§ Mr. Ian Davidson (Glasgow, Govan)
This is the first debate that we have had for some time on the shipbuilding, ship repairing and other maritime industries. I hope that it will be the first of several exchanges to take place both here and elsewhere within the House on this important issue, because it is widely recognised that important changes have taken place in the industry over the years: it has been rationalised, privatised and then rationalised again, and it now bears no resemblance to the traditional image of shipbuilding as an old-fashioned rust bucket industry. Instead, it is a high-tech, high-skill, high-investment industry in which Britain needs to play a part in future.
For both industrial and national defence reasons, it is important that we safeguard the shipbuilding industry and do all that we can to ensure its success. Given the projected increase in the world market for shipbuilding, we must ensure that the UK gets its fair share of future orders. Hon. Members on both sides of the House should agree that we need a partnership between the public and private sectors to ensure that the industry does as well as it can. In those circumstances, the private sector's role is to ensure that the industry is efficient, adequately financed and resourced, and in a position to compete and win orders. The public sector's role is to ensure that the competition which the industry enters into is fair and that there are no hidden subsidies or support elsewhere.
Although the privately owned industry is efficient thanks to the efforts of management and unions, the danger is that it will not win orders abroad in the magnitude that its efficiency warrants because of unfair competition. There must be a level playing field or, more appropriately in these circumstances, a level swimming pool. If the effect of a tilted playing field is significant, hon. Members will realise that the impact of a tilted swimming pool is even more substantial if one is trying to swim uphill. We need a market that is fair and regulated, and we must establish that the rules are the same for everyone.
I wish to raise three major areas of concern. First, the world market is likely to be substantially affected by an unwarranted expansion of the Korean shipbuilding industry. South Korea caused a glut in the industry by its tremendous expansion during the 1970s. That led to a refinancing requirement in the 1980s, when the industry had to be bailed out by the South Korean Government. The South Koreans now propose a tremendous increase in their yards, which is not warranted by their financial circumstances. The South Koreans are showing that they are willing to buy market share using Government subsidies, both direct and indirect, which involve free and heavily subsidised financial packages.
Do the Government accept that that is the position and, if so, what do they intend to do about it? There is no point in British industry making great efforts to increase efficiency if it is to be beaten by unfair competition by foreign yards. The South Koreans have clearly decided that they have a strategic industry and want to take their share of the market in shipbuilding, but they should not be allowed to drive out British yards by unfair competition.
My second concern is about state aid in Europe. Germany is clearly prepared to pay a substantial amount for reunification, which involves propping up, 271 modernising and investing in east Germany. The impact of that on the shipbuilding sector is to give German yards an unfair advantage over their competitors. Substantial allegations have been made that German yards are winning orders at, effectively, below real costs. I should be grateful to know whether the Minister accepts that assertion and, if so, what he intends to do about it.
Elsewhere in Europe, publicly owned yards that still operate as part of the nationalised sector, particularly in Spain and Italy, receive concealed Government subsidies to allow them to bid for orders abroad. The Minister will be aware of the current competition for orders from the South African navy. This may not be the appropriate time to discuss the details of that, but there are grave concerns about whether the Spanish competitor has an unfair advantage over Yarrow on Clydeside. I hope that, once that order is resolved, the Minister will be prepared to look into that issue.
Similarly, France has just received substantial assistance, which has been agreed by the EC, for restructuring. The danger is that that money will be used not to restructure but to buy orders. The Minister will be aware of recent reports that the Royal Caribbean order of two vessels at some $270 million each involves a subsidy of approximately $130 million per ship. With that level of subsidy, any British yard seeking to compete without state support cannot do so. That differential is so enormous that fair competition can be achieved only by ensuring that there is equality.
My third area of concern is ship financing schemes. It is widely believed that Norway outside the EC and Germany, Denmark and Spain within it have better finance schemes than those allowed by the UK Government. If the Minister accepts that that is the position, what does he intend to do about it? David Smith, president of the Shipbuilders and Shiprepairers Association, and members of that association have raised that matter with the Minister and intend to meet him in future to pursue that important question. In reflecting the industry's concerns, the shipbuilding industry, its management and unions, are noticeably not asking to be propped up or subsidised. They simply ask the Government to ensure that competition with Europe and the rest of the world is fair because they believe that the strenuous efforts that they have made to make the industry more efficient should be rewarded by the opportunity to compete fairly.
I could go into great detail, but I recognise that this is not the time to do so because many other hon. Members wish to contribute to the debate. I hope that the Minister accepts that it would be more appropriate for him to meet a delegation to discuss those points in detail so that they can be more fully explored.
On military procurement, with the ending of the cold war, this is a time for industrial regrouping and alliance forming throughout Europe and the world. While it is not entirely clear whether that regrouping will be on an international or national basis, or whether it will be because of takeovers, industrial alliances or partnerships, it will none the less take place. The Government have a clear responsibility to ensure that Britain's national defence and strategic interests are protected and that that is not left simply and solely to the market.
§ Ms Rachel Squire (Dunfermline, West)
I support my hon. Friend's remarks. Will he join me in welcoming 272 today's expected announcement that two additional submarines are to go to Rosyth royal dockyard for refitting, which will help to guarantee 1,000 jobs? Does he also agree, however, that, first, it is vital for the defence interests of our country that Rosyth receives the contractual guarantees for surface ship work that were promised to it? Secondly, does he agree that the Government should adopt a procurement and industrial policy that secures what is left of our shipbuilding and ship refitting industries and recognises their vital role in the defence of the country?
§ Mr. Davidson
I agree. I hope that the Minister also agrees. It is extremely important that we ensure that any industrial rationalisation guarantees that our industrial and military capacity follows our defence policy and does not lead it. We do not want a repeat of the situation during the Gulf war, when the Belgians refused to sell us ammunition because they disagreed with our policy in that conflict. That decision could have had a horrendous impact upon our ability to exercise what we considered to be our national interest. It is important that our military shipbuilding capacity is preserved so that we can guarantee our ability to implement any policy on which we determine.
Given the limited time available to me, I shall not discuss what will happen at VSEL, but, in future, I hope that the Minister will be prepared to discuss that matter, either privately or in public, with interested Members. My hon. Friend the Member for Dunfermline, West (Ms Squire) has already referred to Rosyth, so I shall say nothing further about it or Devonport.
Sea safety is a relatively minor point compared with the sweep of issues that I have raised, but it is worth considering. It is in our national interest to ensure the highest possible safety standards for our mariners and the cargoes that come to our country. I hope that the Government will press as hard as they can to ensure that those high standards are maintained by all ships that come to our country. I hope that they will also do what they can to ensure that the shipbuilding and ship refitting industries are able to benefit from the commercial opportunities offered by such safety work.
