Shipbuilding Strategy

Chris Stephens Excerpts

Tuesday 23rd January 2018 Westminster Hall

[Luke Pollard]

My hon. Friend is spot on. The confusion about the role of this warship is at the heart of the problem with the shipbuilding strategy. It looks like we put the cart before the horse in defining a price tag but not a role. It is essential that in the next couple of months the Ministry of Defence comes forward with that, to provide all defence-leaning Members of Parliament, on both sides of the House, with a reason to celebrate this warship, not critique it, because I worry that the critique will not support it and help its attractiveness as an export product. We should turn those weaknesses of the Type 31 into its strengths and promote a corvette class, not a poorer frigate. That would give the Royal Navy two carriers, two amphibious assault ships retained and not cut, six destroyers, eight proper frigates, five corvettes and the new offshore patrol vessels. That is still too few ships, but a line we should not go below, or accept further cuts or reductions against.

The shipbuilding strategy suggests that UK yards will build five Type 31s as replacement for the Duke class, and pitch for competition for 40 to export. As Darth Vader warned Director Krennic in “Rogue One”—a film I am sure we have all watched:

“Be careful not to choke on your aspirations”.

I truly want to believe the MOD when it says that there is a market abroad for 40 Type 31s, built in Britain, but I cannot see where that might be.

[Chris Stephens (Glasgow South West) (SNP)]

Given that we do not know the capability, and given the comments made by the hon. Member for North Durham (Mr Jones), is there not a question as to who we would export these Type 31 frigates to? Does the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) agree that the view of many in the shipbuilding industry is—to quote his hero Darth Vader again—that we want these ships, not excuses?

[Luke Pollard]

As a Luke, I am not sure Darth Vader is quite my hero, but the point the hon. Gentleman makes is a good one. There are 14 other ship manufacturers globally providing a light frigate option of between 2,000 and 4,000 tonnes. That is an awful lot of competition when the customers are ill defined. Let us look at some of those competitors for the Type 31 frigate: there is the French and Italian FREMM class; the Spanish Navantia F-105; the Danish StanFlex; Germany’s F-125 Baden-Württemberg class; and South Korea’s Incheon class, let alone the myriad cheaper platforms built by China and other far-eastern nations.

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[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

Thank you for giving me the opportunity to speak in this debate, Ms McDonagh. I thank my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) for his comprehensive contribution, in which he outlined the key concerns about the national shipbuilding strategy, and the right hon. Member for New Forest East (Dr Lewis) for outlining his longer term perspective on the attrition of the capability of the Royal Navy’s frigate and destroyer fleet, which the national shipbuilding strategy ought to aspire to address as an outcome.

I first encountered the man who wrote the report that spurred the creation of the national shipbuilding strategy, John Parker, about three years ago when he attended Glasgow University to deliver a speech on his history of working in the shipbuilding industry. He had a great reputation as a managing director at Harland and Wolff shipbuilders in the 1980s, where he started as an apprentice and grew up through the ranks. There was an international discussion about the long-term decline of British capability, from the global world leader in the shipbuilding industry that it once was to a marginal player now even in Europe, never mind the rest of the world.

I asked him three years ago when I was working at BAE Systems what his greatest regret was in his career. He stood up and said, “My greatest regret is that Europe is building 90% of the world’s cruise ships, and Britain, with such a great heritage of building world-beating ocean liners and passenger ships, is building none. There are high-wage, highly equipped shipyards in Europe building these vessels, and Britain isn’t building one of them.”

As managing director of Harland and Wolff when it was under the ownership of the British Shipbuilders Corporation—the industry was nationalised until the late 1980s—he recognised the emerging market for cruise ships, which were once again becoming a popular recreational pursuit. Harland and Wolff developed proposed designs for cutting-edge new cruise ships and went to the Government for funding to build them for Carnival, now the biggest cruise company in the world, but the Government said that they were not interested in the design. They wanted to hold a fire sale, get rid of the assets and remove shipbuilding from public ownership. They were not interested in any further investment in what they saw as a dying industry.

In the very same year—1987, the year before Harland and Wolff and Govan shipyard were sold off—Meyer Werft in Germany, a family-owned business, got funding from the German state investment bank to build a completely new, undercover shipyard and then the world’s first modern cruise ship. Today, that shipyard dominates the global market for cruise ship and complex shipbuilding in Europe, building about two 100,000-plus-tonne ships every year. That contrasting approach is symptomatic of a broader malaise that we face when it comes to industrial policy and planning in Britain.

[Chris Stephens]

Will the hon. Gentleman outline what the devastating economic consequences were of that decision on cities such as ours, Glasgow, as well as Belfast and elsewhere in the UK?

