Meeting of the Parliament [Draft]

Meeting date: Tuesday, March 5, 2024

Official Report 960KB pdf

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Ferguson Marine

The next item of business is a statement by Màiri McAllan on Ferguson Marine. The cabinet secretary will take questions at the end of her statement, so there should be no interventions or interruptions.

14:25  

Today’s statement provides me, as Cabinet Secretary for Wellbeing Economy, Net Zero and Energy, with an early opportunity to restate and to reaffirm the Scottish Government’s commitment to ensure that Ferguson Marine delivers two lifeline ferries—the Glen Sannox and the Glen Rosa—so that we bring next-generation technology to the CalMac Ferries fleet and provide reliable, high-quality services to our island communities.

It also provides an opportunity, following meetings that I have held with the chair and chief executive, and with the unions that represent the skilled and dedicated workforce at Ferguson Marine, to report the latest information on costs and delivery dates that the business has provided, and to provide an update on the work that is taking place to ensure a long-term future for the yard.

On Monday 26 February, the chief executive officer, David Tydeman, provided his regular progress update to the conveners of the Net Zero, Energy and Transport Committee and the Public Audit Committee. That process reflects the statutory relationship between the chief executive and Parliament. The relationship is one in which the chief executive is responsible for the delivery of the programme to plan and to budget, and is personally responsible for spending, as part of the statutory accountable officer role that is set out in the Public Finance and Accountability (Scotland) Act 2000.

The next day, Tuesday 27 February, the chief executive, along with the chair, Andrew Miller, and non-executive director Simon Cunningham, appeared at the Net Zero, Energy and Transport Committee, where they were questioned for 90 minutes on the updates that the chief executive had provided. That was helpful and instructive, because the chair and the board of directors are appointed by ministers to provide strategic direction and hold the executive team, including the chief executive, to account for their performance. The yard has been grappling with complex and varied legacy issues, some of which go back many years, and the board is well placed to understand those pressures and consider actions that it believes to be in the best interests of the yard.

I am grateful to members of the committee for the degree of scrutiny that they were able to provide on a range of issues, including the latest cost projections, the approvals that were received from the Maritime and Coastguard Agency and the board’s work to develop a business case for future investment in the shipyard.

In his letter, the chief executive stated that the cost to complete Glen Sannox will not exceed £149.1 million since the point of public ownership. He also reported that the cost to complete vessel 802—or Glen Rosa, as it will be known—will not exceed £150 million since the point of public ownership, and he signalled that he remains hopeful that it can be completed below that maximum figure because the yard is learning from the way that it has resolved the many legacy issues around the first vessel that were inherited.

At committee, the chair reported that the board had scrutinised the cost forecasts, and Simon Cunningham described how it now had much greater visibility of the critical path to handover and the risks to the programme. They said that the board had much greater confidence in the accuracy of the forecasts, in part because Glen Sannox was nearing handover, but also, in respect of vessel 802, because of the diligence that they had carried out, and because management had negotiated fixed-price contracts from subcontractors to replace the more costly time-and-materials contracts that it had inherited on the build of Glen Sannox.

Although I am encouraged by the greater degree of confidence that the board is showing, and although I recognise and agree with the point of my predecessor Neil Gray in his update to Parliament—namely, that inflationary and other significant pressures, such as around supply chains and design gaps, impact on the cost of completion—the level of those increases remains deeply disappointing. I share the frustration that will be felt by everyone across the Parliament and, indeed, in our country.

I met the chair and the chief executive last week, and I impressed upon them the need to understand that frustration and to take whatever action is appropriate to avoid further increases in costs. I will ensure that my officials continue to meet every week the senior management at Ferguson’s and its delivery partners, including Caledonian Maritime Assets Ltd and CalMac, to ensure that they are living up to that requirement.

Separately, we have commenced due diligence on the latest projections, using external advisers to ensure that they are accurate and justifiable. I will update the Net Zero, Energy and Transport Committee and the Public Audit Committee once that work is complete. That will be a short exercise, but one that is necessary to ensure that we continue to spend in the best interests of our island communities, taking into account the wider economic benefits that delivery of the vessels will ultimately provide to the Clyde and Hebrides ferry services routes.

On build progress, the chief executive indicated in his update that the Glen Sannox has proved to be very reliable during its sea trials. When running at full power, she has been smooth and quiet and has performed very well. The chief executive reported that the recent delay in installing the liquefied natural gas system was due to a delay in securing a contractor in a globally expanding market. He also outlined that, although handover with a single fuel was possible, the end user—CalMac—had been very clear that it expected a dual-fuel vessel on commissioning and that that was therefore what the shipyard was instructed to deliver. He further set out to the committee that he considered that the redesign of stairwells to certain areas of the ship to meet Maritime and Coastguard Agency requirements—which, I should add, it is absolutely right to require—had increased the cost by over £1 million. Taking those and other factors into account, the chief executive reported that the Glen Sannox would be handed over to CMAL at the end of May this year and that the handover date for 802 would move to September 2025.

