Credits Guarantee Department. It seems to me that if the facilities which are made available to the aircraft manufacturing industry were applied to shipowning they could be of as much help to shipbuilding as they are intended to be to aircraft manufacture. If we can have an assurance on that point I shall be extremely grateful.

10.29 p.m.

The Civil Lord of the Admiralty (Mr. T. G. D. Galbraith)

I regret that I have had to cut out from the debate two hon. Members whom I know would have liked to speak, but there is not a great deal of time.

The hon. Member for Sunderland, North (Mr. Willey) made a very interesting and well-informed speech, and I agreed with much of what he said. I will do my best to answer most of his points. However, I could not agree with him when he suggested that the Government were complacent about this matter. That was a ridiculous suggestion. Sponsorship for the shipbuilding and ship-repairing industries is one of the Admiralty's responsibilities in which the Admiralty as a Department and myself personally take a very great interest.

It is now nearly six months since we last had a debate on this subject, and I am glad of the opportunity provided by the hon. Member for Sunderland, North to bring the picture up to date. In June, it was generally agreed that in spite of difficulties in some respects, overall the shipbuilding industry was in a reasonably strong position.

Since then, so far as I can make out, in spite of everything the hon. Member has said, there has been no great change in the position. The order book in June stood at about 6 million tons and today it stands at about 5.7 million tons. In June, there was some cause for concern because of the cancellation of orders. Naturally, that concern still exists, but there has not been any recent spate of cancellations and, so far as I can see, at the moment the future in this respect seems to be slightly brighter than it was.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East)

Does the hon. Member realise that there are now 1,300 men out of work in the shipbuilding and ship-repairing industries on Tyneside alone, as against 400 a year ago, and that that causes concern?

Mr. Galbraith

As the hon. Gentleman the Member for Sunderland, North stated, that is mainly in the ship-repairing industry.

Dame Irene Ward (Tynemouth)

It is very important.

Mr. Galbraith

Of course, it is important, but we are discussing the prospects of the shipbuilding industry.

The figure for the rate of completion remains steady at about 1½ million tons a year and it looks like continuing at that rate for at least the next two years. Therefore with the order book at approximately 6 million tons, and a rate of production of 1½ million tons a year, the shipbuilding industry would seem to he in a fairly sound position.

Unfortunately, as was pointed out, in spite of this overall strength, there are some firms building smaller types of ships which are rather badly off. I know that a number of yards will not have further work to lay down once their present orders are completed, and empty berths have already begun to appear for those firms, as distinct from the larger firms.

The position is serious, as I know only too well because I have just returned from a visit to some of the smaller yards on the Clyde, where I have had the advantage of hearing about these difficulties "straight from the horse's mouth." Although we know a lot about the difficulties, the correct remedy is far from clear. Indeed, it is not clear whether a remedy for the industry is needed. Even the industry, which discussed this problem with me, is by no means sure of the solution, and at this moment I am waiting to hear from the industry the results of its deliberations on the subject.

Mr. P. Williams

Both sides of the industry?

Mr. Galbraith

Not both sides of the industry—one stage at a time. I have asked the employing side of the industry and when I have that answer, it will be opportune to discuss the matter with the other side.

Mr. Blenkinsop

Does not the hon. Gentleman feel that it is time to draw both sides of the industry together for a conference on this urgent matter?

Mr. Galbraith

Bringing both sides together is a matter which I intend to discuss if there is time.

The trouble is that a world-wide depression in freight rates, following upon the recent heavy building programme, has created a situation in which there is likely to be the keenest competition between the various shipbuilding countries in the world. This means that if British yards are to secure orders they must be able to offer high-quality goods, a reasonably firm price and a reasonably firm date of delivery.

I do not think that we have very much to fear in this country about quality. As for price and date of delivery, there are three things which will make a great deal of difference: first, the state of modernisation of the yards; secondly, the availability of material; and, thirdly, the effective use of the labour force, which I believe is probably the most important of them all.

It is when we come to this third factor in competitive ability—the relationship between management and men—that things are perhaps not quite as good as they ought to be. I know that this is a very difficult subject to discuss, but criticisms have been made of the shipbuilding industry in this respect by people abroad and it is perhaps only common sense to try to see ourselves as others see us.

Two main complaints have been made by these foreign observers. First, they say that somehow or other the industry has not the right relationship and sense of confidence between men and management and that it needs a move on both sides to put this right. In a way, I am surprised by this observation, because I have met both sides of the industry, and generally I find them most reasonable and helpful; but somehow or other they do not seem to be able to hit it off together.

The second criticism from abroad is that we have not yet adjusted our shipbuilding trades and customs to modern methods of shipbuilding and that we are not taking the best advantage of the new techniques. Here again, it is very difficult and probably rather presumptuous for an outsider to say what ought to be done to put the matter right, but I think that most people will agree that in this sphere there are difficulties which must he overcome before we can say that the industry is truly efficient and truly competitive.

What I fear are not the international matters to which the hon. Member referred. What I fear is that if these difficulties are not overcome then they are bound to have the effect of influencing ship owners to place their orders in foreign yards, because in the last resort, as the hon. Member said, it is firm dates and firm prices which determine where the orders will go.

What I have said is in a way rather cold comfort because what it amounts to is that, as I see it, the most necessary thing to be done for the future prospects of the industry is for the industry to help itself. I think that to a certain extent the hon. Member agrees with me. He suggested, however, that some other things might be done, as did my hon. Friend the Member for Sunderland, South (Mr. P. Williams); they both suggested that something might be done to extend credit. The evidence, as far as I have been able to obtain it, is that up to date no British ship owners have placed orders abroad because of better credit facilities. Nevertheless, we are keeping an eye on the position and when ordering starts again, if easier credit facilities turn out to be the determining factor, we shall certainly examine the possibility of helping the industry in this way.

As to the committee which the hon. Gentleman and my hon. Friend wished to have, I have listened carefully to what has been said but I am still not convinced that we have not all the information we need. I distrust committees and reports. I think that we have too many of them. But I am always open to conviction, and if the hon. Gentleman likes to continue the discussion later I shall be glad to listen to his suggestions.

I do not believe that there are just reasons for taking a pessimistic view of the prospects of the industry. Technically, it is in a strong position. The principal yards are up-to-date and the main weakness in the industry, if our foreign friends are right, is in the field of human relations which it is well within the power of the industry to improve itself. I have no doubt that if men and management find that orders are going elsewhere because other yards are more efficient in the use of labour, they will soon buckle to, in their own way, to prove once again that our shipyards can solve their own difficulties in bad times just as well as they can in good times.

In saying that, I do not want the House to think that I am suggesting that the present difficulties are due to any defects in the industry. They are world-wide and affect every country alike. All I am saying is that once orders begin to pick up, as they are bound to sooner or later, on an international scale, competition for them will be extremely keen. Therefore, I think that it behoves the industry, during the present lull, to make certain that it will be in a position to face that competition and to get a good share of any orders which may be going.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty minutes to Eleven o'clock.