It appears Scotland’s troubled Ferguson Marine Port Glasgow shipyard will be kept afloat. A further £14 million of public money has been injected into it, according to announcements this week. At the same time, the Scottish government also took the opportunity to confirm the nationalised yard will not be directly awarded a contract to replace state-owned ferry operator CalMac’s ageing fleet of small vessels. Instead, the contract will be put out to tender.
This is the latest in what has become known as Scotland’s ferries fiasco. It started with an SNP government wanting to be seen to be rescuing commercial ship building on the Clyde just before the 2014 independence referendum. Then there were allegations of a rigged contract for two new ferries to serve Scotland’s west coast. Now it has ended up with a white elephant of a business – continuously sucking in taxpayer money while failing to get new boats into service.
The Scottish government said the additional investment will be used to ‘improve productivity and build a sustainable future’. The money will be invested over two years ‘subject to the plan passing detailed legal analysis and independent financial and commercial assessments, which should be complete by the Autumn’.
And Deputy First Minister Kate Forbes has waded in too, saying:
Extensive analysis and legal advice confirm that a direct award of the small vessels phase one contract to FMPG introduces substantial risks and uncertainties for the shipyard and the communities which rely on the lifeline vessels, due to the strict conditions imposed by the UK Subsidy Control Act. Instead, we will do everything which is legally possible to support the yard and the workforce to secure a long-term future, which is why we have come to an agreement on initiatives and funding to improve productivity.
Encouragingly, Forbes says the Scottish government is in talks with BAE Systems to secure further sub-contract work from the defence manufacturer. Indeed, a spokesperson for BAE said:
We are in advanced negotiations with the company regarding further strengthening our partnership, the placement of additional work subject to agreement of terms and its continued involvement in the programme.
This is important. Ferguson’s former boss David Tydeman secured a pilot project for the yard to produce three units for BAE’s Type 26 frigate program me. Tydeman – who was unexpectedly sacked by the Ferguson Marine board in March – had produced a five-year turnaround plan that needed £25 million of investment in a new steel plating production line, as well as other upgrades to put the yard in a strong position to build CalMac’s new smaller ferries as well as ongoing work for Britain’s navy. There were fears BAE’s enthusiasm was dissipating when, last year, the Scottish government refused to sign off on cash to upgrade the site.
Speaking with me earlier this week – just after the latest announcement – Tydeman said the £14 million investment is the ‘mid-level’ capital expenditure request set out in the business plan he put together before his departure. Going on, he added:
That should deliver productivity improvements from enhanced facilities, as set out in recommendations by consultants to the Scottish government in autumn 2022. The difference between this level and the £20-25 million requested in early 2023 is that the higher level also increased through–put capacity and positioned the yard to be more able to do BAE work alongside building ferries – without capacity constraints potentially leading to bottlenecks or choices in priorities.
The question is whether this is sufficient to make the yard commercially sustainable without ongoing government financial support. Going by the previous business plans, it seems unlikely. True sustainability would require greater investment and a combination of defence work – alongside commercial shipbuilding contracts.
It seems the Scottish government has taken the decision to spend just enough to keep the yard afloat to take it beyond the May 2026 Holyrood election, with the business’s long-term future crystalising at that point. That long term future probably won’t take the form of the yard becoming a sustainable commercial builder of ferries. A more likely outcome is for its capacity to be fully absorbed in some form into UK defence manufacturing, be that a takeover of the site or workers being absorbed into BAE’s Govan yard along the river.
And the result is much uncertainty. There is still no guarantee Scotland’s islanders will see better ferry services anytime soon. What is clear, however, is that a UK defence contract work will be crucial to the sustainability of work at the Ferguson Marine site. What was meant to be a totemic example of a new nationalist Scotland has instead become a symbol of the strength of a unified Britain.
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