The next milestone in the delivery of the Glen Sannox will be when she moves under her own power again to the dry dock at Inchgreen in early April. There, a number of hull-cleaning and maintenance tasks will be carried out, which will conclude in her return to sea for a second set of sea trials later in the month.

Weather and tide permitting, plans are under way to launch 802 on 9 April. The delay from the original planned date of 12 March was in part due to the need to have more work carried out on the Glen Sannox at the Port Glasgow site. However, the launch of 802 is an important milestone for the delivery of the vessel, and we look forward to engaging with the yard on the details of that.

The vessel will be named formally at a later date. That is consistent with the plans for the vessels that are being built in Turkey, the first of which is due to be launched in a similar manner this month. That will mean that we are on track to deliver six new vessels by 2026 for our island communities, to continue to support their economic resilience.

I will continue to impress upon Ferguson Marine the impact that delays are having on island communities and the need to do everything possible to bring two high-quality ferries into service. Our due diligence on the latest cost projections will also test the delivery dates provided by the yard, but it is clear to me that completing those vessels at Ferguson Marine still presents the fastest possible route to getting vital new lifeline services, as well as providing wider economic benefits to the Inverclyde area.

I will move on to the future of the yard. From the very start, we have sought to ensure that the yard has a sustainable future, whether that be in the public sector or, as we have always said, by returning the yard to the private sector if and when the time is right to do so.

Members will recall that, last November, the former cabinet secretary confirmed that we were unable to support an initial business plan and associated request for capital investment that Ferguson Marine submitted, and that we had asked the board to revisit the proposal and develop a revised plan. I hope that that is successful and that the board will be able to provide a robust case for investment that is deliverable, makes economic sense and, of course, meets our legal requirements on subsidy control. The Scottish Government has provided funding to enable the yard to draw on external advisers to support that process, and I understand that extra resource is being provided at Ferguson Marine board level to steer that work. I welcome that commitment from the board and look forward to considering the new business plan, which we expect to receive by the end of this month.

I recognise that, as the existing contracts near completion, these are unsettling times for the workforce. I have been impressed by the passion and commitment that the trade unions have shown in making the case for future investment, and I was pleased to have the chance to hear directly from union representatives during a meeting in Parliament last week. Their views are vitally important to me, and I took the opportunity to listen and to assure them that ministers will leave no stone unturned when it comes to securing a future for the yard and for shipbuilding on the Clyde.

As a former transport secretary, I am acutely aware of how important the delivery of the Glen Sannox and Glen Rosa is to our Clyde and Hebrides ferry services network and to the island communities that that network supports. I am encouraged by the results of the initial sea trials of the Glen Sannox and am committed to supporting Ferguson Marine, its board and the people who work for it to ensure that both ferries are delivered as soon as possible.

I am also determined to do all that I can to support the shipyard in securing a route to a sustainable future. I have already met trade unions and understand both their frustrations about the mistakes of the past and their determination to find a brighter future for their current members and for future generations of workers in Inverclyde.

I do not underestimate the challenges involved, but the yard is incredibly significant to the local, regional and national economies and we are committed to doing all that we can to ensure that it remains so.

The cabinet secretary will now take questions on issues that were raised in her statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. Members who wish to put a question should press their request-to-speak buttons.

I thank the cabinet secretary for advance sight of her statement. It came a bit later than is usual, so I ask her to look into that.

It was a disappointing statement, which said very little—in fact nothing—that is new. Any islanders who are watching will, and not for the first time, have been disappointed. They might have been expecting some news or announcement that would give them some hope or tell them something that they did not already know, but that was not in the statement.

I am pleased that the sea trials of the Glen Sannox have gone well; that is encouraging. I think that we are getting close to the end of what has been a scandal. That is good. The islanders will—eventually—get their new ferries, which is to be applauded.

The cabinet secretary says that the Government will carry out due diligence on the costs and the timescale, which seems to suggest that she does not entirely trust what she is being told. Who will carry out that due diligence and how much is it going to cost? The cabinet secretary rightly said that the Government turned down a previous request for an extra £25 million that would have given the yard a new plating line. As we look to the future of the yard, will she commit to any extra investment? What will the yard look like? How can it secure a route to the sustainable future that she says she wants?