§ Rev. Martin Smyth (Belfast, South)
I am following the hon. Gentleman's arguments carefully and I agree with everything that he has said. Does he agree that there is great concern throughout the industry that the Government are not paying enough attention to safety standards? As a result, we could lose our seat at the international conference that established the maritime safety conventions. The Government are failing to safeguard the rights of British people employed in the industry worldwide, who sometimes have to take orders from political commissars in contravention of those conventions. I believe that one of our representatives at the conference is a low-grade civil servant, who has little understanding of the industry. Surely that reflects the Government's concern about safety.
§ Mr. Davidson
I am grateful to the hon. Gentleman for raising that extremely important point. I am sure that the Minister will refer to it in his response, but I hope that he will not do so at such length that the answers to my questions are squeezed out.
The environmental benefits of sea travel are worth noting, particularly when so much concern has been expressed about road traffic and the fumes that it causes. 273 People should realise that sea travel, particularly cabotage, is an environmentally friendly method of moving goods around the European Community. The Government should encourage that practice wherever possible and ensure that our shipbuilding and ship repair industries take advantage of the related commercial opportunities.
The fact that so many other hon. Members want to take part in the debate demonstrates the importance that so many of us attach to the shipbuilding industry. I hope that this debate will not be the only occasion when shipbuilding, ship repair and other related industries are discussed in the House.
§ Mr. Gary Streeter (Plymouth, Sutton)
It is a pleasure to follow the hon. Member for Glasgow, Govan (Mr. Davidson), who led off this important debate extremely well. I find myself in the rather unusual position of agreeing broadly with almost everything he said—that spells the end of his political career. He was right to refer to competition, which is at the heart of shipbuilding and related maritime industries.
I must declare an interest as I am a partner in the law firm, Foot and Bowden, which has a large shipping department. I am not, however, directly involved in that work.
I am particularly proud to take part in the debate given the vast maritime history of the city of Plymouth. It is the city of Drake and of the Pilgrim Fathers, who set sail from the Mayflower steps. It still has strong maritime connections, because it is the home of the world-famous Devonport dockyard and naval base. It is the city of Millbay docks, from which Brittany Ferries takes passengers to France and Spain. It has a substantial fishing fleet and a waterfront and yachting facilities beyond compare in the United Kingdom. We hope to contribute to that maritime heritage with a national maritime aquarium. That will combine Plymouth's maritime history with our hunger for knowledge and the research carried out by the expanding and extremely successful university of Plymouth. I am sure that that aquarium will become a world-famous focal point. I look forward to its opening.
Maritime history is not just in the blood of Plymouth people but, as an island race, it is in the blood of all of us. Perhaps that is why we have a slightly different concept of the European Union than our continental partners. Perhaps, because of that, we do not want to participate in full economic and political union, unlike some of our European partners. We cannot buck not just the market, but our geography and our history.
I have an enormous sympathy for any hon. Member who represents a community in which an established and traditional industry has declined. That has happened over the centuries for a variety of reasons. Sadly, I represent such a community. When I first arrived in Plymouth in 1980, 13,500 people were employed at Devonport dockyard. That number has now fallen to 4,000. I accept that the industry was subject to overmanning in the old days and that naval requirements have changed, but that does not make it any easier for the people in that local community to cope with such downsizing, as the Americans call it. I understand the anger of the communities that have to cope with the huge impact of the decline of their traditional industries.
274 It is important to consider the Government's proper role in such circumstances. It is interesting that the hon. Member for Govan did not, to his credit, call for the loss-making industries to be propped up by taxpayer subsidy. He called for fair competition. That is the right approach. It is for the Government to ensure fair competition so that our shipbuilding and ship repair yards operate on a level playing field, or in a non-tilted swimming pool, with other shipyards throughout the world. I am not convinced that that is happening now. It is important that the Government do not allow competitive tenders for naval ship repair work to go to yards outside Britain, because it would be wrong for European shipyards to do such work. There is a real fear that the Government subsidies enjoyed by some shipyards on the continent enable them to compete more fully than our yards.
I was pleased that the hon. Member for Govan mentioned the Korean shipbuilding industry. Let me put down a marker on the subject of global free trade. In theory, we probably all support the concept, and if there were indeed a level playing field—as there doubtless will be in due course—such market conditions would of course be right; but the subsidies provided by other Governments, wage levels in other countries and all sorts of strange working practices make the road to our alleged goal of global free trade a rough and rocky one. Let us have competition by all means, but let it be fair.
I welcome the agreement reached by the Organisation for Economic Co-operation and Development in September 1994, which insists on the phasing out of subsidies for other shipbuilding yards and shipping industries generally. However, we must play our part in ensuring that other nations comply with their obligations. We are fed up with being the one nation that plays by the rules in Europe and the world, while others cock a snook at European directives and agreements. Let us be fair, but let us also ensure that no one takes advantage of us. There is no point in our shipyards and shipping companies being exposed to the full glare of competition and market forces if they must compete in a world in which other countries subsidise their industries.
We in Plymouth are fortunate to have Devonport Management Ltd., a highly successful company with a skilled and motivated work force that has attracted work from overseas and from outside the naval industry. That company now wants a period of stability and consolidation in the shipbuilding and ship repair industry, and fair competition.
Let me raise another constituency issue. British Aerospace Systems and Equipment Ltd., also based in Plymouth and a vital supplier of the naval industry, wants competition among major contractors. As I said on 16 February in the debate on the Royal Navy, it is important toencourage competition between British Aerospace, GEC and other major prime contractors, as the best means of ensuring value for money in naval, whole ship and systems procurements".—[Official Report, 16 February 1995; Vol. 254, c. 1190.]I hope that the Government will ensure that that competition is guaranteed.
My final constituency point concerns the excellent service that Brittany Ferries runs from Plymouth. For many years, we have had a very successful roll on/roll off ferry industry: it is possible to enjoy a pleasant cruise to Roscoff in France and Santander in Spain. The industry 275 is now developing, and other routes are being considered. I have used the company's services in recent years, and I can thoroughly recommend starting any holiday from Plymouth. Interestingly, 50 per cent. of British people who go to France and stay for more than four nights spend their time there west of a line from Le Havre to Biarritz. It is entirely wrong to begin a holiday by travelling from Dover to Calais; Plymouth is definitely the right starting place.
Many ferry operators fear that the Dover to Calais service is becoming little more than a floating supermarket. People are, in effect, enjoying an hour of duty-free shopping without even leaving the ship at its destination. Local newspapers are offering promotions enabling people to board such boats for 50p.
§ Mrs. Jacqui Lait (Hastings and Rye)
Does my hon. Friend agree that it is now cheaper to buy in France than to shop on the duty-free boats?
§ Mr. Streeter
My hon. Friend may well be right. I have not so far availed myself of that opportunity.
My point is that the impact on other ferry companies that cannot offer such a floating supermarket service is very great. Consumers are entitled to ask why they should pay so much more to travel to France from Portsmouth or Plymouth when they can sail from Dover to Calais for 50p. The answer, of course, is that the service is heavily subsidised by the duty-free shopping.
