Shipbuilding Industry

HC Deb 26 March 2003 vol 402 cc71-92WH

Motion made and Question proposed, That the sitting be now adjourned.—[Mr. Phil Woolas.]

9.30 am

Mr. John Burnett (Torridge and West Devon)

Mr. Deputy Speaker, it is a pleasure to welcome you to the Chair for such an important debate. When I applied for the debate, I did not expect that, only yesterday, 100 employees of Appledore shipbuilders in my constituency would have received 30 days' notice of redundancy. It is a dreadful irony, and I shall return later to the predicament of that important and excellent shipyard.

I am pleased to see the hon. Member for Tynemouth (Mr. Campbell) in his place. He is a member of the all-party shipbuilding and ship repair group, and I know that he is a great supporter of the industry. I am delighted also that a number of other Members are here and I hope, Mr. Deputy Speaker, that they catch your eye.

It is often said that the shipbuilding industry goes from feast to famine. We are now in the famine phase; indeed, we have been in that phase for a considerable time. However, even when world market conditions improve, Britain's shipbuilding industry must constantly endeavour to overcome unfair competitive practices. Those practices includes the huge steel subsidies given in certain countries, and other compensation arrangements; for example, two companies in an overseas country that have a mutual agreement to depress prices for services or materials, with the state often surreptitiously picking up the tab. In addition, certain advantageous loan and guarantee arrangements available within the European Union do not seem to be available in this country.

Those anti-competitive arrangements have been referred to in previous debates on shipbuilding. However, that does not mean that they should not get a good airing today. Indeed, the difficult predicament of Appledore shipbuilders, and of other non-Ministry of Defence shipyards, is certainly down to those factors.

I am pleased to note that the hon. Member for Glasgow, Pollok (Mr. Davidson) has joined us. He is secretary of the all-party shipbuilding and ship repair group. I am keen to put on record my gratitude for his work for the group and, more important, for the industry.

As hon. Members will know, an agreement was reached in 1994 by the Organisation for Economic Co-operation and Development against threats by the United States to penalise subsidised shipping that entered US ports. The object of the agreement was to eliminate all subsidies, including contract aid and anti-dumping procedures. The agreement should have come into force in January 1996, but it has not; ironically, because of delays in ratification by the US, the country that precipitated the negotiations.

In December 2002, the OECD announced that the world's principal shipbuilding economies had launched negotiations on ways to counter over-capacity and plunging prices in the world shipbuilding industry. A special negotiating group was set up, with the participation, on an equal footing with OECD members, of numerous non-OECD economies; namely Brazil, China, Croatia, Romania, the Russian Federation, Chinese Taipei, and Ukraine, all countries with large shipbuilding capacities. Part of the group's remit was to establish normal competitive conditions in shipbuilding.

We are informed that the special negotiating group hopes to conclude its work by 2005, but many are sceptical about whether that time limit will be met. In the meantime, that world industry—for that is what it is—will be bedevilled in any event by other market-distorting factors, such as various Government support measures and transfer pricing, all of which distort normal competition conditions in the world shipbuilding industry.

It has often been said that Korea operates an unfair pricing system. I suspect that one of the reasons why Korea is singled out is because, by 2000, it had achieved 40 per cent. of the world market compared with only 29 per cent. in 1997. I remind the House that the EU and Norway had a market share of 16 per cent. in 2000, as against 18 per cent. in 1997.

Many hon. Members believe that Korea has won orders by pricing orders below production costs, and is able to do so by recycling funds received in aid and money from the International Monetary Fund. Not surprisingly, the Koreans emphatically deny that allegation. The EU is prosecuting an anti-subsidy case against Korea through the World Trade Organisation. The dispute settlement procedures will take much time to be resolved and, during that time, yet more damage will have been done to our industry.

Unfortunately, Korea is not alone. Early last year, Appledore was competing for a Government contract to build a heavy load barge. The idea, which came from the Department for Transport, is excellent. A large barge would be constructed to carry heavy loads—especially heavy transport vehicles such as cranes—by sea rather than on the roads. That would be in the interests of the environment and road users. Unfortunately, Appledore could not compete against a bid from the Dutch company, Damon. We have now discovered that the entire ship fabrication work for that barge is being done overseas; I believe in Ukraine.

I know from discussions with Appledore and others that certain countries of the former Soviet Union offer huge subsidies in steel. We understand that they are buying steel for shipbuilding for less than a quarter of the world price. When Appledore's management telephoned the appropriate authorities in Ukraine, it was told that it could not buy steel at that price. No shipyard can compete against that level of subsidy.

Many hon. Members may be surprised that a British shipyard should be short of work, given that the Government announced in July 2000 the largest programme of new warship construction since the second world war. Unfortunately, Appledore and a number of smaller shipyards were not included as prime contractors in respect of any of those orders. Appledore tendered for the two alternative landing ships logistic—ALSLs—that the Government were minded to order.

On 26 October 2000, the Government announced that the successful bidder was Swan Hunter shipbuilders; good for them. However, we were amazed to find that a further two ALSLs had been ordered without a tender process and that they were to be built at the Govan shipyard, using Swan Hunter's design. To have the opportunity to build only one of those vessels would have been a massive boost for the Appledore yard, and for the local economy of north Devon. Additional jobs would have been created, the yard would have been extended and we would then have been able to compete in the market for medium-sized vessels.

Appledore went on to tender as prime contractor for some offshore patrol vessels. Just before tenders closed, the Ministry of Defence, through its intermediaries, informed us that a condition was to be imposed that Appledore had to be willing to buy back the ships after five years. That was a body blow for the shipyard, imposing an outrageous burden at the last minute. No responsible management in a medium-sized independent shipyard could possibly accede to that condition.

I come now to the future, which, unfortunately, is pretty grim. However, a Plymouth-based company, Sea Wind International, is seeking to place an order with Appledore for an offshore construction vessel, which is needed to construct offshore windmills. That is exactly what the Department of Trade and Industry said it wanted in its recent energy White Paper, and there are significant Government inducements for wind farm operators. Let us hope that the British industry has the opportunity to become involved in those important projects.

Sea Wind International will invest a substantial amount of its own money in the cost of producing the vessel. Obviously, it will have to borrow some, and banks, as usual, are seeking guarantees in respect of their loans for the vessel. I believe that such guarantees are available in other European Union countries, and we look to the Government for a loan guarantee. The offshore construction vessel will provide one-and-a-half years' work for the yard and will, in due course, be employed doing just the sort of work that the Government are exhorting the renewable energy industry to take on. That investment will sustain the shipyard and create a further 140 new jobs in Plymouth.