I note Graham Simpson’s point about the time at which the statement reached him.

Regarding the statement’s content, I respectfully note that Opposition parties from across the chamber asked for it, which is why I have given that update today, very soon after taking over my new portfolio. I am happy to do so, because it is important to the Government. The update acknowledged the chief executive’s updates on costs and timing, registered my disappointment with the scale of the change in the position and assured Parliament that due diligence will take place.

Regarding that due diligence, I do not think that Graham Simpson would wish to cast any doubt on the importance of the Government doing that, because it is what prudent public spending and consideration of what is put in front of us is about. That due diligence is under way, and we are doing it supported by independent advisers. Mr Simpson has asked for a timescale. I do not have one while the work is on-going, but I can say that it will be shorter than the former period of due diligence, due to improvements in internal board scrutiny, since then.

In relation to the future, I am committed to supporting the board and Ferguson Marine in their production of an updated business plan, and to considering it on receipt of it.

I thank the cabinet secretary for an early copy of her statement.

There can be no doubt that there is a lot of blame to go round when it comes to delivery of the new ferries, but it is absolutely clear that the workforce at Ferguson Marine is blameless.

The cabinet secretary’s statement fails to give assurances on the yard and its workforce. We need to know that there will be capital investment in the yard. When I visited the yard almost a year ago, the workforce and the management were clear that such investment was needed in order to secure its future.

Does the cabinet secretary therefore accept that making a decision on the matter is urgent? To what strategy is the Government working? What are the timescales for decisions being made? Will the decision on investment be made before the decisions are made on the small vessels replacement programme?

Finally, will the Government work with all parties in the chamber to ensure that we secure a future for shipbuilding in Port Glasgow?

I agree entirely with the sentiment that Alex Rowley expressed about the importance of the workers at Ferguson Marine. The Government is focused on completing the vessels and on the future of the yard, and the workers are central to that.

It is worth stating that the Ferguson Marine workforce has been at the heart of the Government’s actions in respect of the yard to date, and will continue to be at the heart of what we take forward in the future. That is partly why I was so keen to meet and to hear directly from GMB members’ representatives last week. Their views have been very instructive to me, and I have made the commitment to them that I would like to visit the yard as soon as I can.

I share Alex Rowley’s view about the urgency of understanding future plans as the 801 and 802 contracts come to a close. That is why the Government is supporting the development of the updated business case. I will give very close consideration to it when it is with me, which I expect will be at the end of March.

I welcome the delivery of the Glen Sannox in late spring, but it is deeply disappointing that the £41 million small vessels replacement programme is being reprofiled—that is, delayed. Ferguson’s has previously delivered high-quality hybrid small vessels on time and on budget—including the MV Catriona, which sails out of Lochranza—and the yard is crying out for orders. Does the cabinet secretary agree that it makes sense to prioritise ordering small ferries to show the market that Ferguson Marine has successfully turned a corner while delivering much-needed new vessels for our island communities?

I understand Kenny Gibson’s close interest in the matter. The small vessels replacement programme has not been “delayed”, and my colleague the Cabinet Secretary for Transport is actively overseeing it.

As for the position as it relates to my economy portfolio, direct award is, under procurement rules, possible only in strictly limited circumstances. Breaching those rules is not an option in and of itself, and could lead to legal challenges, costs and further delay. We will consider, case by case, future contracts for vessels from public agencies, and whether any might be open to direct award in those strictly limited circumstances.

However, it is worth restating that the very best way for Ferguson Marine to be supported into future public or private contracts is to increase its competitiveness. That is exactly what is on-going with regard to the business case that I mentioned.

I am extremely concerned about the vagueness in relation to the LNG system and whether that might cause further delays to the launch of the Glen Sannox. Islanders on Arran would rather have a vessel that runs solely on diesel than have no vessel running at all.

Is the Government digging in on the original wording of the contract, or is there any flexibility in respect of launching the ship sooner rather than later? Why is the Scottish Government, which owns the yard, not committing today to the small vessels replacement programme project being in Inverclyde, or is it more likely that Turkey will once again be the main benefactor of Scottish ferry-building contracts?

I will first address the final point, on the small vessels replacement programme. As I stated in response to Kenny Gibson’s question, a direct award is legal only in strictly limited circumstances under public procurement rules.

On LNG, that is an operational matter for the chief executive. However, the issue was discussed in some depth at last week’s meeting of the Net Zero, Energy and Transport Committee. It is estimated that the LNG commissioning programme for the dual-fuel engines will be completed by the end of May.