§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
On a point of order, Mr. Deputy Speaker. How much more must we hear about cross-border shopping in a debate about the shipping and shipbuilding industry?
§ Mr. Deputy Speaker (Mr. Michael Morris)
The subject is tangential to the debate, but it has some relevance to shipping in general. Nevertheless, I ask the hon. Member for Plymouth, Sutton (Mr. Streeter) to return to the main substance of the debate.
§ Mr. Streeter
The title of the debate on the Order Paper, Mr. Deputy Speaker, includes the words "and other maritime industries".
§ Mr. Deputy Speaker
I am aware of the title. I have ruled, and I hope that the hon. Gentleman will respect my ruling.
§ Mr. Streeter
I certainly will, Mr. Deputy Speaker—and you will be delighted to learn that I am approaching the end of my speech. [HON. MEMBERS: "Hear, Hear."] The ferry companies will be disappointed that Opposition Members do not consider them to be maritime industries; they employ a great many people. [Interruption.]
§ Mr. Deputy Speaker
Order. I do not think that that remark was required. If the hon. Gentleman wants to make such remarks, he should go outside.
§ Mr. Streeter
It is disappointing that Opposition Members remain stuck in the past. They see only the industries and businesses with which they are familiar; they forget that the world is changing all the time. My constituents who are employed by Brittany Ferries are concerned about their jobs and futures. They wanted to send me here to speak on their behalf. I am sorry that Opposition Members cannot see beyond the end of their noses.
276 A number of important issues need to be discussed and fair competition is at the heart of all those issues. The Government must play their part in ensuring that our shipbuilding, ship repair and other maritime industries are not prejudiced by unfair subsidies abroad, and I ask for an assurance from my hon. Friend the Minister that he is paying attention to the interests of those industries.
§ Mr. John Hutton (Barrow and Furness)
I congratulate my hon. Friend the Member for Glasgow, Govan (Mr. Davidson) on selecting this subject. As he said, this is the first occasion for some time—certainly the first occasion in the current Parliament—on which we have engaged in a wide-ranging debate about the shipbuilding industry: I welcome that, and I know that my constituents will as well.
It is incontrovertible that, as has already been said, the shipbuilding industry has been in steep decline for more than a generation. The results of that decline have been visible, and many Labour constituencies have lived with the consequences—massive unemployment, the end of apprentice training schemes, a fear of the future and a profound sense that job security is vanishing.
We have also seen the decline of certain famous shipyards—indeed, the disappearance of two: Cammell Laird on Merseyside and Swan Hunter on Tyneside. That is very regrettable, and could have been avoided had the Government shown the commitment and support for our shipbuilding industry that other Governments in the European Union have shown. It is a lasting indictment of the Government's record that they were prepared to sit on their hands and do nothing to support those famous shipyards.
As my hon. Friend the Member for Govan hinted, the reasons for that decline are numerous—they are also complex. They have to do with hidden subsidies, both direct and indirect, which many foreign countries have provided for their shipbuilding industries. The reasons involve the lack of investment in the industry in the 1960s and 1970s.
Whatever the reasons for the decline, it is incumbent on the Government to recognise that we can do something about it, as my hon. Friend the Member for Govan said. The Government must recognise that the prospects for the industry are not all doom and gloom. Most independent analysts expect an increase in demand for new merchant shipping throughout the remaining years of the decade. It is important that the remaining industry, which is a high-tech, state-of-the-art industry, should be able to take advantage of the increase in demand when it comes. There has been significant investment in many of the principal yards in the past 10 years.
There will be increased demand for a number of reasons. The first reason is the increasing age of our merchant shipping fleet, which is nearly 17 years old in Britain, compared with 13 years old throughout the rest of the European Union. Our shipping is ancient and needs to be replaced. There will also be an increased demand because of the improving environmental standards related to the carriage of goods by sea. Another reason for an increase in demand is the requirement for double hulling. Improvements in other aspects of the carriage of goods by sea will also lead to an increase in new merchant shipping orders. There are also chances for British yards to take 277 advantage of increased export opportunities in the naval shipbuilding sector. All those factors should give the Government sufficient grounds to look at the industry again and review the way in which they provide practical support to shipbuilding.
One of the problems bedevilling British shipbuilding over many years has been unfair competition abroad. My hon. Friend the Member for Govan mentioned the South Korean industry, which now accounts for nearly 30 per cent. of the world market for merchant shipbuilding. Some 25 years ago, there was no South Korean shipbuilding industry, but it now accommodates about one quarter of the world demand for merchant shipbuilding.
There is no reason why the British Government should not look at a range of policies to support the British shipbuilding industry and show it the same level of support and patriotism as other countries have shown their shipbuilding industries. In particular, I hope that the Under-Secretary of State for Industry and Energy will look carefully at the capital allowance regime that applies to shipowners' purchasing decisions. It is important that we match the best fiscal policies that apply throughout the European Union; at present, we do not. As a result, British shipowners are less inclined, and have historically been less inclined, to place new orders with British yards for merchant ships. The Minister and his colleagues in the Government should consider that issue directly.
I welcome the ban in the new regime on state subsidies for shipbuilding. It is clearly important that any new fiscal regime should apply to all shipowners who want to place orders. I am not saying that there should be a hidden subsidy just for British shipowners, but I am sure that when we consider the tax rules and the fiscal regime closely, we shall find ways of providing a positive incentive for British shipowners to place new orders and work.
I congratulate my hon. Friend the Member for Govan. I know that there will be widespread interest in the British shipbuilding communities in our debate. We want the Government to give a positive message of support to the industry, to give it practical assistance and encouragement, and to take action to reverse the generation of decline that has caused unemployment and misery throughout the length and breadth of this country.
§ 12.2 pm
§ Mrs. Jacqui Lait (Hastings and Rye)
Like my hon. Friend the Member for Plymouth, Sutton (Mr. Streeter), I was impressed by the remarks of the hon. Member for Glasgow, Govan (Mr. Davidson), who could have made his speech from the Conservative Benches. I was worried when the hon. Member for Barrow and Furness (Mr. Hutton) started to go down the old Labour route; he recovered himself to support the call for the Minister to ensure that there is a level playing field in the shipbuilding industry. I say that not just because I spent the first 20 years of my life on Clydeside and saw the decline in shipbuilding, but because for a long time I have wanted world trade organisations and the European Union to ensure that competition is free and fair in all industries. Interestingly, the Transport Commissioner in the European Union may be one of those urging free and fair competition on other countries in the European Union.
278 My constituency has a long coastline but no traditional shipbuilding or ship repairing. I was attracted to the debate because of the mention in its title of maritime industries. I hope that I shall stay in order as there are a number of what I regard as maritime industries along the coastal strip of Hastings and Rye, all of which add employment to the area. Those industries are expanding and beginning to show that the industries now associated with the sea are not just the old traditional ones of ship repairing and shipbuilding.