I should put on record that the Minister for Employment Relations, Industry and the Regions has seen me and the managing director of Appledore shipbuilders on several occasions. He has also seen Jim Wilson, the excellent managing director of Appledore, and representatives of Sea Wind International. He has informed us that he is anxious to help, and we shall see him again next week. I must impress on the Minister that time is of the essence. At Appledore, we have the last significant commercial shipyard left in England. It has an enviable record that is second to none. It is a company of not only vital local importance but national importance. It has a consistent record of building ships of the highest quality to a fixed price and to a fixed time.

In that respect, I should also mention that we had a subcontract to build HMS Scott, the arctic survey vessel, which was built in 1995 and has been at sea almost continuously since she was launched. When the current Secretary of State for Defence had an opportunity to scrutinise the contractual arrangements and to see exactly what Appledore had done in the process, he was moved to say that its work was exemplary and that he wished he could say the same about other Ministry of Defence contracts. As I said, that is an outstanding vessel, built on time at a fixed priced. The company has an outstanding work force and an innovative apprenticeship scheme. It and the region deserve the support that we seek.

9.44 am

Mr. Alan Campbell (Tynemouth)

I am grateful for the opportunity to contribute to this important debate and, at the outset, I draw attention to my entry in the Register of Members' Interests. I congratulate the hon. Member for Torridge and West Devon (Mr. Burnett) on securing the debate and very much regret, as he does, the loss of jobs in his area. I also want to associate myself with his comments about unfair practices and subsidies in other countries. Those points will definitely be understood and supported on Tyneside.

I want to limit my contribution today to the state of shipbuilding on Tyneside. We have a proud tradition of shipbuilding, and it will not have gone unnoticed to Tynesiders that the Sir Galahad is awaiting clearance to go into the Iraqi port of Umm Qasr to bring much-needed humanitarian aid to the people of that area. That ship was built at Swan Hunter, and we wish her and her crew a safe return.

Almost exactly three years ago, I secured an Adjournment debate in this Chamber on shipbuilding in Tyneside, against the background of a crisis in the industry. We had marched through Newcastle and London to draw attention to the problems of shipbuilding and offshore construction, but I am pleased to say that, three years on, considerable progress has been made with regard to shipbuilding on Tyneside.

As the hon. Member for Torridge and West Devon has already said, Swan Hunter was able to secure the contracts for two landing ships, which will soon be completed and launched; the first ships built on the Tyne since 1995. At about the same time, the topside of the Bonga project, a floating production storage and offloading vessel—FPSO—will be completed by AMEC on time and to price, like Shearwater three years ago. In two years' time, we very much hope that, at Swan Hunter and other yards across the region, we shall begin to construct a major part of the two aircraft carriers that were recently ordered.

The transformation of the shipbuilding industry in the region is a tribute to the superb work force and to forward-looking companies such as Swan Hunter and AMEC. It is also a tribute to the decisions taken by the Government to put work into the region in the form of MOD contacts and actively to support AMEC in its attempts to win the Bonga project. It is also due to the difficult decisions taken by the Government after 1997 to create a stable economic framework. Although I acknowledge difficulties with the exchange rate, the manufacturing industry in general benefits from low interest rates and low inflation, which allow us to move away from the damaging situation of previous decades when wage rises and wage demands priced us out of the market. That means that United Kingdom companies can now compete for and win work from abroad, although it is still difficult.

The success and revival of shipbuilding on Tyneside is also a tribute to an attitude in the region of not waiting for MOD work, important though it is, but of actively seeking commercial work to ensure that yards are consistently full and not lurching, as the hon. Gentleman said, "from feast to famine." We are seeing a new way of working at Swan Hunter, which is at the centre of a cluster of small and medium-sized companies in the supply chain that, together, are trying to find ways of working efficiently and innovatively. It is no coincidence that the owners and many of the senior managers of Swan Hunter are Dutch, because I understand that cluster working is the norm in certain parts of the continent. We have imported that lesson, which is standing us in good stead.

I understand also that cluster working goes down well with the Ministry of Defence, which wants to ensure that the benefits of contracts do not go just to the prime contractors, but to the supply chain companies.

As I said, the landing ships that will be completed this year will be the first ships built and launched on the River Tyne since 1995, but the aircraft carrier orders announced in January will take us into a new dimension. Two of the vessels are three times the length of the pitch at St. James's park, and one can imagine the number of man hours required to construct even part of such a vessel. About 1,000 jobs will be either created or safeguarded on Tyneside, and a similar number created on Teesside, over a 10-year period in an industry that is used to lurching from one short contract to another. It is an excellent example of public expenditure, because it will provide not only the best kit for our armed forces, but jobs in UK shipyards. I am sure that the work force and companies will look to future Governments of whatever political persuasion to ensure that such contracts continue to be placed and persevered with.

The prospect of carrier work has been a huge psychological as well as economic boost for the region. I must also say that it stands in stark contrast to how Swan Hunter was treated in 1995 by the then Government. It is also important to recognise the important contribution of the north-east maritime and offshore cluster, which is a strategic cluster bringing together companies, agencies and trade unions in the region. I include in that the important work of the One NorthEast regional development agency, and I want to put on record my thanks for the work of Kevin Curran, the GMB regional secretary. He has been instrumental not only in bringing the cluster together, but ensuring that work comes into our region.

The cluster examines strategic issues such as training and the possibility of creating a core work force in an industry that has been plagued by short-termism, and is going out of its way to challenge the culture that existed a decade ago that shipbuilding was dead. We should not underestimate the difficulties that shipbuilding in the region still faces, but it is infinitely better placed now than it was three years ago when I secured my Adjournment debate.

I have three points for the Minister, the first of which concerns the work force. A work force still exists on Tyneside, although it may be scattered to the four winds with people doing other jobs outside the industry. Despite the apprentices who have been brought in, the average age of the work force on Tyneside is still in the high 40s, and there will be a point, perhaps during the lifetime of the carrier work, when many of those people will leave the industry. I want the assurance that the Government acknowledge the extent of the problem and are committed not only to bringing people back into the industry—former workers want to return from being taxi drivers, for example, to the industry in which they trained—but to investing resources to bring new people into the industry and convince them that they have a future, as I believe they do.

My second point is about procurement issues, which I know are ongoing. Will the Government ensure that a ship that they order that can in any way be described as a military vessel is so described? That will mean that the work is placed in UK shipyards and not abroad, as happened after our mistake with the roll-on/roll-off ferries. In procurement, will the Government also examine the proposition that best value in shipbuilding does not always mean the cheapest? Tyneside credits itself on quality and reliability, and that should be built into the equation.

