HC Deb 28 June 1971 vol 820 cc7-16W
56. Mr. Millan

asked the Secretary of State for Trade and Industry if he will publish in the OFFICIAL REPORT a copy of the letter dated 3rd May, 1971, written by Upper Clyde Shipbuilders Limited to his Department.

58. Mr. Sillars

asked the Secretary of State for Trade and Industry if he will publish in the OFFICIAL REPORT a copy of all the documents sent to him with the last four-weekly report by Upper Clyde Shipbuilders Limited, received by his Department.

67. Mr. Lawson

asked the Secretary of State for Trade and Industry (1) what estimates of cash flow were included in the reports his Department received from Upper Clyde Shipbuilders Limited; on what basis; and for what periods;

(2) if he will state the dates from 1st November, 1970, up to the present on which he received financial and other reports from Upper Clyde Shipbuilders Limited.

74. Mr. Carmichael

asked the Secretary of State for Trade and Industry if he will publish in the OFFICIAL REPORT a pro forma copy of the financial and other reports which he was receiving from Upper Clyde Shipbuilders Limited before 14th June, 1971; and how frequently these reports were being received.

81. Mr. Gregor Mackenzie

asked the Secretary of State for Trade and Industry what matters were covered in the regular reports received by his Department from Upper Clyde Shipbuilders Limited.

Mr. John Davies

U.C.S. provided monthly management accounts, cash flow forecasts, profit projections and net assets projections, and weekly production statistics, as prepared for the company's Board. Other financial informtion was received from them from time to time. The monthly accounts for the period ending 18th December, 1970 were sent on 22nd March, 1971, the monthly returns for the three months ended 12th March, 1971 were sent on 3rd May and the monthly accounts for the period 9th April were sent on 11th June. The Information sent on 3rd May did not disclose any serious deterioration in the position previously notified to me. On 8th June, the Company provided for the firet time a statement showing the extreme seriousness of their net assets and cash position. The monthly accounts contain information which is commercially confidential to other firms.

Following is a more detailed reply, together with the text of the letter of 3rd May which commented on the returns sent on that day:

  1. 1. On 18th November, 1970 the company prepared and made available to the Department a comprehensive survey of their financial position as they saw it at the time. This included cash flow forecasts, profit and loss projections and net assets projections to 17th December, 1971.
  2. 2. The monthly management accounts for the period ending 18th December, 1970 were sent to the Department on 22nd March, 1971.
  3. 3. The monthly management accounts for the three months ending 12th March, 1971, together with project results for the period 29th August, 1970 to 17th December, 1971, a comparison of the projections with actual achievement and a cash flow forecast to 17th December, 1971, were sent to the Department on 3rd May accompanied by the following letter.
  4. 4. On 8th June the company provided information on the position disclosed by the review of their financial position which they had set in hand on 7th May. This included, inter alia, the cash position at 8th June, a net assets projection to 28th August, 1972, a balance sheet analysis to 25th August, 1972, projected profit and loss statements for 1971 and 1972 9 and a cash flow forecast to 25th August, 1972. It showed that by August, 1971 the Company would have a net asset deficiency of £5½ million, and that cash was only available to pay the wages up to 18th June.
  5. 5. On 10th June the company forwarded their draft accounts for 1969.
  6. 6. On 11th June the company forwarded their monthly management accounts for the period ending 9th April.

Following is text of the letter of 3rd May:

The various management reports referred to below have already been forwarded under separate cover. Before commenting on the results, I would like to draw your attention to certain features of these reports—

