Upper Clyde Shipbuilders (Hansard, 15 July 1971)

§ Mr. John Davies

The sequence of events was as follows 14th October—Mr. Mackenzie, the S.I.B. Director on the Board of Upper Clyde Shipbuilders, told the Department that he doubted 158W whether the company could be profitable in the long term and therefore whether it should continue trading. 27th October—As a result of the above, the Parliamentary Under Secretary of State for Industry told the Chairman of U.C.S. that until the Government were satisfied as to the future viability of the company new credit guarantees could not be issued to shipowners. 19th November—The Chairman gave the Parliamentary Under Secretary a financial report on U.C.S. which stated that in the opinion of the Board the company had a reasonable prospect of success and was justified in continuing to trade. This report included the assumption that there could be a capital reconstruction involving the writing down of loans. The P.U.S. agreed to examine this report. 17th December—The Secretary of State told Board members of U.C.S. that the financial statement had not reassured the Government as to viability sufficiently to enable them to resume issuing guarantees. 18th December—Members of the U.C.S. Board indicated the possibility of renegotiating prices with shipowner customers as an additional element of support of the company. 23rd December—Members of the U.C.S. Board reported that certain shipowners were prepared in principle to pay increased prices provided U.C.S. indebtedness to the Government was substantially reduced. The Secretary of State agreed to consider some modification of the capital structure. 5th January—The Secretary of State met shipowner customers at their request. 5th January—Members of the Board of U.C.S. reported to the Secretary of State their agreement in principle with the shipowner customers, subject to finalisation of details. 14th January—The Chairman of U.C.S. told the Secretary of State that the Board had decided it would be wrong to accept contributions from shipowners until the separation of Yarrow (Shipbuilders) had been achieved. At the same meeting U.C.S. reported on brief proposals prepared by accountants for the reconstruction of the company's capital which the Secretary of State agreed were satisfactory in the circumstances. 2nd February—The Secretary of State saw the Chairman of Yarrows and agreed the hiving-off arrangements of Yarrow (Shipbuilders). 3rd February—The Secretary of State had a further discussion with the Chairman of U.C.S. at which he told him of the agreement over Yarrow (Shipbuilders). He also agreed that credit guarantees would be resumed within two to three weeks. 11th February—The Secretary of State was finally able to inform the House of the hiving of Yarrow (Shipbuilders) ; the arrangements made with shipowners ; and agreement on the broad lines of capital reconstruction of which the precise details remained to be worked out. 19th February—Issue of credit guarantees resumed on completion of the arrangements for increased contributions from shipowners. 159W 12th March— U.C.S forwarded to the Department management accounts for the period ending 18th December, 1970. 3rd May—U.C.S. forwarded management returns for the three months ended 12th March. The covering letter indicated that trading results were showing a most encouraging trend although the cash position continued to be acutely difficult. 5th May—The accountants considering the capital reconstruction informed the Secretary of State that they were awaiting essential information from the company to enable them to report further. 7th May—New cash and profits forecast commissioned by the U.C.S. Board. The Secretary of State was notified that the reconstruction proposals were held up awaiting this new forecast. 7th June—The profits forecast received by U.C.S. Board indicated insolvency as a result of which the Board concluded that it could no longer continue to trade.