My third and final point is that when the Government are in a position to place or influence the placing of large contracts, they should consider the lasting benefits to the region. As hon. Members will know, a planning gain factor exists in development matters, and I believe that the Government could consider something similar. For example, they could ensure that when a large contract is awarded, part of the contract finds its way into investment by the company into higher and further education. We will need project managers as well as engineers in the future, and it is clear from the work of the clusters that higher education is the way forward for shipbuilding. We must concentrate on the value-added projects, which is where the real wealth is found. In doing that, we will ensure that the high-scale, value-added projects that are available offer a future for shipbuilding and that shipbuilding is not an industry of the past, but part of the new economy.

9.56 am

Mr. Mark Hoban (Fareham)

Thank you, Mr. Cook. I congratulate—

Mr. Deputy Speaker (Mr. Frank Cook)

Order. I would be remiss in my duties were I not to remind the House that when it was decided to have parallel sittings in Westminster Hall, it was agreed that the occupant of the Chair should be addressed as Mr. Deputy Speaker.

Mr. Hoban

I apologise, Mr. Deputy Speaker.

I congratulate the hon. Member for Torridge and West Devon (Mr. Burnett) on securing this debate. His comments on the feast and famine in the shipbuilding industry were well made, and I will return to that point later. I also echo the comments made by the hon. Member for Tynemouth (Mr. Campbell). As a native of the north-east, I understand the concerns that he raised about the shipbuilding industry. He also made a valid point about the skills that must be developed to meet the needs imposed on shipyards in securing contracts and the new aircraft carrier programme. That is another point to which I want to refer later.

In south-east Hampshire, the shipbuilding industry is an important local employer that spreads far and wide along the south Hampshire urban area. Although the Vosper Thornycroft shipyard is due to move from Southampton to Portsmouth in the near future, many people employed in that yard live in constituencies up and down the M27. Vosper is a major local employer, employing 1,000 people in its shipbuilding operations, and it is investing £50 million in the new yard in Portsmouth. Part of the Type 45 destroyer, the contract for which was announced last year by the Government, will be built there.

The next opportunity for Vosper Thornycroft is the future aircraft carrier programme, and like other shipyards, it hopes to win a decent share of the contract. Everyone was grateful for the Secretary of State's reassurance on 30 January that the work on the carriers would be split between four yards; Swan Hunter on Tyneside, BAE Systems Marine at Govan, Vosper Thornycroft at Portsmouth and Babcock BES at Rosyth. In that statement, he went on to touch on the crux of the issue affecting all those yards: The precise arrangements will be the subject of discussions between the alliance and the yards, to determine the best value for money and work load capacity."—[Official Report, 30 January 2003; Vol. 398, c. 1028.] That concerns me, and one aspect highlighted by the hon. Member for Tynemouth was the need to develop skills to meet those needs.

Vosper Thornycroft believes that it may have to employ an additional 1,000 people, which will double its shipbuilding work force. Many of those recruits will not have the necessary skills to complete the work on time and to budget, so it is important for all the yards concerned to have some certainty about the work that will be allocated to them as soon as possible. That certainty has been affected by the way in which the Government have decided to involve both Thales and BAE Systems in the deal. Before that arrangement, all the yards had a fairly clear idea of the proportion of the contract that they would obtain if their preferred lead bidder won the contract.

The arrangements set out in the Secretary of State's statement of 30 January have led to a great deal of uncertainty in those yards over what work they will have and what skills they will need to develop in their staff. Vosper Thornycroft has developed a programme called "Skills for Life", which will meet the needs of the work force that it must recruit and the specification laid down by the Ministry of Defence.

The other aspect of the "Skills for Life" programme is to enable employees at the end of the carrier contract to be used elsewhere in the yard, in the neighbouring yard—the Fleet Support Ltd. ship maintenance facility in Portsmouth—or elsewhere in the local economy. Clearly, the optimum solution for many of the yards involved would be to move away from feast or famine. A levelling of the work load would assist not only the employers but the employees, as well as local suppliers.

As with the maritime cluster in the north-east, the South East England Development Agency, SEEDA, is looking to develop a cluster of suppliers, which will be required to invest in extra capacity and skills in their work forces. A greater degree of certainty in the stream of orders will advantage the prime contractors, the shipbuilders and their suppliers.

It would be useful if the Minister could address today when we will get certainty over the placing of the orders and whether we can sort out the peaks and troughs. If he cannot answer those questions today, will he take them back to the MOD, which is in the lead on those issues?

We have seen in the past few days that our naval capacity is fundamental to the deployment of troops and our armed forces overseas. The orders placed by the Government to strengthen that naval capacity are welcome, but we need a vibrant, viable shipbuilding sector—particularly a naval shipbuilding sector—to service those orders. I hope that the Government take back today the message that we need to ensure that all parts of the shipbuilding sector are there to support our armed forces.

10.2 am

Mr. Ian Davidson (Glasgow, Pollok)

We meet at a time when the future of shipbuilding has never been brighter. As secretary of the all-party group on shipbuilding and ship repair, I start by saying how grateful we are, as has been mentioned, for the co-operation that we have received from this Government, particularly in the placing of naval orders. I do not think that at any time within memory has so much work been given to the yards, and in a fashion that has allowed them to plan. It is clear that the flow of work will allow the yards continued employment and stability for the foreseeable future.

For the first time, the yards can make promises to their work forces about continuity of employment and try to recruit new people with a guarantee of stability of employment. That is extremely welcome in my area and in many other areas of the country. I am talking about not only the major orders for the Type 45s and the aircraft carriers but the orders that came before those. The programme of work has been a model of procurement.

I want to raise at this early stage—while the Ministry of Defence is discussing the Military Afloat Reach and Sustainability, or MARS, project—the absolute importance of ensuring that all the vessels involved in that project are built in the United Kingdom. I appreciate that innovative routes of financing are being examined, but because those vessels will be involved in support for fighting vessels, it is essential that they are considered naval vessels and are built in the UK. We have had difficulties with some items of procurement in the past, as my hon. Friend the Minister may be aware. I refer in particular to the two ships of the ALSL order that were given to Tyneside. Some steelwork and some design work—more than had been expected—from that order went off to Holland, resulting in delays for not only Swan Hunter but the work on Clydeside. If we get assurances from Government that work will be done in this country, we do not want then to find that subcontract work, especially steelwork, is handed out abroad. I am sure that the Minister will be able to give the same assurances that we have already had on that from the Under-Secretary of State for Defence, Lord Bach.