  1. 1. You already have in your files the report dated 18th November, 1970 which included a profit projection and long term cash forecast, both covering the period up to December, 1971. Immediately prior to the finalisation of the recent negotiations with our customers and with Her Majesty's Government these figures were revised to take account of the disruption caused to our shipbuilding programme due to the acute and increasing shortage of funds at that time. It is these revised figures, which were prepared mid-February, which are embodied in the projection and cash forecast.
  2. 2. The accounts for periods 6 and 7 which are forwarded introduce for the first time certain special items at the foot of the profit and loss statement, viz. shipowners' contributions and cancellation of interest. The amount included in respect of shipowners' contributions is brought in on the same basis as gross margin on the respective building contracts. So far as the cancellation of interest is concerned, this has been limited at this time to cancellation of interest on the subordinated loan. There would be a further improvement to our figures if it could be assumed that the Treasury loan and the S.I.B. loan would be dealt with in like manner in 1971.
  3. 3. The financial provisions released in these management accounts will require to be revised upwards as soon as the accounts for the year ended August, 1969 are approved by the U.C.S. Board. This is expected to take place this week, but by that time the period 8 accounts will have been finalised. This adjustment will therefore be made in the period 9 accounts.
The general picture shown by these accounts is that the loss for the four periods ended 9th April, 1971 is greater by £564,000 than was estimated in the projection. However, the efficiency variance is very close to the figure projected and in fact the achievement ratio in period 7, details of which are in the management accounts for that period, and in period 8, the detailed accounts for which have not yet been published, has reached the projected level of achievement of 85. Preliminary indications are that steelwork in period 9 will improve further. There is, however, no early indication of outfit performance, and therefore further comment must await the period 9 accounts. The level of overhead represented by Yard and Group expenses has in periods 5–8 been £77,000 less than projected; extrapolated on an annual basis this would represent a very substantial saving. At the time of writing it is not clear why the gross margin has fallen so far short of projection, but once the period 8 accounts are available in detail it will be possible to comment more fully on this point.

While the trading results are showing a most encouraging trend, the cash position continues to be acutely difficult

Management reports forwarded under separate cover

  1. 1. Management accounts for periods 5. 6 and 7.
  2. 2. Statement of the projected trading results to December, 1971.
  3. 3. Statement of projected and actual results for periods 1–4, i.e. ending 17th December, 1970 and periods 5–8, i.e. ending 9th April, 1971.
  4. 4. Long term forecast.

57. Mr. Millan

asked the Secretary of State for Trade and Industry what was the total amount of shipbuilding credit guarantees refused by his Department over the period November, 1970, to March, 1971, in respect of ships being built by Upper Clyde Shipbuilders Limited.

59. Mr. Douglas

asked the Secretary of State for Trade and Industry what was the date on which shipbuilding credit guarantees for ships being built at Upper Clyde Shipbuilders Limited were suspended; and on what date the company were so informed.

70. Mr. McCartney

asked the Secretary of State for Trade and Industry what were the total amounts of shipbuilding credit guarantees in respect of ships being built by Upper Clyde Shipbuilders Limited which were suspended over the period November, 1970, to March, 1971.

75. Mr. Carmichael

asked the Secretary of State for Trade and Industry what was the date on which the suspension of shipbuilding credit guarantees in respect of ships being built by Upper Clyde Shipbuilders Limited was lifted; what were the factors which led him to lift the suspensions; and what was the date on which the first guarantees were given after the lifting of the suspension.

78. Mr. Buchanan

asked the Secretary of State for Trade and Industry what reasons he gave to Upper Clyde Shipbuilders Limited for the suspension of credit guarantees in November, 1970, on ships being built by them.

86. Mr. James White

asked the Secretary of State for Trade and Industry when he informed the shipowners concerned that shipbuilding credit guarantees in respect of ships being built by Upper Clyde Shipbuilders were being suspended; and what reasons he gave them for the suspension.

Mr. John Davies

When the S.I.B. director on the Board of U.C.S. told the Department on 14th October, 1970, that there were serious doubts about the viability of U.C.S., he was at once told that the Department would have to consider carefully the position on further credit guarantees. At that time there were applications for credit guarantees involving a potential liability of £53 million in various stages of consideration of which applications in respect of five owners were approaching finalisation. The company was told on 27th October that no further guarantees could be given until the doubts on viability had been resolved. The giving of guarantees was resumed on 19th February immediately after shipowner customers of U.C.S. had formally agreed to make a substantial financial contribution to the company additional to the original contract prices for their ships.

60. Mr. Douglas

asked the Secretary of State for Trade and Industry if he will give the dates of all official meetings from 1st October, 1970, between him or other Ministers in his Department and representatives of Upper Clyde Shipbuilders Limited; and if he will state the purposes of and the matters discussed at these meetings.