[Mr Sweeney]

The impact was absolutely devastating, and we saw the wider impact in Govan as well, which was a commercial shipyard up until 1999 when Kvaerner pulled out. That Norwegian oil company rebuilt the yard in the early 1990s for commercial oil tankers and gas carriers. The result of that collapse was disastrous. Sir John Parker said that just as we had got British shipbuilders match-fit, ready to compete, the rug was pulled from under them. Just as the industry was ready to re-enter the market and be a globally competitive player, it was wrecked. That is the sad legacy of the collapse of British merchant shipbuilding to the point where we are entirely reliant today upon the Ministry of Defence to sustain what is left of British shipbuilding capability. That is partly why I am concerned about the national shipbuilding strategy, if it is restricted in its entirety to naval shipbuilding and not the wider issue of how we re-establish a market foothold in commercial shipbuilding. The two are intrinsically linked.

If we are to achieve a competitive advantage we ought to broaden our horizons and re-establish how we deliver a resurgence in British commercial shipbuilding capability. That was Sir John Parker’s biggest regret. That is what drove his frustration at that time, and a lot of that is what underpins the recommendations in his report. He talks about a vicious cycle of changing requirements, which the right hon. Member for New Forest East mentioned, and a year-zero approach every time we have a new MOD shipbuilding programme which duplicates effort and introduces unnecessary costs. It is so bespoke in its approach to designing ships that it introduces unnecessary costs, which render British shipyards uncompetitive, even in the naval sphere, never mind the commercial sphere.

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[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to see you in the Chair, Ms McDonagh. I thank the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) for securing this debate. During the defence debate less than two weeks ago in the Chamber, every single Member of the all-party group on shipbuilding and ship repair complained that we had applied for debates since the publication of the national shipbuilding strategy. All of a sudden, at the very next ballot, the hon. Member for Plymouth, Sutton and Devonport secured one, so I thank him for that. I hope he will accept my apology to him in relation to Darth Vader. I actually misspoke. I did not mean to say “his hero”. What I meant to say was “their hero”, because Darth Vader is a Conservative icon and not of any other political party. I can see nods coming from the Conservative Benches.

The history of how we have got to this point is important, particularly for those of us who represent the best shipbuilders in the world: the shipyard workers on the Clyde, and those in the Govan shipyard in particular. In 2014 they were promised that 13 Type 26 frigates would be built there, plus a frigate factory. Ever since, there has been a real concern that there has been a row-back by the Ministry of Defence. The frigate factory was cancelled. Then, in November 2015, during the national strategic defence review, there were no longer 13 Type 26 frigates, but eight. We were told not to worry and remain happy because instead of five Type 26 frigates, there will be five Type 31 frigates, which the Clyde will build and will be exportable. I will come back to that later.

Sir John Parker’s report was an honest attempt to deal with the feast and famine that we have heard about from the hon. Member for Glasgow North East (Mr Sweeney), but it contained several historical inaccuracies that concern me because the national shipbuilding strategy seems to be based on those historical inaccuracies, which is that two different types of ships have never been built in the same shipyard. That is not the case. Anybody who had worked at Yarrow’s would tell us that that was not the case, because, while they were building ships for the Royal Navy, they were building a different type of ship for the Malaysian navy. If the Government are basing their decision on such an historical inaccuracy, it is up to us Members of Parliament to tell them that it is an historical inaccuracy, and perhaps they might want to comment on that and put that right.

[Mr Sweeney]

I thank the hon. Gentleman for his comments, particularly about the frigate factory. Does he agree that the major issue was the fact that financing could not be achieved, because of fragmentation of the programme? If that had been gripped in the same way as programmes such as HS2 or the London Olympics, and the budget had been assured through its whole life, there would have been a business case to finance, through commercial means, the investment necessary to build a world-class shipyard on the Clyde.

[Chris Stephens]

I agree entirely. My Glasgow comrade is absolutely correct. That was one of the significant reasons for the frigate factory being cancelled.

My concern about the national shipbuilding strategy has been expressed by others: it is that we are going back to 1980s thinking and introducing competition. One of two things can happen when we start to introduce competition on that basis. Shipyards will try to undercut. As we heard earlier from my Glasgow comrade, that meant the collapse of Swan Hunter. It would be inevitable if we went back to the days of competition. Alternatively, companies would get together and the prices of ships would increase.

I think I am being fair and moderate in my remarks when I say that we are now at a place where the announcement of the national shipbuilding strategy was a presentational dog’s breakfast. The then Secretary of State, the right hon. Member for Sevenoaks (Sir Michael Fallon), claimed six times in the Chamber that there was a frigate factory on the Clyde. While he was on his feet in the Chamber making that claim, GMB officials were taking Scottish journalists around the proposed site, which was rubble and ash. There is no frigate factory on the Clyde. It was a presentational disaster for the Government.