On the aircraft carriers, we in the shipbuilding and ship repair group are grateful for the close liaison that there has been with the MOD and Lord Bach. The assurances that many of us sought that all the design, build and intellectual property rights would be retained for this country have been made. We have also had suitable assurances that nothing will be done that will compromise the UK's opportunities to compete for export orders of naval vessels in the future. We will not find that key parts of the skills base or the technology will be retained elsewhere. Given the present creative tension with France, that issue has exercised the minds of many of my colleagues, but I am glad to hear that guarantees have been given that that tension will not interfere with our opportunity to seek export work in the future.

The tripartite structure that the Government have chosen for the aircraft carriers of BAE Systems—formerly British Aerospace—Thales and the MOD, which has an overarching management and risk management role, is novel, innovative and not without dangers. However, given that the MOD seems willing to bear that risk, who are we mere mortals to cast doubts on its ability to cope with the complexities? We want to ensure, however, that none of those complexities will cause delays to the ordering and subcontracting programmes. As other Members have mentioned, this order is a bonanza not only for the yards where the main modules will be created, but for virtually everywhere in the UK that can turn its hand to metal fabrication and the like. It is one of the largest boosts to the entire industry for a considerable period. I hope that the liaison that we have had with the MOD to date continues and that we are able to have similar liaison with the Department of Trade and Industry to explore various issues relating to the future of the industry.

There are still several issues for the future that need to be explored. The first is the need to do what we can to ensure that the order books are smoothed out. The pattern of ordering for the Type 45s and the aircraft carriers might result in some peaks and troughs, and it would be helpful if the Government entered the negotiation process with an understanding that it would be in the interests of all concerned to adjust the times, dates and schedules to allow smoothing out. We want to avoid, as far as possible, the boom and bust that has been the curse of the industry in the past.

Other Members have mentioned skills. Given the nature and age profile of the industry, considerable recruitment is likely to be required in the future. In my constituency and neighbouring areas, 10 years' guaranteed work in the shipyards as a result of the naval orders is longer than many other local employers can offer. The Government have a responsibility to work with Scottish Enterprise and other local organisations to market the industry as something that offers a secure future for youngsters leaving school. There are obvious difficulties surrounding the industry. It still has an image of providing dirty jobs, which is unfortunate in many ways. I have been to the yards and seen the high-tech basis of much employment there, and we need to ensure that the jobs are marketed in a way that sends out a proper, balanced image of the industry.

It is interesting that we have had so much debate in Parliament on university education. A high proportion of the young people from my constituency will not go to university, but will take apprenticeships. I do not see public schools fighting to ensure that they get a disproportionate share of modern apprenticeships. If the future of industries such as shipbuilding is marketed correctly, perhaps they will move into that area; such competition would be welcome.

The Government have a heavy responsibility to ensure that the jobs are made sufficiently attractive to bring in some of the best and brightest of our youngsters. As my hon. Friend the Member for Tynemouth (Mr. Campbell) said, many who have left the industry and are working as taxi drivers and the like would be enthusiastic about returning if there were to be stability of employment and the opportunity for reskilling that enabled them to move up the salary scale. Many of the wages in the industry leave a bit to be desired; that is not the way to recruit and retain the best and brightest work force for the future.

The Government also have a responsibility to discuss more closely with the Shipbuilders and Ship Repairers Association—the employers—the future of the LINK project. The funding will expire at the end of 2003, and all the money is already committed. Substantial amounts have been spent on business improvement master classes; research and development; projects such as SSA marine; advice on science and technology; marketing services; a variety of special interest groups; and areas that suffer a shortage of skills and education.

Now that the future seems bright for the industry, we need to ensure that the Government contribute to such pump-priming amounts, balanced by income from the industry so that it remains at the cutting edge. Where international competition is concerned, others have already made points about unfair practices by other countries. In particular, the running sore of South Korea has not been adequately tackled by the European Union or by other major shipbuilding powers. The message that such nations take from that is that they can get away with it with virtual impunity. The Government have been relatively feeble in that regard, although I recognise the difficulties that they have faced in persuading the European Union to act. If we were to establish a precedent of taking action against unfair competition, it would have consequences for many of our European friends and neighbours.

Finally, I pay tribute to my colleague, the hon. Member for Torridge and West Devon (Mr. Burnett), for securing this important debate. He has been a stalwart as vice-chairman of the all-party group, and I know that the chairman has been grateful for his support.

10.13 am

Mr. David Chidgey (Eastleigh)

I, too, congratulate my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) on securing this debate. It comes at a good time and gives us a chance to pause for breath after some dramatic developments in the shipbuilding industry in the past 18 months or so. I also congratulate the hon. Member for Tynemouth (Mr. Campbell) on his studied and thoughtful analysis of the industry and of what could well happen in the future.

Some years ago I was fortunate enough to secure a Westminster Hall debate on the shipbuilding industry at the time of the campaign to save south-coast shipbuilding. The industry was in sharp decline, the major shipbuilder in our region, Vosper Thornycroft—whose Woolston shipyard had been in my constituency until the boundary changes—was struggling in the domestic market, although it was a very successful exporter of ships, and 6,000 jobs in the industry were at risk across the region.

The main problem was the lack of royal naval orders, particularly for Vosper Thornycroft, which is known throughout the world for its excellence in warship building. It was having great difficulty in convincing overseas customers, mainly Governments, that they should buy its wares, when it could not demonstrate that it had the seal of approval of building our own Royal Navy's ships, which are reckoned to be the best in the world.

The future of shipbuilding on the south coast hung in the balance. There was great concern, not just for the jobs, but for what it meant to the community. Our tradition of warship building has been unbroken since at least the time of Henry VIII, and it was on the verge of disappearing. When I was a student engineer in Portsmouth, people could not remember when the last ship had been built in the dockyard. I think that it had been in the 1950s, so we have had a 50-year break in the naval dockyard of naval ship construction.

The award of the type 45 destroyer contract was important not just as an order but as a way of helping to win the fight for survival. The key issue was the fact that the order was placed through competition. Hon. Members will remember that there was a great debate at the time; it was feared that the Government would set aside the well-established principle that naval contracts should be awarded on the basis of competition between shipyards. The argument was advanced strongly that there should be a negotiated contract with BAE Systems, through its subsidiary BAE Marine, to take on the whole lot. The other option was that it should be split and that there should be competition between the two yards most able to undertake the work, BAE Systems and Vosper Thornycroft.