One company in my constituency exports 98 per cent. of its products. It produces a propulsion backpack for divers, such as we may remember seeing in the James Bond films. The diving industry is expanding and has grown tenfold in the United Kingdom in 10 years. It is a high-tech industry that operates at the frontiers of technology and it provides an opportunity for wealth and job creation for the residents of Rye.
There has also been a recovery in the boatbuilding industry. That raises the question of definitions of boats and ships. I am talking about the small, leisure boat industry, in which a worldwide recovery is taking place. Companies around our shores have fought their way through a difficult recession. New orders are emerging and companies are developing new boats using new technology and equipment. They operate at the frontiers of technology to export and develop new and attractive packages for the international yachting and sailing world. As we have more leisure time, particularly in the rich west, there is a greater demand for such boats.
I may stray slightly out of order when I mention one developing sector. I am not sure whether it is a maritime industry, but I am sure that you, Mr. Deputy Speaker, will tell me if I stray out of order. The medical world is developing the use of sea water, along with shellfish, to produce a high-tech—
§ Mr. Deputy Speaker
Order. I am married to a general practitioner and can say that the hon. Lady has strayed pretty wide of the subject.
§ Mrs. Lait
I bow to your judgment, Mr. Deputy Speaker.
The more different industries develop, the more difficult we shall find it to define a maritime industry. The opportunities for developing new products, for export, and for creating jobs and wealth may come in different guises from the historic shipbuilding and ship repairing industries, but their long-term contribution to this country could be just as effective. I hope that in future debates we can extend the definition of maritime industries so that I can tell people about sea water and shellfish.
§ 12.7 pm
§ Mr. David Chidgey (Eastleigh)
I am grateful to be called in the debate, particularly as so many hon. Members wish to contribute. Hon. Members may not realise that shipbuilding, particularly naval shipbuilding, is a large employer in my constituency, and I want to have the opportunity to press that point.
I fully endorse the remarks of the hon. Member for Glasgow, Govan (Mr. Davidson), particularly the fact that shipbuilding is often dismissed as a sunset industry, incapable of withstanding the demands of worldwide competition. There have, unquestionably, been drastic rationalisations, not least in the warship building industry 279 that interests my constituents. Employment in that part of the industry was running at 21,500 in 1990 and is now down to below half that figure. Now, 11,000 people work in the warship building industry in this country. The decline in shipbuilding and its impact on employment is not confined to the famous yards on the Clyde and the Tyne.
In response to the remarks of the hon. Member for Plymouth, Sutton (Mr. Streeter), I should say that as a young student apprentice working in Portsmouth dockyard I remember that 22,000 people were employed to repair and refit capital and other ships for the Royal Navy. At the same time there were burgeoning shipyards along the coast around Southampton, such as Vosper, Harland and Wolff and Thornycroft. What remains of the Portsmouth dockyard today employs a mere 2,000 people—less than one tenth of the number employed when I worked in engineering as a young man.
Harland and Wolff has long since departed from Southampton waters. Vosper and Thornycroft combined to form a highly successful firm, which has shown what can be done through flexibility, innovation and export-led marketing. United Kingdom shipbuilding can succeed in the global market if we specialise in what we are good at, and I suggest that we are good at building high-value, highly sophisticated, specialised warships.
The Vosper Thornycroft shipyards in Eastleigh have shown that British shipbuilders can take on the world and win. In the past 30 years we have exported 370 ships to more than 34 navies worldwide. That is a magnificent achievement from which our shipbuilding industry can draw strength, but how can the industry benefit from the lessons that have been learned—and learned particularly hard in my constituency? The key to the industry's success is investment in skills and modern machinery, to which the hon. Member for Govan referred in his speech and which has led to increased productivity. The productivity of shipyards in Eastleigh has increased by more than 50 per cent. in the past five years. I challenge any hon. Member to find a more successful example anywhere in the world today.
We must recognise the importance of continued product innovation and move away from the traditional aspects of shipbuilding. Shipyards in my constituency have pioneered glass-reinforced plastic warships and they are leading the design development of Trimaran warships. We must also make a commitment to the motivation of the work force. Some 50 per cent. of the workers in my constituency and in nearby areas have a direct stake in the business of the shipyards for which they work. There has been no industrial disruption in the local shipyards for the past five years. That is a very telling point.
We face increasingly fierce competition in the global market. As the hon. Member for Govan pointed out, the end of the cold war, the decline in defence budgets and the potential for so-called "home competition" from our European Union counterparts have made it much more difficult for the United Kingdom shipbuilding industry. We must now contend with about 40 major competitors worldwide in bidding for orders overseas.
I hope that the Minister will concede that it is absolutely essential that we are able to continue to supply ships to the Royal Navy. It is the vital endorsement of our products at home that enables us to sell to export markets. If the Ministry of Defence is considering inviting shipyards from our European Union counterparts to tender 280 for naval shipbuilding contracts or subcontracting in this country, surely it must first establish whether our shipyards have the same free access to bid for similar contracts in the home markets of our potential competitors. If they do not, competing shipyards should not have the opportunity to compete against our domestic companies.
Fierce competition throughout the world has led our main competitor countries to adopt the policy of choosing a single national champion, which they then support in pursuing export opportunities. I welcome the fact that the MOD has apparently decided to follow suit. The Government's support in global export markets can make the vital difference between success and failure, particularly if we are competing against combined teams of Ministry officials and Departments and shipyards overseas. However, if the Government are to choose a national champion, that decision should be made objectively.
I believe that I am correct in saying that only a handful of shipyards in this country—one of which is located in my constituency—have the capacity to act as prime contractors for naval ship construction. In choosing a national champion that the Government will promote and support in bidding for export opportunities, it is essential that that decision should be based on an objective assessment of a shipyard's capability, export contract record and its knowledge of the market being pursued. Above all, there must be an objective assessment of which company is most likely to succeed in its pursuit of that opportunity.
I know that other hon. Members are anxious to speak in the debate, so I shall summarise my comments. The United Kingdom shipbuilding industry should no longer be considered a sunset industry. Drastic restructuring and rationalisation has already taken place and we have seen huge productivity increases through the investment in state-of-the-art facilities, the development of modern management techniques and full worker participation in the yards.
If we are to succeed in a fiercely competitive market, however, we need the dedicated support of the Government—not just for spasmodic and infrequent major new-build contracts, but for regular refit and repair work. That work should be awarded to the yards that are best able to undertake it, and invariably they will be the firms which designed and built the warships. At the very least, the firms in my constituency should be allowed to compete openly with other firms to refit the ships that they built.
I hope that the Minister will take on board the points that I have raised. I look forward to his assurance that they will be considered because they are vital to the future success of the shipbuilding industry and to the interests of my constituents.
