Harland and Wolff

HC Deb 01 July 1980 vol 987 cc534-6W

Mr. Peter Robinson

asked the Secretary of State for Northern Ireland if he is yet in a position to make a statement on the recently completed review of the position and prospects of Harland and Wolff.

Mr. Giles Shaw

Yes. It is common knowledge that there has been serious slippage in the delivery dates for existing orders, on a scale implying major increases in costs and demands on the taxpayer. The company's report and accounts for 1979 are expected to show a trading loss of over £24 million as compared with £21.4 million in 1978. Productivity overall has been below levels which Harland and Wolff has previously attained and below the standards necessary in order to compete in a very difficult world market—particularly at a time when competition from shipyards in the Far East and developing countries has greatly increased.

The reasons for programme slippage have been various and by no means restricted to factors within the control of management and work force. The most significant general cause has been the fact that in common with shipyards in many parts of the world the company has been forced in recent years to take orders for which its facilities and structures are not really suited. The present order book consists of three relatively small and complicated ferries requiring a high proportion of outfitting work, and of two liquid petroleum gas carriers whose novel and sophisticated technology involves extremely demanding design work and the development of new manufacturing processes. The results of the past year reflect the fundamental difficulty of adapting Harland and Wolff's skills, facilities and production systems—which were designed for flow production of large, simple vessels—to these different requirements.

Nevertheless, there have been some encouraging signs of improvement in performance in ferry construction and in steelwork productivity. The winning of the much needed BP tanker order fills a major gap in the order book and provides the opportunity for continuity of work. This gives everybody in the yard a new chance to demonstrate a greatly improved performance on ships ideally suited to the yard's facilities.

The company has already taken action to meet the situation. It is streamlining the work force: 800 redundancies have so far taken place since July 1979, bringing the total work force to 7,000. The company is negotiating with the work force a pay settlement covering the period from September 1979 to April 1981 on the basis of management proposals which would relate pay increases to a range of improvements in working practices and other measures which would fully finance the deal and significantly improve productivity. I cannot emphasise too strongly the importance for the future of all concerned of agreement on effective productivity measures and the punctual execution of the yard's orders.

The Government intend to take the following immediate action in the light of their review. First, the Government propose to make available £42.5 million to Harland and Wolff in 1980–81. Full provision for this will be taken in Supplementary Estimates. Secondly, while management concentrates on the effort to improve shipbuilding performance and non-shipbuilding projects already in hand, the Government will themselves initiate an examination of the prospects for further diversification and will establish an independent review team to investigate with urgency alternative possibilities for utilising the facilities and skills within Queen's Island. The company has already undertaken a number of useful but limited diversified projects; it is now time to cast the net wider and to look at more radical options.

Looking further ahead the Government will be reviewing the structure of the board and its executive management policy; and will encourage the company to strengthen where necessary its management capacity. For too long, too great a strain has rested on too few shoulders. The Government will also consider restructuring the company's capital base as the present level of share capital is relatively low. In the meantime, as has been well understood since 1975, the Government stand behind the company's liabilities, and a legislative home will be provided for this already effective understanding by the issue of a guarantee under the Aircraft and Shipbuilding Industries (Northern Ireland) Order 1979.

The Government will continue to ensure that the arrangements for co-operation between British Shipbuilders and Harland and Wolff work smoothly, and that shipbuilding policy generally is thoroughly co-ordinated throughout the United Kingdom.

I have outlined the immediate action which the Government will be taking as a result of their review. The longer term will depend on urgent improvements in performance to enhance the company's credibility as a shipbuilding enterprise and on a determined effort to diversify its product potential so that its jobs and skills may rest on a broader and more viable base.