The decision was whether to leave the United Kingdom with a sole prime contractor in the naval shipbuilding industry or to have two competing prime contractors able to bring the Government and the country the benefits of competition; not just costs, but innovation and a dramatic and dynamic approach to the task of winning orders. I am glad to say that the principle of competition was upheld and Vosper Thornycroft benefited from the award of part of the Type 45 contract. I understand that that is going particularly well.

That award turned round the prospects for shipbuilding on the south coast. I understand the difficulties of the excellent firm Appledore that my hon. Friend the Member for Torridge and West Devon described. The right principle is in place, but the benefits have not been distributed as well as they might have been.

Mr. Burnett

Does my hon. Friend agree that it is particularly difficult at present for shipyards that do not have the benefit of MOD orders, but rely on worldwide commercial conditions?

Mr. Chidgey

My hon. Friend is absolutely right. Although I would not wish in any way to diminish the excellent work of Appledore, in most cases it is probably a supply-chain operator rather than a prime contractor. I shall return to the issue of how we give our supply chain industry every opportunity to bid fairly for work.

The benefits of the Type 45 destroyer contract are worth dwelling on for a couple of minutes. It brought with it £50 million of investment in the Portsmouth shipbuilding facility—which we used to call a dockyard—which will be completed later this year. It will be the most advanced facility in western Europe, and its advanced capabilities in design and manufacture will not just benefit competition for projects within the UK, but will enable it to compete effectively throughout the world. As many colleagues know, overseas firms are fighting tooth and nail for the opportunities to win warship contracts. The facility is of terrific benefit to our local economy and it is strengthening competition for royal naval projects.

The Rand Corporation made an assessment of the MOD's procurement options for the Type 45 destroyer, in which it said: To summarise the current status of the UK shipbuilding industrial base only two shipbuilders—BAE SYSTEMS Marine and VT—have the combination of physical facilities, management and labour experience, and financial resources necessary to provide that service to the MOD. That is a healthy situation, and I should like it to be strengthened and preserved.

Vosper Thornycroft, the prime shipbuilding contractor on the south coast, can now restructure, expand and diversify into a wide range of engineering facilities. The VT Group, as it is now named, has moved its headquarters to my constituency and has developed its work force of 6,000, of whom 1,000 are in shipbuilding, to provide a wide range of skills in engineering, design and construction, and product support. Most importantly, the group has strengthened its training for the future generation of engineers and technicians in the industry.

As hon. Members have mentioned, we are now on the verge of the award of substantial contracts for the future aircraft carrier. I understand that the VT Group is well placed to win a substantial part of that, which could be some 20 per cent. of the production and through-life support. I do not just hold a candle for a local employer in my constituency; I can see beyond that to what the contracts mean for engineering and shipbuilding across the region. Hampshire has the most defence-dependent economy of any shire county in the country. I hope that the speedy award of the future aircraft carrier contracts will not only bring major recruitment in the shipbuilding division of VT—over 1,000 additional personnel—but will be just one aspect of the benefits of orders for the Royal Navy. Those orders are won through competition, and they will benefit a wide sector of the local economy.

Lack of skills is the major issue in the economy of what is often known as the affluent south-east. Although overall unemployment is low, lack of skills is restraining economic development, which is a huge problem. The future aircraft carrier project gives an opportunity to develop the "Skills for Life" training programme. There are exciting prospects of continual, diverse training, and career development by choice in many different ways; not only in Vosper Thornycroft, but in the local economy. People will have the option of moving in and out of shipbuilding as the peaks and troughs arise, while developing and improving their skills, and making themselves more productive and more employable.

From the discussions that I have had with the Learning and Skills Council, Eastleigh further education college—of which I am a governor—and the VT Group, which is the second biggest supplier of modern apprenticeship schemes in the UK, I can be confident that the programme has the potential to break the mould with regard to the mounting skills shortage in the area and the problems related to peaks and troughs in the shipbuilding industry. In the modern world it is important to give people the skills that enable them to change their roles and their jobs, be flexible and take up opportunities as they arise.

So far the news has been good. Shipbuilding on the south coast has been saved from collapse due to the MOD's retention of the principle of competition. More than £50 million has been invested in the shipbuilding industry, and there is a groundbreaking "Skills for Life" programme. However, there is just one cloud on the horizon; procurement by prime contractors through the supply chain. In a speech to the Northern Defence Industries in October last year, the Minister with responsibility for defence procurement said: How prime contractors manage the supply chain is primarily their business but we have an interest in ensuring fair play. This is essential if we are to maximise benefit from your skills and expertise. In that context we have reached an agreement through the MOD/industry commercial policy group—on a number of practices dealing with supply chain relationships. He said that the agreement had been established on codes of practice, which is an important step towards encouraging a positive equitable and co-operative approach between the MOD and its suppliers". That is all very well, but do such things happen in practice? "Positive equitable and co-operative" are the key words, and the contracts such as those for the Type 45 destroyers and the future aircraft carrier are a good opportunity to display those qualities, but will they? Those contracts are hugely complex and taking a huge slice of taxpayer's money; I reckon that the figure is about £15 billion, but it might be more than that.

Although the MOD, rightly, does not willingly subsidise the defence industry, it is well known—hon. Members have given examples of case after case this morning—that other countries subsidise their industries, in particular their defence industries. The state advantage to foreign firms in direct competition with UK suppliers to the Government and the taxpayer is, frankly, not acceptable. Although I recognise that he does not speak on behalf of the MOD, I ask the Minister to assure us that he will take the matter up with his colleagues and perhaps try to assure us later that MOD contracts in the supply chain—especially those to the Royal Navy, which probably constitute most of the overall cost—will not be awarded to foreign firms that benefit from state subsidies, whatever form those subsidies take. Will the Government take the initiative to set an example, and reject the award of contracts to the MOD in the supply chain when the firms involved undercut UK firms through the benefit of unfair subsidies? Competition must be transparent, open and fair.

10.26 am

Brian Cotter (Weston-super-Mare)

I congratulate my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) on initiating the debate, which is important not only for the Appledore company in his constituency and shipbuilding as such, but for manufacturing as a whole. Hon. Members frequently address issues to do with manufacturing and keeping the country going as they relate to those skilled with their hands.

There has not been fairness in the shipbuilding industry for some time. As is so often the case, such matters have been allowed to drift on for far too long. My hon. Friend rightly referred to South Korea and eastern European countries, where steel has been greatly subsidised, which means that manufacturers and users in this country cannot gain from those lower steel prices.