§ Mr. Piers Merchant (Beckenham)
At the outset, I align myself with two important themes to which the hon. Member for Glasgow, Govan (Mr. Davidson) alluded in his speech. First, he said that it was essential that the Government should do all in their power to ensure that British shipbuilding yards are able to operate in a spirit of fair competition. That has been a bugbear in this industry for decades and we must fight zealously for fair 281 competition. Secondly, I entirely support the hon. Gentleman's remarks about the importance of maintaining a strategic warship production industry. Heaven forbid that we should ever need to fall back on it as an absolute requirement, but, if defence is to have any meaning, it is essential that we maintain the means of warship production.
I wish to contribute to the debate for three principal reasons. First, I have a constituency interest. One might not think that the leafy, landlocked constituency of Beckenham is relevant to the shipbuilding industry, but it is. When a recent order—which, sadly, we did not win—was open to tender, I was lobbied by Swan Hunter of Tyneside and by two local companies in Beckenham, both of which would have provided a considerable amount of subcontract work. That shows that shipbuilding is important not only in those areas that have traditionally relied on it, but as a core industry that generates jobs and business elsewhere in the country—perhaps in the most unlikely places.
Secondly, I worked for a company one of whose subsidiaries, Clarke Chapman, was an important part of the shipbuilding industry on the Tyne. I know the importance of the industry to those companies and their employees.
Thirdly, one might say that I have an historic interest in the industry as my former seat of Newcastle upon Tyne, Central was particularly important to the shipbuilding industry of Tyneside. I spent a good deal of time campaigning on behalf of the industry that existed then—sadly, it hardly survives today—and I have maintained my interest in it. Only last year I was presented with a very nice booklet entitled "Swans of the Tyne" which bears the inscription:Best wishes on behalf of Swan Hunter Campaign Committee".I looked nostalgically through the booklet and on the last page I saw a picture of the Ark Royal, which was completed in 1985, sailing down the Tyne. I visited the Ark Royal shortly before it began its sea trials. What a magnificent ship it was. It was a tribute to the productive capabilities and skills of the Tyneside shipbuilding industry—how sad it is that that has been almost entirely lost. It is a very sad story and one that I bitterly regret.
In 1926, 40 per cent. of world demand was met by the British shipbuilding industry: it is now about 1 per cent. In 1960, 44,000 jobs in Tyne and Wear were dependent on the shipbuilding industry: it is now a matter of a few thousand. The amount of merchant tonnage produced in Britain was 1.5 million in 1976. That has fallen to about 250,000 tonnes now. It is a very sad decline.
I want briefly to examine the lessons that can be drawn from that experience. The lessons are many, but they show what we must do to prevent other industries from making the same mistakes.
I do not believe that the decline of the shipbuilding industry was inevitable. It was inevitable that it should suffer from the cycles created by the economy and that the fall in demand should hit the British shipbuilding industry, but that it should have had such a cataclysmic result was avoidable. It is interesting that as the shipbuilding industry recovers, countries such as France and Spain, not Britain, are picking up orders, which says something principally about our structural decline.
282 I should like to allay the myth that the Government have done nothing to help as that is palpably untrue. Apart from the shipbuilding intervention fund paid by the British Government, which represents the 9 per cent. maximum allowed under the seventh directive, nothing more could be done to help that would be in line with international agreements. The £2 billion that was pumped into the industry between 1977 and 1988 shows that a great deal was done, but, sadly, even that was insufficient to sustain the industry.
The problem arose before then, in the 1960s and early 1970s, when order books were full or pretty near full and production was at a record level. Steps were not taken at that time to deal with the industry's ills. Had they been solved then, the industry would have survived.
I refer briefly to three of the problems. The first was a management failure. I would never blame one side of industry, but there was terrible management failure in the shipbuilding industry—old-fashioned management, a loss of entrepreneurial skills, innovative necrosis, undercapitalisation, organisational chaos and a contempt of the work force. All that was clear on Tyneside in those years. I referred to it at some length in a speech that I made in the House in 1984.
There was also, however, a bad failure of trade union practice. Labour Members have not always been prepared to admit that and I feel that they should. It is undoubtedly true that the number of disputes, the demarcation and inflexibility that led to late and cancelled orders and costly products that therefore failed in competitive terms could have been avoided if only those problems had been addressed. I pay tribute to the work force for addressing those problems, but it did so too late. By the time the problems were put right, the strength of the industry had sapped away. That was a shame.
Nationalisation in the 1970s did not help, as it introduced another organisational dimension and confusion to an industry that was already badly holed under the water. Just about everything that could go wrong with an industry went wrong in the 1960s and 1970s, except the skills, which are still there and are slowly being lost for all time. I deeply regret that.
The House can do nothing about the historic situation, but it can learn. I have no problem with Government intervention when it is necessary for an industry. It happens here and I am perfectly happy to see it continue, but, above all, we must have a duty to put in place measures that affect industry, competition and labour relations to prevent the tragedy that hit the shipbuilding industry from happening elsewhere.
§ Mr. Edward O'Hara (Knowsley, South)
I congratulate my hon. Friend the Member for Glasgow, Govan (Mr. Davidson) on introducing the debate. I take a close personal interest in it as I spent my formative years as a young lad in the docklands area of Liverpool. The lives of my family and friends were closely involved with the fate of the British merchant fleet and, of course, I represent a constituency in Merseyside, a maritime area.
I wish to relate the destiny of the shipbuilding industry to the decline of the merchant fleet. A number of points have been made in that respect and I shall not repeat them. As an island nation, there are two important strategic reasons why we need a strong merchant fleet—for the 283 security of our trade, most of which is carried by sea and, of course, for our defence. I include the merchant fleet in my comments on defence as the Falklands campaign could not have been mounted without the magnificent support of the merchant fleet and the Gulf war amply demonstrated the dangers of losing that capacity and becoming beholden to foreign merchant shippers. Furthermore, a strong merchant fleet supports a strong shipbuilding industry.
§ Mr. Eddie Loyden (Liverpool, Garston)
Does my hon. Friend realise that only three of the 104 ships chartered for the Gulf war were British owned and that the rest were either flagged out or foreign?
§ Mr. O'Hara
My hon. Friend is absolutely correct. We were obliged to pay through the nose for those foreign ships.
Reference has been made to the decline in the number of ships. There were 1,305 ships of 500 gross registered tonnes in 1979; by the end of 1993 that figure was down to 258. I do not have the latest statistics, but the trend has been so steady that I doubt it has been reversed.
Reference has also been made to our declining share in the world market from nearly 7 per cent. in 1979 to less than 4 per cent. in 1992, according to the latest statistics in my personal files. We were fourth in the league table of shipping nations in 1979. By 1992 we were 31st, behind such countries as the Bahamas, Cyprus, Singapore, Malta and the Philippines, when seaborne trade was and is increasing by 4 per cent. per annum.