Mr. John Davies

On 27th October, 1970, the Under-Secretary of State for Trade and Industry told the Chairman of the company that no further credit guarantees could be given until doubts on viability expressed by a director of the company had been resolved. On 19th November, 1970, the Chairman gave the Under-Secretary information on its financial position. He was told that the Government would examine the information and if satisfied would resume the issue of guarantees. Between that date and 3rd February there were discussions in cluding a number of meetings with the company on the steps they were taking to strengthen their financial position. On 3rd February the company was told by me that on the basis of the arrangements it proposed to make the issue of guarantees would be resumed. There were no further meetings between Ministers and representatives of the company until I saw the Chairman on 9th June.

62 and 63. Dr. Dickson Mabon

asked the Secretary of State for Trade and Industry (1) how much financial assistance he is giving to the provisional liquidator to enable him to give assurances that ships at present being built by Upper Clyde Shipbuilders Limited will be completed; and whether he will give an assurance that all necessary help will be given;

(2) what financial assistance he is giving to the provisional liquidator of Upper Clyde Shipbuilders Limited to enable him to keep supplies coming to the company.

64. Mr. John Robertson

asked the Secretary of State for Trade and Industry what is the upper limit of public money he is willing to put into a reconstruction of Upper Clyde Shipbuilders Limited.

76. Mr. Hugh D. Brown

asked the Secretary of State for Trade and Industry if he is now in a position to make a further statement about Upper Clyde Shipbuilders Limited.

79. Mr. Small

asked the Secretary of State for Trade and Industry what discussions he has had with the liquidator of Upper Clyde Shipbuilders Limited; and what has been the outcome.

87. Mr. James White

asked the Secretary of State for Trade and Industry how much money, and over what period, he is prepared to make available to the provisional liquidator of Upper Clyde Shipbuilders Limited to pay the wages and keep the work going.

Mr. John Davies

The provisional liquidator is continuing work on those ships where he considers this is justified in the interests of the company's creditors. To hold the position while the Government are considering the possibilities of reconstructing shipbuilding on the Upper Clyde the Government have agreed to provide funds to enable the provisional liquidator to keep all the employees of the company on the payroll until 6th August. The best estimate I can give at present is that his total requirement from the Government for this period will be £3 million. An estimate will be submitted to the House shortly.

65. Mr. John Robertson

asked the Secretary of State for Trade and Industry what is the relationship between his Department and the three financial experts he has appointed to look into a reconstruction of Upper Clyde Shipbuilders Limited; and what is the relationship of the Shipbuilding Industry Board to the three experts.

Mr. John Davies

The experts will advise me on possibilities of reconstructing shipbuilding on the Upper Clyde so as to secure a healthy and prosperous industry there. They will be free to consult whomsoever they wish including the Shipbuilding Industry Board.

66. Mr. Tom McMillan

asked the Secretary of State for Trade and Industry whether he will write-off all claims by the Government and the Shipbuilding Industry Board against the provisional liquidator of Upper Clyde Shipbuilders Limited arising before his appointment.

82. Mr. Gregor Mackenzie

asked the Secretary of State for Trade and Industry whether he will arrange to renounce the secured loans granted to Upper Clyde Shipbuilders Limited by his Department and the Shipbuilding Industry Board in favour of unsecured creditors.

Mr. John Davies

No.

69. Mr. McCartney

asked the Secretary of State for Trade and Industry what estimate he made of the cost to public funds of redundancy pay, unemployment benefit, assistance to a reconstructed undertaking, and costs of providing alternative employment before he decided not to allow the board of Upper Clyde Shipbuilders Limited the £6 million additional financial assistance it asked for; and by how much the estimate exceeded £6 million.

Mr. John Davies

No estimate is possible until a scheme of reconstruction has been worked out.

71 and 72. Mr. William Hannan

asked the Secretary of State for Trade and Industry (1) what arrangements he is making to consult the management executives concerned in any reconstruction of Upper Clyde Shipbuilders Limited;

(2) what arrangements he is making to consult the trade unions concerned in any reconstruction of Upper Clyde Shipbuilders Limited.