I should like to declare an interest, in that I am the managing director of a small manufacturing company. I do not know whether the company is doing anything in the way of shipbuilding orders at the moment, because although I keep reasonably good track of my company I am there for a few hours a week only, when my brain is ticking over as to what is going on. However, the company has done shipbuilding work in the past and we shall, I hope, no doubt do so again.

I pay tribute to Appledore, having visited the website, read its history and seen a fine picture of what looks like a schooner from the early days—I am not sufficiently into shipping to describe it properly—and one of a tanker from today. The company is long-established. People tend to think that because long-established companies have been around for a long time they may not be meeting competition very well. However, from what I have read about Appledore, I am certain that it is a vibrant company, as many British manufacturers are; otherwise, it would not still be trading, as it hopes that it will continue to do. Although Appledore is rather bigger than my company, I feel a commonality in that both share the desire to carry on the manufacturing tradition of this country.

The hon. Member for Glasgow, Pollok (Mr. Davidson) spoke with great heart about manufacturing and engineering skills, the need for training, and the need to recognise manufacturing as an attractive industry to enter. I urge all hon. Members to take that on board. We should encourage people not only to go to universities such as Oxford and Cambridge, but to go into manufacturing. Having been in manufacturing for a good part of my life, I would recommend people to go into it and give it the priority that it should have, because it can be an interesting, challenging and exciting industry to work in. My hon. Friend the Member for Eastleigh (Mr. Chidgey), who has a great deal of experience in engineering, spoke today, as he has in the past, with great knowledge on the matter. He rightly spoke about the need for skills training to get the right people in place in manufacturing. He made interesting comments about the supply chain measures and spoke, far better than I, on the need to address the situation. I hope that the Government will respond appropriately.

We have seen unfair practices throughout the world. In that connection I would like to refer to the Organisation for Economic Co-operation and Development agreement of 1994, which was made against threats from the US to penalise shipping that was seen to be subsidised. On 5 December 2002, the OECD announced that the world's principal shipping economies had launched negotiations on how to counter overcapacity and plunging prices in the world shipbuilding industry. As a result, a special negotiating group, known as the SNG, was set up. Future meetings of the SNG were to discuss mechanisms to deal with subsidies and other support measures, as well as disciplines on pricing and other practices that distort the market and eventually, to produce remedies and dispute settlement procedures.

The SNG was supposed to be concluding its work by 2005, which is all well and good. However, that is an awful long time away. In the meantime, we must ask what effect unfair practices will have on the shipbuilding industry and on Appledore in particular. Korea has been mentioned in that context. Although submissions have been made over many years about the shipbuilding industry in South Korea, there is a strong feeling that that country has indulged, and may be continuing to indulge, in subsidies and benefits not available to our companies. I hope that the Minister will respond to that concern.

The EU supported the abolition of state help, although it initially delayed changing its rules on the seventh directive on aid to shipbuilding to accommodate the OECD agreement until reciprocal measures had been introduced in some of the far east countries. We look to the Government for guidance and a response on what is being done to address the situation. Our very fine companies have to trade from a disadvantageous position.

Lord Sainsbury of Turville, Minister for Science at the Department of Trade and Industry, said in response to a written question on competition from Korea: We have long recognised the adverse impact that Korean unfair competition has had upon the world shipbuilding market. The European Union (EU) is pursuing, with our firm support, a bilateral/trade remedy to this issue ߪ If the Commission's examination does confirm the case against Korea and does recommend action in the WTO, we would be minded to support such action, subject to completing our review".—[Official Report, House of Lords, 9 May 2001; Vol. 634, c. 387W.] Many believed that the matter would be resolved without referring to the World Trade Organisation. However, that was not to be, and on 24 October 2002 the permanent delegation of the European Commission to the WTO sent a request for consultation to the permanent mission of Korea and to the chairman of the dispute settlement body at the WTO. I hope that the Minister will tell us how matters are proceeding on that matter.

I also hope that the Minister will assure us that officials at the DTI are keeping in close touch with the shipbuilding industry. I am sure that the hon. Member for Glasgow, Pollok and other hon. Members on the all-party shipbuilding and ship repair group will know much more than I on the matter. On a very personal level, I hope that Government officials have been in touch with Appledore and are doing everything that they can to help it to survive and prosper.

In summary, it is my heartfelt wish that we do all that we can to support engineering and shipbuilding manufacture. We must not let matters slide when addressing unfair competition from other parts of the world.

10.35 am

Mr. Henry Bellingham (North-West Norfolk)

I congratulate the hon. Member for Torridge and West Devon (Mr. Burnett) on securing the debate and on presenting his case so eloquently and forcefully. I declare an interest that is in the Register of Members' Interests. The point that the hon. Gentleman made about feast or famine was well made. He also clearly illustrated the real problems faced by yards that do not have MOD work. They are much more exposed to unfair competition from abroad. The hon. Member for Weston-super-Mare (Brian Cotter) also touched on the OECD agreement and Korea, and I will return to that in a moment.

The hon. Member for Torridge and West Devon spoke about the various anti-competitive loan guarantee arrangements in the EU. I see the point that he was making about their effect on non-MOD yards, including Appledore. He pointed out—

Mr. Burnett

My understanding is that many companies in the EU get loan guarantees for the cost of manufacturing vessels. We seek the same terms; we seek no favours or support. We merely seek the same terms that are available to others.

Mr. Bellingham

That is a fair point. It is important that the Minister speaks about our own home shipbuilding credit guarantee scheme, which was set up under the Industry Act 1972. It is interesting that we were debating the Industrial Development (Financial Assistance) Bill in Committee yesterday. Although we did not discuss part 3, we looked at the section 8 scheme. The scheme is far-reaching and has supported 1,200 vessels up to a value of £4.5 billion since its inception. Presumably, it is possible under that scheme to sort out the problems in the shipbuilding industry that have been raised by the hon. Member for Torridge and West Devon. Perhaps the Minister will tell us whether that is the case.

The hon. Member for Torridge and West Devon also mentioned the Dutch firm Damon, which was able to subcontract most of its work to the Ukraine by buying steel in at a quarter of the world price. That is staggering. I agree with him that no one could compete against such subsidy. Perhaps, if he does not have the answer now, the Minister could write to the hon. Gentleman and to me, as it is a cause of substantial concern.

The hon. Member for Torridge and West Devon also mentioned the offshore patrol vessel for which Appledore bid. However, a buy-back condition was imposed, presumably by the MOD. If so, that is fairly staggering.

Mr. Burnett

At the last moment.