Reference has also been made to the age of the fleet. My hon. Friend the Member for Barrow and Furness (Mr. Hutton) referred to the average age of ships in our merchant fleet as nearly 17 years, which is absolutely true. It was six and a half years in 1979; in other words, there has been hardly any replacement since 1979. The average age of ships registered with our major competitors—Denmark, France, Germany and Japan—is nearer 10 years.
We need an increased fleet because a maritime nation needs an increased fleet, not a declining fleet. We also need a renewed fleet. That is the connection between the destiny of the merchant fleet and that of the shipbuilding industry. Obviously, a strong merchant fleet supports a strong shipbuilding industry. As the British merchant fleet will clearly require massive replacement before the end of the century, it seems crazy that Britain is not retaining the capacity to build those ships, provide those jobs and retain and develop those skills.
It has been suggested to me in discussions with the Chamber of Shipping that it does not really matter whether we retain Britain's shipbuilding capacity. It justifies building abroad on the ground that the hull of the ship is just a small proportion of the total investment in a ship; much of the investment goes into the fitting of the ship and our fitters still fit out hulls that are built abroad. However, when one asks where the engines for such ships come from, it is more reticent.
Many ship fitting skills still exist in my constituency. I was interested recently to discover that a furniture factory had set up on Merseyside because it found a dormant pool of ship fitting skills that could be transferred to furniture making. In a dock road in Liverpool recently, I noticed that, sadly, an instrument maker to the shipping industry from the early 19th century, perhaps the late 18th century, had gone out of business.
284 Solutions are needed. We do not have a shipbuilding capacity to build the shipping fleet that we need now and will need even more in the future. It is a matter on which owners and trade unions are agreed. I shall mention several measures briefly in passing so that others have time to speak.
We could pay more attention to the rules of cabotage, particularly with regard to coastal shipping, as many of our near neighbours do. We could give fiscal incentives to scrap ships and build new ones. We could improve our safety standards, which would give a boost to the ship repairing industry. We could give more investment to maritime transport, which is the poor relation of transport investment in Britain.
Those points could be developed further but I confine myself in the short time available to those few suggestions about what is wrong and the direction in which solutions may be found.
§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
I am grateful to those Conservative Members who have praised the former shipyard workers of Tyneside, but I cannot truthfully say that I know any former shipyard workers on Tyneside who would return the compliment to a Conservative Member of Parliament.
The shipbuilding community of Tyne and Wear is no more. In 1979, the largest single shipbuilding community in Britain was on Tyne and Wear. It is a measure of the significance to our community of that once great industry that this short debate has been attended at different moments by my hon. Friends the Members for Newcastle upon Tyne, Central (Mr. Cousins), for Wallsend (Mr. Byers), for Gateshead, East (Ms Quin), for Jarrow (Mr. Dixon) and for Sunderland, South (Mr. Mullin).
The industry was the cornerstone of the economy of the communities that we are elected to represent. It used to be commonplace, I suspect, in debates such as this, to say that we are an island nation; that more than 90 per cent. of our trade is carried in ships; that the Royal Navy's international role and the role of the British merchant marine is of enormous importance; that the ability to have officers to serve on our merchant ships as well as with the Royal Navy, and the ability of British citizens to find employment as seafarers, is of huge importance to our nation. More recently, we could add that we have an important and expensive stake in offshore installations, particularly in the North sea, for the purposes of mineral extraction.
It is conventional also for Labour Members to say that, since 1979, the Government have neglected those areas. Frankly, the industry would be in better shape had the Government confined themselves to just neglecting this whole area of our national activity. The truth of the matter, particularly as it obtains to shipbuilding, is that the Government have intervened. Warship procurement decisions are intensely political. The calamity suffered by the community that I represent was entirely the consequence of political decision-making within Government, particularly decisions that have affected procurement decisions of huge strategic importance.
Time is short in the debate. When it was clear that Swan Hunter was doomed, and that every person who wanted to stay in the shipbuilding industry who gravitated to Swan Hunter because it was the last large yard open in 285 Tyne and Wear would be thrown out of work, the Government made certain promises to our community about economic development and alternative employment prospects.
I want to draw to the attention of the House today the fact that not one of the promises made in May 1993 by the Prime Minister from the Dispatch Box at Prime Minister's Question Time has yet been put into effect on Tyneside. If the Minister takes one message away from the community that I represent, it must be that we want the promise of alternative employment opportunities to be kept. We want some action and we desperately need it now. We needed it last year and we certainly need it now.
When Swan Hunter went into receivership it was putting £1 million a week into our economy in wages alone, with the wages of subcontractors as well. It is an enormous blow to our community that that employment base is no longer there. Only another large fabrication project on the Tyne could immediately take people off the unemployment registers in any large numbers. I say that on the very day that scrap metal merchants are in Swan Hunter cutting the yard to pieces to ensure that it can never produce such a project. Something must be done and it must be done now.
§ Mr. Peter Robinson (Belfast, East)
I shall follow the fine example of brevity of the hon. Member for Newcastle upon Tyne, East (Mr. Brown). I should say at the beginning that I have an interest, since I have a modest shareholding in the finest of all shipyards in the world—Harland and Wolff of Belfast.
I congratulate the hon. Member for Glasgow, Govan (Mr. Davidson) on choosing this subject for a short debate. The general principles that he outlined are principles which I can wholeheartedly endorse.
It has been a general thread running through the debate that Members on both sides of the House believe that it is incumbent upon the Government to ensure that we have what has been described as a level playing field. We do not have that at the moment.
Even those yards, particularly in South Korea, which are now putting up their hands and claiming that they are clean and that no subsidies are being given to them, clearly are receiving hidden subsidies. Those who know anything about industry in South Korea will know that it is easy to give hidden subsidies because the people who are building ships are also turning out the steel and doing everything else connected with shipbuilding, so subsidies can be given in relation to other products and materials related to shipbuilding.
This nation must recognise that it is not in a position, certainly at present, to compete in the same market as the South Koreans. The hon. Gentleman is entirely right that the future, at least the near future, for shipbuilding in the United Kingdom must be at the high technology end of the shipbuilding market.
Harland and Wolff was forced into competing in the bulk and tanker market, but it has had to try to find a niche in the high-tech end of the industry. It now has a product far in advance of anything that can be offered anywhere else in the world.
286 I hope that BP in the North sea and the Gulf of Mexico, where the water levels are such as to allow oil to be pumped using ships, will consider buying British in order to ensure that our industries benefit from the oil in the North sea in particular.
§ Mr. Mike Watson (Glasgow, Central)
The hon. Gentleman spoke of the importance of seeking orders in the industry in other directions, linking up with oil, and so forth. One matter which has not been given much airing in the debate is the need, at a time of contraction in the number of military warships and military spending, for defence diversification and perhaps the establishment of a defence diversification agency. That is the policy of my party. What is the hon. Gentleman's view on that policy? Is not that an important way to ensure that skills which cannot be retained in the shipbuilding industry can none the less be used in the future because, as has been said, they include skills at the cutting edge of technology?
