Folly of hostile approach to Ferguson Marine

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THE looming collapse of Ferguson Marine comes a mere five years after its rescue from closure – amidst great fanfare – by venture capitalist Jim McColl. Its current predicament is not entirely surprising and speaks to a broader failure of how this country pursues industrial development.

Having started my own career in shipbuilding further upriver at Govan and Scotstoun, I first visited Ferguson’s at Port Glasgow in 2016 with Scottish Enterprise when the shipyard was in the midst of a major reconstruction programme.

It is located on a highly constrained site, limited to building ships of a maximum 100 metres in length. After a brief period of closure in 2014, the shipyard was then undergoing a wholesale rejuvenation as it attempted to restart ship construction, whilst the shipyard itself was being simultaneously reconstructed to enable a greater share of steel block fabrication work to be undertaken indoors. The new business was supported in this endeavour by state ferry contracts for Caledonian MacBrayne, £45million in government loans as well as direct grant assistance from Scottish Enterprise.

Despite this significant state investment, there has been a dysfunctional relationship between the state customer and the shipyard that has fatally undermined the business.

It was noted by the managing director at the time that unplanned delays by Scottish ministers placing the £97m contract for the first of two new LNG ferries, MV Glen Sannox, meant the profit margin had already been virtually wiped out. This was due to currency fluctuations affecting the value of a vital subcontract placed with Wärtsilä in Finland to supply integrated propulsion systems, fuel tanks and engineering and site support services for the dual-fuel ferries. The UK no longer has any slow-speed marine diesel engine manufacturing capability, after the closure of Kincaid’s of Greenock by the Norwegian-owned Kvaerner Group in 2000.

If the objective of saving the shipyard was to pursue a mission-oriented industrial development of commercial shipbuilding in Scotland – rather than just superficial political grandstanding – then a far more integrated, patient and collaborative approach between state customer and shipyard should have been adopted from the outset, in order to help regenerate industrial capability that was and remains fragile and fraught with risk.

This is exactly the sort of approach that Mariana Mazzucato, who has been advising both the Labour Party and SNP on industrial policy, has put at the centre of her recommendations for how the state should promote industrial development.

Instead the Scottish Government adopted an adversarial and hostile approach, imposing numerous design changes through a third-party ship design consultant that has played havoc with cost controls and schedule performance. Where state purchasing power and financing should have been used to patiently re-baseline the shipyard’s ability to construct ships, instead it has been used to drive the shipyard into severe distress and is destroying the value opportunity that Ferguson Marine presents for the Scottish economy.

Instead of perfunctory tinkering and the state attempting to replicate the short-term, profit-seeking behaviours of the private sector, they should be taking a long-term, strategic approach. That is the ethos at the heart of Labour’s industrial strategy for government.

Just as Bi-Fab stands idle and unable to secure a significant share of the vast marine renewable fabrication work in demand off Scotland’s shores, and just as 163 years of railway engineering in Springburn is abruptly allowed to be strangled by a foreign owned asset-stripper while rail maintenance contracts flow out of the country, we see the Scottish Government standing by – and in the case of Ferguson Marine actively implicated in the predicament the shipyard has now found itself in.

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