Mr. Bellingham

At the last moment, indeed. Perhaps the Minister could comment on that or write to me. I know that he is not here to answer for the MOD, but it struck me as unconscionable.

Mr. Hoban

On offshore patrol vessels, does the hon. Member agree that the important issue is to ensure that taxpayers get good value for money? If the buy-back led to taxpayers getting a better deal, it was not a wholly bad decision.

Mr. Bellingham

Indeed. That is exactly one of the points that I hope the Minister will answer. We all need clarification on that.

I agree with the comments about offshore wind turbines. There are currently planning applications for more than 90 offshore turbines along the Wash and off the Norfolk coast. In fact, if there is another proposal put forward by the United Kingdom Atomic Energy Authority, it could lead to another 100 turbines going off the Norfolk coast. That would certainly solve the problem of huge controversies about onshore turbines, which are extremely unpopular. Much of the work will indeed be given to UK companies. I should have thought that that would create a huge amount of potential for the future.

The hon. Member for Tynemouth (Mr. Campbell) talked about the yard in his constituency, Swan Hunter. I visited Swan Hunter some years ago as part of a project that I was doing at the time. I know only too well the extraordinary sense of affinity between the city, the yard and the people in the region. I was very pleased to hear from the hon. Gentleman that the yard is going through a period of revival and that there is a spirit of optimism in his constituency. The point that he mentioned about the cluster work is obviously extremely important, as is the way in which Swan Hunter has been able to look very proactively for non-military work.

The hon. Gentleman rightly congratulated the Government on the orders that have come from the MOD. However, it was the last Conservative Government who wrote the two large aircraft carriers into the defence programme, and it is only fair that credit is given for that. Apart from that, I thought that what the hon. Gentleman said about trying to attract skills back into the industry was very important. That point was echoed by my hon. Friend the Member for Fareham (Mr. Hoban) and the hon. Member for Eastleigh (Mr. Chidgey) when they talked about ensuring not only that there is re-skilling, but that people who already have those skills are attracted back into what is obviously a very exciting industry to work in, notwithstanding the peaks and troughs.

I certainly agree with what my hon. Friend the Member for Fareham said. Although the split of the work between the four yards is welcome in many ways, there is a need for a framework for the split of work and a need for consistency. That will be crucial in ensuring that the right levels of recruitment take place. If the Minister cannot answer that question now, he can talk to his colleagues at the MOD and move forward on that. Since the excitement, and especially the relief, of the announcement that the main contract did not go to Thales's offshore construction service, there is a need to dot some of the i's and cross some of the t's because the yards obviously need to know exactly where they stand so that they can move forward with their long-term planning.

The hon. Member for Glasgow, Pollok (Mr. Davidson) made a very good point about the subcontracting work going abroad, which was echoed by the hon. Member for Weston-super-Mare. It is fine if subcontracting work goes abroad, but it should not go to yards that are unfairly subsidised by particular countries within the EU. The Government must be alive to that important point. The hon. Member for Glasgow, Pollok made the point that there will be a spin-off benefit for small and medium-sized companies not just on Clydeside but throughout the UK. That is obviously important. I hope that a steady flow of vessels will be launched in his constituency. I also hope that even he will put his well-known republican views to one side to welcome members of the royal family to launch those vessels in the years ahead.

The Minister should definitely answer the point that the hon. Member for Eastleigh raised regarding skills. Several hon. Members are very concerned about the crucial need to get people who have skills back into the industry as well as attracting those who are in the industry already.

As far as the economy is concerned, there has been a very substantial decline in manufacturing and heavy engineering, and shipbuilding and ship repair are obviously part of that. Since 1997, 600,000 jobs have been lost. In fact, the CBI predicted the other day that another 40,000 could be lost between now and Easter. I am very sorry that probably 100 jobs at Appledore will be included in that figure. That is why it is vital that everything that can be done is done to help key industries such as shipbuilding. The picture as far as MOD orders are concerned is fairly rosy, notwithstanding the need for clarity now and certainty, which I hope that we shall see in the very near future.

I do not always agree with the hon. Member for Weston-super-Mare, but as far as non-naval work is concerned, I agree with him that the OECD agreement and the special negotiating group are most crucial to the way in which we move forward. With those sentiments, I would add that 2005 is still a long way off. Why can there not be any progress before 2005 as far as the special negotiating group is concerned? What are Her Majesty's Government doing to encourage more progress? What meetings have taken place? What role is the shipbuilding forum playing in spearheading discussions between Her Majesty's Government and the special negotiating group? Have any talks taken place and if not, why not? I should have thought that one of the absolutely key roles for the shipbuilding forum would be in those discussions with the OECD and the special negotiating group, which is made up of non-OECD countries.

As far as home-grown assistance is concerned, the shipbuilding intervention fund, as I understand it, came to an end in December 2000. What, if anything, is being put in its place? I want to push the Minister on the home shipbuilding credit guarantee scheme. Questions have been asked about why various UK yards cannot get access to the same level of credit guarantee as their EU counterparts. If that is the case, why is more not being done to widen the scheme and make it more attractive? That is vital as far as Korea is concerned because there is not only anecdotal evidence that Korea is winning orders at prices below production costs; I have read article after article that endorses that point. If we are to guarantee any future at all for non-MOD yards in this country, that point must be addressed.

I very much hope that the Minister will answer those questions. If he answers them successfully, we hope very much that there will be a brighter future for the UK yards than there perhaps has been for several years.

10.48 am

The Minister for E-Commerce and Competitiveness (Mr. Stephen Timms)

I too congratulate the hon. Member for Torridge and West Devon (Mr. Burnett) on securing the debate. We have had a useful discussion with several well informed contributions, in which Members have drawn on their constituency experience of the shipbuilding industry. I also want to pay tribute to the work of the all-party group, and I am glad that my hon. Friend the Member for Glasgow, Pollok (Mr. Davidson) has been able to contribute to the debate. The debate provides me with a useful opportunity to stress again our continuing support for the UK shipbuilding industry and to draw attention to the actions that we are taking to help it improve its competitive performance to meet the considerable challenges, several of which have been highlighted in the discussion.

The hon. Member for Weston-super-Mare (Brian Cotter) asked me to confirm that the Department was continuing to take a close interest in and be in close contact with the industry, and I am glad to do that. I pay tribute to Appledore Shipbuilders in the constituency of the hon. Member for Torridge and West Devon. As we heard, that company has a long and distinguished tradition of shipbuilding. The hon. Gentleman has rightly drawn attention to some challenges that the yard faces. I want to comment on those, but first I will set out the context.

