Revealed: How BIS abandoned British shipbuilding

by Iain Wright

A couple of weeks ago, the MoD announced that a £0.5bn contract for the next generation of Royal Navy tankers had been awarded to a South Korean company.

Ministers thought that they had got away with this because there had been no bids from a British firm.

Peter Luff, the defence procurement minister, was quoted as saying that: “There was no British bid.  That does make it a tad difficult to award (the contract) to a British company if there is not a bid from a British company.  We don’t build tankers in the UK.”

Excuse me?  We don’t build tankers in the UK? I think the minister should try telling that to the Shipbuilders and Shiprepairers Association (SSA), whose membership comprises about 99 per cent of the UK ship production and supply chain, and whose director still insists that this contract could be built in the UK within the timeframe and to the quality required and awarded to a UK shipyard to help maintain jobs.

The government is hiding behind the excuse that no British firms applied. But this is sophistry.

There was a European bid on the table that offered a greater share of work for the UK than the South Korean winners. This would have meant 35 per cent of the contract being delivered in Britain.

But the MoD ignored the wider British economic interest.

This  sorry episode raises two serious questions: – why wasn’t the broader economic context taken into account, and could the government have done more with British suppliers to help them bid?

In both cases, it is down to the departmental champion of business across government, the department for Business, Innovation and Skills, to make the Britain’s economic case to other departments and support British companies in engaging with government.

So I asked a parliamentary question as to what meetings the business secretary Vince Cable and his ministers had with MoD ministers and civil servants, UK businesses and trade associations to prioritise the British economic interest in such an important contract.

I got the answer back last week.  No meetings had been held between BIS ministers and anybody on this matter.

I find this astonishing.

Surely, at a time of enormous pressure on the public finances and with a government purporting to tackle the deficit but presiding over rising unemployment and stagnating growth, the department for business would be determined to see how this big defence contract could attract as much British activity  – and hence tax flows back into the treasury – as possible.

I would have thought that BIS ministers would have been actively engaged with meetings with the ministry of defence, the CBI and the SSA, to inform shipbuilders and their supply chain about this work, seeing if there were barriers to overcome to bidding for contracts and then working with them positively to ensure the price and quality was sufficiently robust for the taxpayer.

It’s all very different with our European partners.

The decision on the Royal Navy tankers compares with a contract to provide 21 frigates for the French and Italian navies. This contract was awarded to – surprise, surprise – French and Italian companies.

Are we as a nation so grossly uncompetitive that we can’t even bid for contracts, let alone win them? I suspect not.  Why don’t ministers operate within EU law that allow the impact on jobs to be part of the contract criteria?

The situation does look set to get worse.  The ministry of defence is now explicitly stating that it will definitely not “consider employment, industrial or economic factors in its value-for-money assessments”.

How is this backing British business? If the government can do a welcome U-turn on transport procurement – the process for buying Crossrail train will now include requirements to establish a local presence, build up local supply chain and provide training and apprenticeship opportunities – why can’t defence procurement do this?

Surely the department for business should be co-ordinating such activity across whitehall?

The reality is, in a modern global economy, you need a business department at the very heart of government, working closely with businesses and using all the tools at its disposal, such as sizeable defence procurement contracts, to enhance its economic position.  You need every single minister in government backing business and ensuring that the awarding of contracts is linked to the nation’s economic competitiveness.

That’s not protectionism.  That’s not raising trade barriers and making domestic industry uncompetitive and (ultimately) obsolete.  It’s about an active industrial policy approach by a government working in a joined-up way to ensure that British business not only have a level playing field, but that they get on the pitch in the first place.

That is why Ed Miliband making the case for patriotism at the heart of economic policy last week was so timely and so right.  He is right to suggest that it is patriotic to have an active government using all the means at its disposal to give competitive British firms the chance to shine.

Sadly, a weak business department led by an out-on-a-limb secretary of state who is not listened to by the rest of whitehall is detrimental to British business.  Industry is crying out for an active, co-ordinated and intelligent government approach, and so are we in the Labour party.

Ed has been at the forefront of the responsible capitalist agenda, setting out a case for an economy based on long-term productive wealth creation and fairness.  With his case for patriotism not protectionism, he’s moved the debate on again and suggested something which resonates with modern industry, unions and voters.

Let’s hope the government is listening and at minimum, the ministry of defence is directed to take account of Britain’s economic future when awarding these enormous contracts.

Iain Wright MP is shadow minister for competitiveness & enterprise

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4 Responses to “Revealed: How BIS abandoned British shipbuilding”

  1. Anon E Mouse says:

    Either a bid was entered by a British firm or it wasn’t.


  2. Chris M says:

    Iain, how about renationalising railways? That way you can keep British-based train manufacturers and all busy with work when they need it, and they can plan properly. If you have private companies ordering train carriages at their own convenience, you’re not going to have British firms ready to win contracts. They might be stuck for ages without orders.

  3. Val says:

    Anon E Mouse says:

    March 15, 2012 at 12:11 pm

    Either a bid was entered by a British firm or it wasn’t.


    No, British shipyards were wrong footed by eu rules that labour abided sevilely by and so then scrapped the MOD/Uk industry partnership which was the policy for building these ships. BAE owns four UK yards and was part of a foreign bid.

  4. Val says:

    Don’t forget, the designer BMT were part of the consortium which were handed this contract too. British non BAE yards would never have a look in.

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