Swan Hunter (Hansard, 19 October 1994)

The Minister of State, Department of Trade and Industry (Earl Ferrers)
My Lords, Ministers persuaded the European Commission, as an exception, to allow the warship yard to benefit from the Shipbuilding Intervention Fund for future commercial ship contracts. Considerable efforts have been made by the Ministry of Defence, the Department of Trade and Industry, and receivers to find an alternative buyer for the shipyard, regrettably so far without success.

§ Viscount Caldecote
My Lords, I thank my noble friend for that reply. Is he aware that the average age of ships in the world's merchant fleet is some 18 years and that that will mean that there will be many orders for merchant ships over the next 10 to 15 years? Is it not highly desirable that Swan Hunter should be able to participate in meeting those orders?

Earl Ferrers
My Lords, that may well be so. Of course, the Swan Hunter shipyard has been dependent on warships following a decision taken in the early 1980s. It is a commercial decision for the yard whether to make warships or commercial ships.

§ Lord Dormand of Easington
My Lords, is the Minister aware that some of us recognise that efforts have been made by the Government to help in these very difficult circumstances? However, will he not also agree that the workforce in the shipyard is perhaps the best in the world, and certainly among the best in the 202 world, in all grades? Will he particularly take note of what has been said by the noble Viscount, Lord Caldecote? I believe that that is the most important issue in this situation. Is it not possible for the Government themselves, apart from the Europe Union, to make some interim payment or give some form of interim assistance until the crisis has passed?

Earl Ferrers
My Lords, I accept what the noble Lord says about the workforce. It is a very good workforce. However, in the end one has to operate in the commercial world. The fact is that because of the release of tension which has occurred throughout the world over the past few years the demand for warships is considerably less than it used to be. That is the difficulty in which Swan Hunter finds itself. It would not be appropriate for the Government to support one shipyard over and above any other.

§ Lord Boyd-Carpenter
My Lords, would it. not be a tragedy if this famous yard, with its great reputation for ship building, were firmly and finally to close? Surely the Government can take some steps at least to hold the position for the time being while steps are taken to find whether other support can be obtained?

Earl Ferrers
My Lords, I agree entirely with my noble friend that closure would be a tragedy. It is something about which all of us feel most concerned. However, the fact is that if there is no demand for the type of ships which Swan Hunter builds it is very difficult to keep the shipyard in being. I can tell my noble friend that until quite recently the Ministry of Defence offered Swan Hunter the opportunity to bid for contracts. The acceptance of a contract would have to be on the understanding that the business was on a sound commercial footing.

§ Lord Gisborough
My Lords, as the royal yacht is coming to the end of her useful life, and is useful in promoting trade fairs and so on around the world, will the Minister consider the possibility of a new royal yacht being built at that shipyard?

Earl Ferrers
My Lords, the replacement of the royal yacht is a different and rather wider subject than the continuation of a specific yard at Swan Hunter.

§ Lord Stoddart of Swindon
My Lords, is the noble Earl aware that many of us were encouraged yesterday to hear Mr. Tim Eggar praise manufacturing as being good for this country? Is not shipbuilding manufacturing as much as anything else? Is it not the case that many ships are being built all over the world? As the noble Viscount, Lord Caldecote, said, will not the demand increase? Will the noble Earl listen to the noble Lord, Lord Boyd-Carpenter, and take action to keep this shipyard operating in preparation for the undoubted upturn in shipbuilding?

Earl Ferrers
My Lords, I agree with the noble Lord that manufacturing is highly desirable. Shipbuilding is manufacturing. However, in order to keep any organisation going it has to have orders and customers. Swan Hunter shipyard specialised in warships. There is now less of a demand for warships than there used to 203 be. That makes it difficult for those companies which have concentrated on that sphere. We shall do all that we can to help, but in the end it must be a commercial judgment.

§ Lord Peston
My Lords, none of us can be indifferent to the closure of this shipyard. I do not believe that there is any difference between Government and Opposition on that. However, following the Question of the noble Viscount, Lord Caldecote, it must be possible with sufficient effort for that shipyard to diversify into merchant shipping and away from building warships.
Did the noble Earl read the story in this morning's paper which stated that the Samsung deal involved an £80 million sweetener from the Government? If that is possible, cannot a rather smaller sweetener—if I may use that vulgar word —be made available to Swan Hunter shipyard to help it to make the change from what it used to undertake to what many of us believe it could successfully achieve in the future?

Earl Ferrers
My Lords, perhaps I may remind the noble Lord that in the mid-1970s Swan Hunter built tankers, refrigeration ships, and so forth, as well as warships. In the 1980s the shipyard made a policy decision to build warships only.
With regard to Samsung, the noble Lord is perfectly correct that a grant is available. However, the two cases are not comparable. Assistance to Samsung was provided under Section 7 of the Industry Act 1972 in response to an application for an investment project which will create more than 3,000 jobs in an area of high unemployment. With regard to Swan Hunter shipyard, Her Majesty's Government have done everything possible to help the receiver to sell the yard as a going concern.

§ Lord Peston
My Lords, as there will be an upturn in world shipping demand in due course, I am anxious that we do not read in the newspapers such questions as, "Why is Great Britain not participating in that upturn?" The answer will be that we have closed down our shipping industry too soon, as with other industries. Am I not right that this is a matter of urgency? If the Government do not take action quickly we shall not have the Swan Hunter shipyard.

Earl Ferrers
My Lords, I entirely understand the noble Lord. However, the only way that we can keep a shipyard going is by giving it orders. All orders given by the Ministry of Defence are on a competitive contract. The fact is that when given the last competitive tender Swan Hunter was considerably higher than its next competitor. If we were to follow the noble Lord's desire, it would mean that to keep Swan Hunter going we would have artificially to grant it a contract at the expense of some other companies.

§ Lord Ennals
My Lords, there has been pressure on the Minister from all sides of the House. Therefore, will 204 he now agree to discuss the issue with his right honourable friend and respond in a more positive way than has been possible today?

Earl Ferrers
My Lords, of course I accept the concern that has been expressed around the House. I share that concern. I do not believe that there is advantage in my discussing the matter with my right honourable friend, who is himself particularly concerned. I come back to the basic point. If one keeps a shipyard going, one can do so only by giving that shipyard orders or by it winning orders. The fact is that that shipyard has not won against other competitors. Since fewer warships are now required than in the past, that puts great pressure on the manufacturing industry.

§ Viscount Caldecote
My Lords, does my noble friend agree that the first and urgent requirement is to get the yard out of receivership so that it can bid effectively for any merchant ship orders that become available?

Earl Ferrers
My Lords, the firm is in receivership because of the state of its finances. As I explained, the Ministry of Defence has offered contracts to the firm. It continues to invite Swan Hunter to bid for Ministry of Defence work and to offer the company the opportunity to secure further work. However, in the end it depends on the firm's ability to manufacture whatever product it is competing for at a competitive price.