There is, as we heard, a clear distinction between the market prospects for the naval and the merchant shipbuilding markets in the United Kingdom. The MOD's current naval procurement programme is the largest for many years. It includes the construction of three Astute class submarines, six Type 45 destroyers, four landing craft and two aircraft carriers, which will be the largest naval vessels ever built in the UK. That programme provides an excellent opportunity for the industry to re-establish itself, because it will provide substantial opportunities for the commercial as well as the naval yards.

In heartening contributions from my hon. Friend the Member for Tynemouth (Mr. Campbell) and the hon. Members for Fareham (Mr. Hoban) and for Eastleigh (Mr. Chidgey), we heard about how that opportunity is being successfully grasped throughout the UK. My hon. Friend made important points about cluster working. There are many examples of the success of that approach in other industries and in the shipbuilding industry in other countries. He is right to draw attention to the benefits that it could bring to our industry.

Several hon. Members invited me to comment on the future procurement policy of my MOD colleagues. I shall decline those invitations, but I will say that the MOD consults my Department on procurement decisions in order to take account of the implications for industry. Hon. Members also referred to skills. Next week there will be a meeting between my Department and the MOD's project team in respect of aircraft carriers to discuss skills, so we are keeping a close eye on how those issues and challenges are developing.

I cannot argue that commercial yards are not experiencing great difficulties; they certainly are. UK merchant yards are finding it very difficult to win new orders, but other yards throughout north-western Europe are experiencing similar difficulties for similar reasons. Global demand for new shipbuilding has weakened substantially, reflecting the global economic slowdown. In addition to competition from Korea, about which we heard a good deal, and from Japan, there is increased competition from China and from Turkey, a relative newcomer whose order book has expanded by 30 per cent. in the past three years. There is also new competition from eastern Europe; Ukraine was mentioned.

Mr. Bellingham

Is the Minister concerned about Poland's accession to the European Union and possible subsidies that its shipbuilding industry receives?

Mr. Timms

As I said, there are new competitive challenges from eastern Europe, and we are alive to them. If there are questions of illegal subsidy, the fact that such issues are being addressed in the EU will be helpful, but we certainly keep a close eye on those issues. The question of cheap steel from Ukraine was mentioned, but we have not been able to find firm evidence for what was described. If hon. Members have evidence for that, I would be keen to see it.

Mr. Burnett

I do not want to interrupt the Minister for long, but I will see what I can do about that evidence. He will know that I and the managing directors of Appledore and Sea Wind International have been negotiating with the DTI for a loan guarantee for some time. Next week we again see the Minister for Employment Relations, Industry and the Regions. I hope that this Minister will pass on to his colleague our concerns about the critical difficulties that Appledore faces. I ask him to tell his colleague that about 800 jobs are in jeopardy.

Mr. Timms

I will certainly pass that message on to my hon. Friend. He is following developments with great interest, as the hon. Gentleman knows. We very much regret that the company had to take the decision about redundancies to which he referred. We recognise that redundancies will have a big impact on north Devon, given the lack of real alternative engineering employment in the area. I am pleased, however, that the South West of England Development Agency has announced the establishment of the Bideford taskforce and the immediate involvement of Jobcentre Plus's rapid reaction team to assist the workers who are made redundant in finding alternative employment. The hon. Gentleman will find that that is an effective approach.

The first meeting of the taskforce took place yesterday. Its members include Appledore Shipbuilders, the regional development agency, the district council, the local chamber of commerce, Jobcentre Plus and the Government office for the south-west. David Whiteley, who chairs the north-west Devon economic partnership, heads the taskforce.

We continue to work closely with Appledore to help it to win new orders and, we hope, avoid further redundancies. As the hon. Member for North-West Norfolk (Mr. Bellingham) thought, there is an application for a home shipbuilding credit guarantee scheme loan guarantee for the wind barge contract that Appledore is pursuing. Yesterday my officials met everyone involved. We anticipate having a final report from the advisory committee of the Ship Mortgage Finance Company before the Minister for Employment Relations, Industry and the Regions meets the hon. Member for Torridge and West Devon and the firm next week.

Let me set out briefly what we have done to help the industry in the last few years. In 1998 we set up the Shipbuilding Forum, which was mentioned. It comprised the industry, unions, training bodies, the national training provider—the Engineering and Marine Training Authority—Departments, including the MOD, and the devolved Administrations. Last year we expanded the forum's membership to the marine equipment and boatbuilding sectors, renaming the forum the Shipbuilding and Marine Industries Forum.

In December 1998 we received the forum's first report, which concluded that the industry's future depended on its ability to improve competitiveness. Since then we have been working closely with it to take forward its key objectives for improved productivity, better marketing and improvements in training and skills. Several hon. Members referred to that.

We established the LINK shipbuilding research project to help the industry to improve productivity. Launched in 2001, that five-year project combines academic studies with "master class", which aims to bring about practical, short-term productivity improvements. The concept derives from the automotive and aerospace industries, where industry experts visit and inspect a yard, recommend immediate improvements and, crucially, embed that ability in the yard so that continuous improvement can be achieved. "Master class" has been very successful.

My hon. Friend the Member for Glasgow, Pollok asked about continued funding for that initiative. I cannot make new announcements about that today. We are considering the criteria for Government support for such exercises in future, so I cannot say now how a proposal in respect of that project would stack up against those criteria. It is important to factor in the potential for the Department and the shipbuilders' association to work with RDAs to look for regional initiatives. Of course, yards can access the manufacturing advisory service and the regional centres for manufacturing excellence. We are supporting a newbuilding marketing project, which was launched in 2001. That has highlighted the considerable potential that still exists within UK shipyards to attract new customers.

The Shipbuilding and Marine Industries Forum has identified in particular the need for substantial improvements in the skills base of the industry. My hon. Friend the Member for Tynemouth talked about that a good deal, as did my hon. Friend the Member for Glasgow, Pollok and the hon. Members for Fareham and for Eastleigh. To address that issue, my Department has been working closely with EMTA—the former national training organisation—the Science, Engineering and Manufacturing Technologies Alliance, the Learning and Skills Council and the Department for Education and Skills. The focus has been on improving craft skills, such as welding and project management.

Hon. Members' concerns about skills in the shipbuilding industry could also be raised in the context of a number of other industries. Skills are a big challenge for the UK as a whole. The Government will publish a skills strategy later this year to help us to address it jointly. Apprenticeships are an important part of the progress that we need to make on that front. I was interested to see that the Govan yard advertised 100 apprenticeships recently and received more than 1,000 applications. The attractiveness of this industry is becoming well understood. I welcome that.