Mr. John Davies

The group of experts who will advise me on the reconstruction of shipbuilding on the Upper Clyde hope to consult both management and unions. When I have received their report I will consider what further consultations are necessary.

73. Mr. James Bennett

asked the Secretary of State for Trade and Industry what discussions he has had with trade union representatives about Upper Clyde Shipbuilders Limited; and what assurances he has given them about continued employment.

Mr. John Davies

I was with the Prime Minister when he met the Scottish Trade Union Congress on 21st June. The Minister for Industry met the Scottish T.U.C. on 14th June and was with the Prime Minister when he met representatives of U.C.S. shop stewards on 16th June. The Under-Secretary of State for Trade and Industry met representatives of the T.U.C. and of the Confederation of Shipbuilding and Engineering Unions on 17th June. Trade union representatives were told of the arrangements the Government have made to avoid redundancies in the yards until 6th August.

77. Mr. Buchanan

asked the Secretary of State for Trade and Industry why the capital reconstruction of Upper Clyde Shipbuilders Limited which he announced to the House of Commons on 11th February, 1971, was not carried out.

Mr. John Davies

It was not possible to do this before the company petitioned for liquidation.

80. Mr. Small

asked the Secretary of State for Trade and Industry what information he has about redundancies or prospective redundancies among the suppliers of Upper Clyde Shipbuilders Limited; and what action he is taking to save the jobs concerned.

Mr. John Davies

I have received no reports of redundancies among U.C.S. suppliers. The Government are seeking means to reconstruct shipbuilding on the Upper Clyde on a prosperous and viable basis. That would be the best method of maintaining employment among shipbuilding suppliers.

83. Mr. James Hamilton

asked the Secretary of State for Trade and Industry what approaches have been made to his department by prospective purchasers of Upper Clyde Shipbuilders Limited.

Mr. John Davies

Some interest is being shown. The prospective purchasers are being advised to approach the provisional liquidator and the group of experts.

84. Mr. James Hamilton

asked the Secretary of State for Trade and Industry if he will appoint a public inquiry to look into the relationship between Upper Clyde Shipbuilders Limited and the Government since the establishment of the company.

Mr. John Davies

No.

Mr. Skeet

asked the Secretary of State for Trade and Industry if he will outline the rôle of Government directors on the boards of public companies, the parameters of their responsibility, in reference to the Upper Clyde Shipbuilders, whether the Government appointee through the Shipbuilding Industry Board was given special instructions.

Mr. Ridley

A Government-appointed director, like all directors of public companies, has a duty to serve the interests of all the company's shareholders. His rôle therefore is primarily to make an effective contribution to the running of the company. Part of his job is to satisfy himself as far as possible that the company is being properly and efficiently run and that the Government's investment is safeguarded.

The director nominated to the board of Upper Clyde Shipbuilders Ltd. by the Shipbuilding Industry Board was not a Government-appointed director. I understand that he had no formal instructions as to his duties but had regular discussions with the Shipbuilding Industry Board about the company's affairs.

Miss Devlin

asked the Secretary of State for Trade and Industry whether the Government have a nominee on the Board of Upper Clyde Shipbuilders Limited; what is the nominee's name; for how long the nominee has occupied this position; when the nominee last attended a meeting of this board; when he last received a report from this nominee; and what was its sense.

Mr. John Davies

No directors of this company have been appointed directly by the Government. Under the terms of their Loan Agreement with the company the Shipbuilding Industry Board appointed Mr. A. I. Mackenzie as a director of the company in March, 1968. Mr. Mackenzie attended meetings of the company's Board on 7th, 12th and 14th June. He accompanied the Chairman of the company when the Chairman told the Shipbuilding Industry Board on 8th June of the results of their latest review of the company's financial position.

Mr. Tebbit

asked the Secretary of State for Trade and Industry what progress has now been made in restructuring Upper Clyde Shipbuilders.

Mr. John Davies

The experts I have appointed to advise me on reconstructing shipbuilding on the Upper Clyde have begun their investigations.