When he was in front of the committee, the chief executive explained that the main cause of delay was the lack of available specialist contractors. I understand that there has been a global expansion in the use of LNG, so there has been competition for specialist contractors to carry out the work. However, David Tydeman was able to confirm to the committee that the issue has now been resolved with the appointment of a contractor that is based in the United Kingdom, and that there should be no further impact on building of the Glen Sannox.

I am pleased that the cabinet secretary has already met shop stewards Alex Logan and John McMunagle. I cannot stress enough how pivotal those shop stewards are to the future of Ferguson Marine.

I come back to the matter of a direct award, if that were to happen. Progress has certainly been slow. As things stand, the future of the yard relies on a direct award of the small vessels replacement programme being made to Ferguson Marine. That might not be welcomed by some people but, for the future of the yard and of shipbuilding in Port Glasgow, I ask the cabinet secretary to please make a direct award to Ferguson Marine.

I note Stuart McMillan’s direct plea on behalf of his constituents, and I admire his advocacy on their behalf.

In the generality, Ferguson Marine is absolutely right to be turning its mind to winning its next contracts. Ultimately, decisions on what contracts to pursue are operational matters for Ferguson Marine. However, for the Government’s part, I am very happy to say that we will do all that we can, as the shareholder, to ensure that the business has a sustainable order book and a future.

We are currently considering the outline business case for the small vessels replacement programme. An update on the procurement strategy will be provided in due course, once a decision on investment has been made. I understand the potential opportunity that the small vessels replacement programme offers to Ferguson Marine, but I must restate once again that a direct award is legal only in strictly limited circumstances.

I understand that the cabinet secretary has said that she needs to look at the detail of a new business case for investment in the yard that will support jobs in the Inverclyde area, which has lost 1,000 jobs in the past 12 months. I will follow on from what Graham Simpson asked. Does the cabinet secretary accept the glaringly obvious point that has been made by the GMB—this has cross-party support—that Government investment in the yard is now essential to its winning future work, to improving efficiencies and to securing a positive future for the yard? If that is not the Government’s plan, is there an alternative plan? If so, what is it?

The Government could not be accused of not having invested in Ferguson Marine.

Neil Bibby’s question is about the link between our investment and investment case, and Ferguson Marine’s ability to win future contracts. In June, Ferguson Marine provided the Scottish Government with a request for capital investment of about £25 million. It presented that as part of its making the shipyard more competitive. However, our due diligence concluded that the initial business case did not meet the vital commercial market operator test, which is a key legal requirement if we are to demonstrate compliance with subsidy control rules. That is why we are actively supporting the board in recasting its business case and investment plan, and will give close consideration to them when we receive them at the end of the month.

In relation to the future of the yard, the cabinet secretary will recognise that it operates in a hugely competitive global commercial environment. Will the cabinet secretary tell us what work the Scottish Government has done to move things forward by seeking out potential industrial partners that could bring investment, technology and expertise in order to secure a long-term future for the yard?

I am very happy to do so, because what the member describes is part of the considerations about the future of Ferguson Marine. The board has recently been strengthened with additional commercial and shipbuilding expertise, and the yard is supported by a supply chain that brings new technology and expertise into the yard. As I have said a number of times, the case for further Government investment will be covered in the business plan that the board is currently preparing, which I hope to receive at the end of the month.

In the meantime, it is worth stating again that decisions on what contracts to pursue are for Ferguson Marine, but the Scottish Government stands behind it in supporting it to have the most prosperous future possible.

Listening to the cabinet secretary, you would think that the debacle had nothing to do with the Scottish National Party Government, but we should remember that the project is three times over budget and six years late, that hundreds of millions of pounds of taxpayers’ money has been spent, that the workforce has been utterly humiliated, and that islanders have been left stranded because of ministerial meddling from the beginning. Can the cabinet secretary tell me why no minister has lost their job as a result of this debacle?

I am far more interested in the practical matters around the delivery of vessels 801 and 802 and the future of the yard than I am in politicking, or whatever it was that Willie Rennie was pursuing there.

It is completely inaccurate for him to describe the saving of 300-plus jobs in the last commercial shipyard on the Clyde as humiliating for the workers involved. Our objectives have always been delivering the lifeline vessels, supporting the highly skilled and dedicated workforce, and securing a sustainable future for the yard. That is what I am focused on, not politics.

I call Jackie Dunbar—[Laughter.] Members, I regard that as neither courteous nor respectful when I am trying to speak in the chamber.

It is right that we scrutinise the progress of work at the yard. I was delighted to visit it a few weeks ago to see at first hand the progress that is being made. What should unite us all is a determination to secure a future for Scotland’s commercial shipbuilding industry. Can the cabinet secretary provide any further information about the steps that are being taken to ensure that the yard is competitive and in shape to compete for future contracts?