§ Mr. Robinson
I am happy to concur with the hon. Gentleman. For instance, the American navy is in our waters frequently, yet it does not come to our shipyards to have repairs done. There is a great deal of work that the Government could do to encourage further use of our shipyards.
Leaving the embarrassment of the Conservatives to one side, many people recognise that there is likely to be a Labour Government, probably fairly shortly. I notice the horror on the Minister's face. I shall pay special attention to the winding-up speech by the hon. Member for Cunninghame, North (Mr. Wilson)—I say that, not by way of a challenge, but by way of interest—to determine the attitude that the Labour party will have to the shipbuilding industry in the United Kingdom as a whole and, from my point of view especially, in Northern Ireland.
§ Dr. Norman A. Godman (Greenock and Port Glasgow)
I must be brief, as you know, Mr. Deputy Speaker.
The hon. Member for Beckenham (Mr. Merchant) took us down memory lane. I think I am right in saying that, along with my hon. Friend the Member for Jarrow (Mr. Dixon), I am one of two former shipyard workers in this place. We both served our time as shipwrights.
I make a plea to the Minister. As I said to him the other evening, it is essential for the many hundreds of my constituents who work at Ferguson in Port Glasgow, at Kvaerner in Govan and at Yarrow of Scotstoun that the shipbuilding intervention fund be continued beyond 31 December 1995—European Union wide.
The Greenpeace occupation of Brent Spar prompts a question. Many of those redundant shipyard workers in Scotland might be re-employed, were the Government to adopt a more radical implementation of part I of the Petroleum Act 1987. If the Brent Spar were brought ashore to be dismantled and its materials recycled, it would provide plenty of work.
Shell Expo gave the game away. It said, in a recent publicity leaflet, that 52,000 man hours would be needed to take that redundant oil storage installation and sink it in deep water whereas, if it were brought ashore, as it should be, about 360,000 man hours would be involved in the process. The Government should be doing the latter. 287 They have failed the fishing interests and many others in their failure to implement part I of the Petroleum Act 1987 in a more radical way.
§ Mr. Brian Wilson (Cunninghame, North)
We have had a good debate and, like everyone else, I am grateful to my hon. Friend the Member for Glasgow, Govan (Mr. Davidson) for making it possible. It has highlighted the fact that we should debate maritime issues more often and at more length, because there is obviously a great deal of interest and anxiety about them.
Conservative Members made some rather odd contributions about shellfish, sea water and duty frees, and we heard from the hon. Member for Beckenham (Mr. Merchant) a speech that he gave in 1984, which he apparently thought worth recycling 11 years later.
§ Mr. Wilson
There has been little sign of understanding from Conservative Members that we are discussing a great national industry, which has been allowed to decline grievously as a result of criminal neglect and downright hostility. It is all very well prattling, as the hon. Member for Plymouth, Sutton (Mr. Streeter) did, about island races and maritime traditions, but those words are meaningless if they are not matched by actions.
For years, we have witnessed the relentless decline, not only of shipbuilding but—incomprehensibly—of the British Merchant Navy. As my hon. Friend the Member for Knowsley South (Mr. O'Hara) said, the issues are linked. We need a British-owned, British-registered, British-crewed Merchant Navy; that is the basis of the potential of the shipbuilding industry.
Everyone knows that there will be many merchant shipbuilding orders in the next few years; the question is whether they will be placed by British owners in British yards and whether there will be enough left of the infrastructure to allow that to happen.
The hon. Member for Beckenham spoke about learning lessons, but the lessons have not been learnt. In the same way that the British capacity to build ships was thoughtlessly, mindlessly run down, the British capacity to build trains is being thoughtlessly, mindlessly run down. In a few years' time, since there will be no York and no Derby, we shall buy trains as well as ships from Korea, Spain and America, because idiots have decided that that industry is not worth saving or helping through a difficult time.
I want to ask a few questions, in the few minutes available to me, for the Minister to answer directly. I want to ask him especially about VSEL, and I should like to know why the delay continues in publishing the Monopolies and Mergers Commission report. That report has important implications, not only for Barrow, but for Yarrow on the Clyde and the entire British naval shipbuilding capacity. If, as is widely predicted, both bids are cleared, the conditions that attach to them may be crucial. I put down that marker today.
Why is there a delay? Why has the report now been with the Department of Trade and Industry for longer than the obligatory 20 days? When may we see that report and obtain some movement on that important issue?
288 I shall speak briefly about Yarrow, and especially about the delegation that is in South Africa at present. On behalf of all Opposition Members, and I hope Conservative Members, I extend the best wishes of the House to Mr. Murray Easton, Mr. Gavin Laird and the Lord Provost of Glasgow, Tom Dingwall. It would be fitting indeed if Glasgow and the Clyde, with our long and proud record of solidarity with the democratic movement in South Africa, were now at the forefront of re-establishing Britain's trading links with the new South Africa. I seek an assurance from the Minister that the Government are doing everything possible to support the Yarrow bid and to ensure that that order comes to this country, and especially to the Clyde.
I shall briefly discuss a subject that was mentioned by the hon. Member for Belfast, East (Mr. Robinson). I have with me an interesting publication, commissioned by the DTI, about floating production systems. It is a report from the Oil and Gas Projects and Supplies Office. That is a subject of immense importance, not only to shipbuilding but to all the spin-off industries of shipbuilding. It would be worthy of a debate in itself.
I should be interested if the Minister would confirm that there is the prospect, in the next few years, of 30 large hulls being ordered for use in British waters, in the oilfields to the west of Shetland. That offers massive new potential for shipbuilding and marine technology in this country. We want to know today—I shall give assurances from the Opposition—the extent to which the Government will get behind the British shipbuilding industry to ensure that those orders go to British yards, and that the subcontracting goes to British companies. If not, it is distinctly possible that all, or the great majority, of those vessels will be built in Norway, Spain or in any other part of the world.
I visited the shipyard at Harland and Wolff, in the constituency of the hon. Member for Belfast, East. The future of Harland and Wolff and the large-scale employment that exists there is tied up with what is contained in that report about floating production systems. Equally, as the report recognises and as is realised in that part of the country, the prospect of a substantial shipbuilding revival at Swan Hunter is tied up with this new generation of vessels which will be ordered in the next few years.
The report is valuable and sets out the potential and the difficulties. It says that there is a lack of interest or awareness in investment circles in this country in getting behind the creation of an industry in Britain building those vessels for west of Shetland. I have the report and I am glad that it has been commissioned, but, above all, what I want from the Minister, and he can write to me on this, are the detailed responses to the report's recommendations and observations. That is vital for Harland and Wolff and for the old Swan Hunter yard. There is potential in the Clyde. Right through the maritime industries, this is an exciting, large-scale opportunity to talk, not about the past, but about the future.
