The flaw in the SNP’s plan to strengthen Scottish shipbuilding

The Scottish government under John Swinney and his deputy Kate Forbes could be on the verge of missing an opportunity to strengthen UK/Scottish shipbuilding while possibly failing islanders and the working communities of Glasgow’s Clyde area. This is according to the former head of Scotland’s nationalised shipyard, David Tydeman, who has decided to speak out.

Tydeman was unceremoniously sacked from his job as chief executive of Ferguson Marine in March. As covered here earlier this week, Tydeman had finally managed to overcome the production and design issues that had held up the two highly controversial ferries the yard has spent years and hundreds of millions of pounds of taxpayer’s money trying to build. He had also put together a credible business plan to make the yard commercial, which hinged on a balance between securing regular sub-contract work from defence manufacturers building new Royal Navy ships as well as the construction of several small ferries for CMAL, the state-owned ferry procurement body. 

Scotland’s nationalist administration rejected the plan, and Tydeman, who had also been outspoken about past mistakes and the costs needed to correct them, was sacked a few months later. Speaking this week, he said:

There is a question as to whether the Port Glasgow jobs can be better secured in the longer term by securing a base line from the clearly available military supply chain work, rather than trying to be a stand-alone small commercial yard.

A decision on the future of the yard is expected imminently after Kate Forbes met with local politicians and union leaders last week. ‘In order to have a sustainable future, the yard has to be competitive, and that competitiveness requires investment. The government has always been clear that there isn’t a blank cheque, but all of us want to see a sustainable future for the yard, which underpins the Inverclyde economy,’ she told journalists afterwards. 

Tydeman says the Scottish government’s previous approach, when it nationalised the yard in 2019, did not include enough technical and commercial consideration of the business risks being taken on. Forbes and Swinney were at the heart of that decision. He fears the decision now will again be short term, focused on awarding Ferguson a contract to build the new smaller ferries without the additional balancing revenues coming from military sub-contract work. This will only lead to the yard continuing to be subsidised as an uncommercial business. 

‘It’s a simple fact that the small ferries do not generate enough work per month to cover the overheads of the yard until there are at least three in parallel being built, and this could be two years away even if the contracts are placed next month,’ he says. 

Tydeman believes the competitiveness Kate Forbes identifies can only come from the right mix of work, reduced overheads from a smaller, leaner management team and board structure, and appropriate investment.

‘If placing seven to ten small ferries for CMAL with Ferguson Marine over the next four-to-five years is a £50-100 million subsidy decision, then a key question is how to assess this short-term spend on a cost-per-job basis, what benefit this brings islanders, as well as what happens next,’ he says. 

Scotland’s permanent Secretary, John-Paul Marks, recently warned First Minister John Swinney that ‘significant’ cuts will be needed to balance pubic finances. 

For the past two years Tydeman has been part of the National Shipbuilding Office Enterprise Committee, a UK government body charged with making shipbuilding successful. He says his experience there informs him that high cost-base countries like the UK aiming to retain a shipbuilding capability often start from a decision to construct naval defence vessels ‘at home’. Commercial shipbuilding is then retained via a role in that supply chain. The alternatives are ongoing state subsidy in one form or another, or a niche focus on a sustainable part of the shipbuilding market – for example, Germany and Italy’s success in the leisure and superyacht market.

In the years before 2014 when it slipped into administration, Ferguson was a small yard averaging less than £10 million per year in work and with less than 100 employees. The awarding of the contract to build what became the Glen Sannox and Glen Rosa rapidly expanded the business, suddenly presenting it with the challenge of building two complex vessels in a substandard, constrained site. ‘This clearly failed, and the next steps need to be a recovery exercise aimed at creating a balanced, focused sustainable business while recognising there is not enough market demand over the medium-to-long-term for this to be based on small ferries alone,’ he says.

Tydeman is concerned Swinney and Forbes are set to repeat the mistakes of the past: shelling out taxpayer money while failing to make the business sustainable. ‘And all the while missing the distinction between what it takes to develop a strategic national shipbuilding resource versus being a small independent ferry builder in a short term, niche market,’ he concludes.

It is one of the great ironies of politics that nationalists often fail to act in the national interest. The signals coming from Swinney and Forbes suggest that if they do understand the fundamentals of shipbuilding in high-cost, industrialised economies then they will choose to ignore those fundamentals in favour of political expediency. That will only and ultimately fail the workers of the Clyde as well as Scotland’s islanders.