I add my support to that expressed already for the argument that there is no need for the Royal Fleet Auxiliary Service ships to go to international competition. The reason no British yard has yet asked to be considered is that they believe the work will be sent out internationally; that is inevitable. As has been said, there would be clear economic benefits from building those ships not just for the local economies of the places where they could be built, in a modular format, but from the tax and national insurance take.

I also want to add to concerns expressed about the Type 31 frigate. It seems to me that the price is setting the capability of that ship, vessel or whatever we call it. The suggestion that it could be built for £250 million has already been described as a conspiracy of optimism. We need to know its capability and its role and purpose within the Royal Navy. To put it more simply: is it a complex naval warship? If it is, it should be built on the Clyde, which has been designated by the Government as a specialist shipyard to build complex naval warships.

[Mr Sweeney]

The hon. Gentleman says that the Clyde has that designation, but in reality, under the terms of business agreement, it was extinguished in 2014, although that has not been explained. Why did the rationale change? It makes sense to build all the complex warships on one integrated site where all the learning curves, benefits and efficiencies are concentrated. Why has that changed?

[Chris Stephens]

I think that is a question for the Minister. We need to know the reason, and I shall explain why. I understand that the only country with more than one specialist shipyard is the United States of America. That is probably no surprise given the size of the US Navy. We need to know such things, because recently there was an accident at sea involving a US Navy ship. If it had been built to commercial standards rather than by a specialist yard the collision with another ship would have been a real disaster. The model elsewhere, especially in Europe, is that one specialist shipyard builds complex naval warships.

There is a contract for three Type 26 frigates on the Clyde and I ask the Minister to confirm that the other five will be built there. There is a feeling in the yards and the trade unions that represent the workers that there has been a roll-back on delivering on promises.

I echo the points that the hon. Member for Glasgow North East made about shipyard construction. If the Ministry of Defence is concerned about economies and efficiencies and similar issues, it has a role to play in investing in shipyards and speaking to companies. The Clyde should have a frigate factory, and there is a role for the MOD to play in that.

The national shipbuilding strategy needs a bit more work. This is the first opportunity that hon. Members have had since the statement to raise concerns, and I hope that the Minister has listened carefully and will be able to respond to many of the points we have made.

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[Wayne David (Caerphilly) (Lab)]

It is a pleasure to serve under your chairpersonship, Ms McDonagh, and I congratulate my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) on securing this important debate and delivering such a fine opening address.

We have had a good debate—I genuinely mean that. We heard an excellent and thought-provoking contribution from the Chair of the Defence Committee, the right hon. Member for New Forest East (Dr Lewis), and good contributions from my hon. Friend the Member for Glasgow North East (Mr Sweeney), the hon. Members for Strangford (Jim Shannon) and for Glasgow South West (Chris Stephens), and a particularly ambitious speech from the hon. Member for Dunfermline and West Fife (Douglas Chapman).

Last year the Government published the national shipbuilding strategy, and the importance of naval shipbuilding should not be underestimated. Approximately 15,000 people are directly employed in UK shipbuilding because of spending by the Ministry of Defence, and at least 10,000 additional jobs are in the wider British supply chain. Some months before the publication of the national shipbuilding strategy in November 2016, Sir John Parker published his independent report on the UK’s national strategy for shipbuilding. Many people thought that that would become the national shipbuilding strategy, but—for reasons that are unclear even to this day—the NSS was a response to Sir John Parker’s report.

Those two important publications gave a degree of coherence and a sense of direction to the industry. We were, however, disappointed by the lack of emphasis on many of the points on which Sir John Parker developed coherent arguments. In particular, we would have liked an explicit recognition of the significant contribution that shipbuilding can make to the development of regional economies, and for that to have been put at the heart of the national shipbuilding strategy. That important point in Sir John’s report is not really reflected in the Government’s national strategy.

Today we have heard about the multiplier effect and investment in shipbuilding—that point was coherently expressed by my hon. Friend the Member for Plymouth, Sutton and Devonport. My hon. Friend the Member for Glasgow North East pointed out that our shipbuilding strategy must be part of a broader strategy that goes beyond the defence sector, and that can happen if we have the right perspective to develop it in such a way.