I know that Jackie Dunbar found her visit to the Ferguson Marine yard very helpful and instructive. Some of the workers she was able to meet left an impression on her. I share her determination to secure the future of the yard and agree on the importance of commercial shipbuilding on the Clyde.

The work that I have been describing and that we are supporting Ferguson Marine with, in producing the updated business case and investment plan, is among the key ways that we can ensure a competitive future and help the yard to be in a position to competitively bid for future contracts.

I give my assurance that, with my team, I will give very close consideration to the content of that business case when I receive it.

I am grateful to the cabinet secretary for her statement. As a Highlands and Islands MSP who represents many of Scotland’s island communities, I know that the performance and future of our ferries and ports are a source of deep frustration to those communities. Equally, I recognise what the cabinet secretary said about the anxieties that are felt by the workforce and trade unions at Ferguson Marine. I am interested in understanding what further reassurance the cabinet secretary can offer to the workforce that its views are heard and that its future is a priority.

I mentioned in my statement that I was able to meet Ferguson Marine GMB union shop stewards John McMunagle and Alex Logan. My predecessor, Neil Gray, met them several times to hear their views at first hand. I have also undertaken to visit them at the yard as soon as I am able to. When we met very early on in my tenure in this position, last week, I gave them the assurance that their views and the views of those they represent will be very important to me and to the Government as we move into a critical period for the future of the yard. As I said in answer to a previous question, the workforce has been central to all actions that the Government has taken in respect of Ferguson Marine and will very much continue to be so.

As colleagues have said, the statement says nothing. It reveals nothing that is not already publicly known and certainly does not give any clarity to islanders, who should be at the heart of the Scottish Government’s considerations on the matter but seem to have been forgotten by most of the Scottish National Party contributions. It also gives no clarity on when Scotland’s ageing ferries fleet—whether operated by CalMac, NorthLink or the councils—will be replaced, what it will cost and what role Ferguson’s will play in that. When will my island constituents get the new boats that they desperately need?

I point out to Jamie Halcro Johnston that the statement was called for. I am happy to come to the chamber and update members on the progress on the issue as often as they call for it. The fact that there has been so much activity by the Net Zero, Energy and Transport Committee, which I credit with the scrutiny that it has undertaken, indicates that a great deal of work is going on across the Parliament on the matter.

I point Jamie Halcro Johnston to the update in my statement that we are on track to deliver six new major vessels to serve Scotland’s ferry network by 2026. I also point out to him how challenged we are in that regard by the actions of his party’s Government, which is cutting our capital budget by up to 10 per cent over the coming years. He should be prepared to explain to his constituents why that is the case and why he has not been prepared to stand up to the Tories on it.

For our part, we will continue to focus on the delivery of those six vessels. That will be supported by the work that my colleague Fiona Hyslop is taking forward in the islands connectivity plan.

The cabinet secretary quoted the chief executive of Ferguson’s as saying that the sea trials of the Glen Sannox had been successful. Can she go into any more detail about those trials?

The chief executive gave a full account of that matter when he was in front of the Net Zero, Energy and Transport Committee last week. He described how the vessel was tried at different speeds, how it was a smooth journey and how various vibrations, to which he could speak—I am not as technically able to do so—meant that it was very successful. I also described in my statement what the next stages are for the trials of the Glen Sannox before she enters into service, in the coming year.

The shipbuilding financing guarantee programme of the Turkish national investment bank, Türk Eximbank, can provide direct loans and letters of guarantee to Turkish shipbuilding firms so that they may obtain competitive pre-financing of up to 85 per cent of the contract price. Will the cabinet secretary introduce a similarly competitive shipbuilding financing guarantee programme in Scotland?

That was an utterly breathless contribution from Paul Sweeney. I did not catch most of the detail of it. If he wants to write to me with it, I will be glad to look into the matter and get back to him.

From recent written questions that I have lodged, we know that each of the two new vessels will require two tankers of LNG fuel each week. Each tanker will have a 962-mile round trip from Kent to Troon. Has an audit been carried out to assess whether operating the vessels on dual fuel is better or worse for the environment?

The use of dual fuel in ferries is widely regarded as being positive for the environment, not least as part of the reduction of emissions of various pollutants that are associated with single-fuel vessels. Douglas Lumsden needs only to look at the expansion of that market throughout the world and the research on the environmental outputs of dual fuel to see for himself that it is the better of the two to pursue.

That concludes the ministerial statement. I will allow a moment or two for front benches to organise themselves.