Those structures will be built somewhere. Will they be built in United Kingdom yards or in overseas yards for use in British waters? I should like, although not today because there is no time for it, a detailed response from the Minister, on which we can base an urgent debate.
Only a few weeks ago, we saw the embarrassing spectacle of the Oriana arriving from a German yard to be named by the Queen in Britain. No matter how it is 289 dressed up, it is not a British ship because it was not built in a British yard. It is to the Government's shame that it is no longer possible for such a ship to be built in a British yard when British craftsmen are available to do it and when tens of thousands of people are unemployed in every shipbuilding community.
To some extent, the saving grace was the fact that some 80 per cent. of the equipment on board that ship was made in Britain. I commend the efforts of the maritime supply industries to maintain their export effort and thereby the ability to fit out ships such as the Oriana. They have told me and, no doubt, the Government that they cannot rely indefinitely on the export market for their continuing good health. We need a British Merchant Navy. We need British merchant ships that are built in British yards by British craftsmen and crewed by British seaman. That is a maritime policy worthy of the name for an island nation.
I therefore say to Conservative Members: do not give us any flannel about island races or appeals to sentimental considerations because, unless there is a Merchant Navy and a merchant shipbuilding industry, we betray that proud heritage. The Conservative party likes to wrap itself in the flag, but I cannot comprehend what the Government have done to the red ensign. Let them start to reverse that; let them get seriously behind shipbuilding; let them recognise the urgency and address themselves in particular to the new opportunities that exist in the industry.
§ The Parliamentary Under-Secretary of State for Industry and Energy (Mr. Richard Page)
I add my congratulations to the hon. Member for Glasgow, Govan (Mr. Davidson) on securing the debate. In the 20 years that I have been in the House, I came only third in all the ballots in which I took part, and then I was not reached and called; but enough of that, otherwise I shall be accused of being a rugby selector.
I appreciate the importance of the subject raised by the hon. Member for Govan. He is right to say that we have not had such a debate for some time. I am grateful for the opportunity to respond. I wish I had more time, but a number of hon. Members have made comments. It will not be possible to respond to all of them, but I shall try to respond to one or two questions that have been asked.
As the Opposition spokesman, the hon. Member for Cunninghame, North (Mr. Wilson) suggested, I shall write to him about some of his points. He was a little disingenuous, if I may use that word, in his comments about the Oriana. As he knows, it was not quoted for by any British yard, which is a pity. It was made in Germany. He put the record straight, however, by saying how much British equipment was put into that great ship.
The hon. Gentleman mentioned floating production systems and what can be done in that regard. We are obviously encouraging the whole industry to supply such equipment. We are heartened by Harland and Wolff's interest in the subject. Obviously, we hope that some of those orders will be made and constructed in UK yards.
Before I turn to some of the points made by the hon. Member for Govan, and it is his debate, despite all the other comments made by other hon. Members, it would be helpful if we considered the world and European 290 perspective. Some comments seemed to push it to one side, as if the real market did not matter. Much of what I shall say will be in agreement with the hon. Gentleman's comments.
As the House and people outside know, as a result of low ordering in recent years, on a global basis there is a significant surplus of world capacity for larger ships. As ships get older, they will be need to be replaced, but the expected upturn has not yet occurred and its timing is highly unpredictable. As one or two hon. Members have mentioned, Korean capacity in particular has been substantially expanding, creating more uncertainty for all manufacturers of such vessels.
In 1975, available capacity worldwide was estimated at some 22.4 million compensated gross tonnes. That had dropped to some 15 million by 1990 and is forecast to increase to about 21 million by 2000. The years 1975 and 2000 are roughly comparable in terms of total capacity, but during that period great changes took place in the share accounted for by individual nations. In the past 20 years, western European, Scandinavian and Japanese yards have taken considerable steps, at no little pain, as everyone in the country recognises, to reduce their shipbuilding capacity. They have sought to restore a healthy market and to reduce the possibility of a repetition of the slump in shipbuilding.
In 1975, western Europe and Japan accounted for approximately 80 per cent. of world merchant shipbuilding capacity and Korea accounted for less than 2 per cent. That is interesting, but it is a fast-moving scene. Some sources in the Korean shipbuilding industry reckon that they have just 10 years of dominance before China takes over and supplants them in turn. Over-capacity is having a dramatic effect on prices. Cash prices are significantly lower than they were five years ago. For example, a 150,000-tonne tanker can be bought today for just $40 million compared with $55 million in 1992.
On western Europe, I am glad to say that some aspects of the UK shipbuilding industry are looking a little healthier. Medium-sized yards are specialising in vehicles such as ferries and tugs, and we are achieving some significant advances.
On the Organisation for Economic Co-operation and Development agreement, I must disappoint the hon. Member for Govan. I do not think it would be advantageous to continue. The European Commission has already carried out investigations. We all know that there have been significant market distortions. By removal of all those subsidies, we will find ourselves in a much fairer market. I shall not go into the hon. Gentleman's mixed metaphors, with his comments on swimming and climbing uphill.
An OECD agreement was signed in December 1994 by representatives of the European Union, the United States of America, Japan, Korea and Norway, which account for some 70 per cent. of world capacity. That enables some control to be kept on the effect of unfair subsidies and unfair competition. The OECD agreement has power to investigate allegations of misconduct and to impose penalties. The agreement is a good one for the UK. Korea has accepted a strong anti-dumping code; Japan will modify its home credit scheme; the United States has made concessions to the applicability of the Jones Act; and the EU is giving up its direct subsidy. I hope, 291 therefore, that we shall have a level playing field. I assure the House that the Government will have no hesitation in chasing up any areas where unfair competition exists.
I should like to turn to some success stories. We build ships, although not as many as I should like. The UK has a substantial repair industry, with a turnover of more than £250 million. It employs up to 7,000 people at peak times and they are located all around the coast. Hon. Members have remembered the contribution of those companies serving their localities—a valuable contribution to the UK economy.
Let us not forget the marine equipment industry, which was mentioned by my hon. Friend the Member for Beckenham (Mr. Merchant) and by the hon. Member for Knowsley, South (Mr. O'Hara). There is UK-made marine radar, paint, propellers, engines, and equipment to service the whole range of maritime activities. Sixty to 70 per cent. of a ship's value is in its equipment. Obviously, we want to ensure that we can expand that industry.
We can do more. Marine equipment companies have not been helped by a reduction in home production, but it would be a mistake to assume that they are no longer a world force. The industry has a substantial order book worth about £2 billion. It retains substantial engineering and design expertise and over 70 per cent. of its output is exported to yards abroad. I hope that in July I shall be leading a delegation of business men from the British marine equipment industry to Japan to continue the dialogue and maintain the momentum of our export initiatives.
I thank the hon. Member for Govan for initiating this debate. It has been valuable and I hope that next time I will have a little bit longer to give a more comprehensive response to his important questions.