As we have heard, the new Type 31e and Type 26 frigates—albeit eight rather than 13, as we were initially led to believe—will be replacing the Type 23 frigates as they leave service. I have a number of questions about that ongoing programme. Some of them have already been touched on by other Members, but other questions are new. First, the MOD has said that there should be a cap of £250 million per Type 31e frigate. Why has that cap been fixed, and why at that figure? We need to know, because we have been reassured by people in the Navy that that amount may well be sufficient, but there are also plenty of experts who say that this insufficient and arbitrary figure has been plucked from thin air. Nick Childs, a naval specialist for the International Institute for Strategic Studies, has raised specific concerns about the level of capability and stated that,

“the naval staff seems to think it can get a vessel of about 3,500 tonnes, with an adequate military capability, for the £250m target price. That will be a challenge”.

That is an understatement. It certainly will be a challenge, and many industry experts say that it is frankly impossible. If it is impossible, what contingency measures will the Government take?

[Chris Stephens]

Does the hon. Gentleman share my concerns, and those of others who have spoken in this debate, that the price is dictating the capability of this frigate, instead of the capability being sorted out first, followed by the price?

[Wayne David]

That is precisely the concern with including the arbitrary figure of £250 million. I hope that the Minister will be able to dispel those concerns and clarify the situation.

Secondly, the national shipbuilding strategy correctly states that there is a potential export market for light frigates—the Type 31e. Much of that is for the purchase of a light frigate designed for construction in the market, not by means of traditional production. How is the Government’s exporting enthusiasm for that going? How many orders have they received? How many do they now think are likely? That key question was also raised by my hon. Friend the Member for Plymouth, Sutton and Devonport.

My third point is that, sadly, less than half the steel in the new Type 26s will be British. That is a crying shame, and I hope the Government will ensure that as the shipbuilding strategy develops, it is increasingly seen as an integral part of industrial strategy in this country, and that there will be complementarity with other parts of British industry.

My fourth question is about delays to the Type 26 programme. There is a great deal of concern among the workforce. Apprentices have been laid off and have had to find training elsewhere. Can the Minister say anything about that?

We are all proud to have seen the launch of the Queen Elizabeth carrier, which was formally commissioned into the fleet in December. We now look forward to the launch of the Prince of Wales carrier. The construction and fitting of both vessels has taken a great deal of commitment and dedication from a well-skilled workforce.

It is important to ensure that those skills are not lost but continually put to good use, which is why we should focus on fleet solid support ships. The contract for three new FSS ships will be subject to international competition. The decision is due in early 2020. I am concerned that that stipulation may put off domestic competitors, as the hon. Member for Glasgow South West suggested. That follows the awarding of a contract for four tankers under the military afloat reach and sustainability—MARS—project to Daewoo, a South Korean company that is widely believed to have been given a tremendous amount of state aid that made its bidding far more attractive than it should have been.

We hope that those ships will be built in Britain because that would secure the maintenance of the skills that have been built up in the industry, and support local economies. It would also help to enhance the national shipbuilding strategy’s domestic capability and to make real the renaissance in shipbuilding that Sir John Parker refers to in his report.

On sovereign capability, I ask the Minister to comment on the report that appeared in yesterday’s Western Mail. It suggested that the Ministry of Defence will award a contract for mechanised infantry vehicles to the Germans without any competition. I give the Minister the opportunity to deny that story.

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[Guto Bebb]

It is a pleasure to serve under your chairmanship, Mr Streeter.

As I was explaining, the strategy is about planning. We are talking about the purchase of eight Type 26 global combat ships, the new Type 31 frigates and the next generation of fleet solid support ships. There has been a discussion on the competitive tendering for the fleet solid support ships, but that is in accordance with the strategy, which looks to ensure that warship capability is built within the UK, but that we are also open to go out to competition.

[Chris Stephens]

Will the Minister confirm that the eight Type 26 frigates will be built on the Clyde? Will he also remove the ban on Royal Navy personnel addressing the all-party parliamentary group on shipbuilding and ship repair on the national shipbuilding strategy?

[Guto Bebb]

I regret that I did not hear the second part of the intervention, but the commitment on the purchase of the eight Type 26s was clear, and I will be on the Clyde on Thursday.

The second element of the strategy is design. It is about taking a new approach to design and construction. We want to challenge outdated naval standards and introduce new ones. In effect, I am repeating the comments of the Chairman of the Defence Committee, my right hon. Friend the Member for New Forest East, but it is about forcing through advances in design, identifying new materials and looking at new manufacturing methods to try to make our shipbuilding industry even more competitive, which is part and parcel of ensuring that we have export markets.

The issue of the export markets for the Type 31 has been touched on by many Members. The figure of 40 frigates is the potential market that was identified for this type of frigate in 14 countries. That was part of market research that was undertaken. We have never argued that there are 40 potential orders for the United Kingdom; what we are saying is that there are 40 potential orders for that type of ship that will be open to competition from the United Kingdom.