Meeting of the Parliament

Meeting date: Tuesday, April 17, 2018

Official Report 833KB pdf

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Burntisland Fabrications

The next item of business is a statement by Keith Brown, the Cabinet Secretary for Economy, Jobs and Fair Work, on an update on Burntisland Fabrications. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions. I call Keith Brown. Take up to 10 minutes, please, cabinet secretary.

17:02  

Thank you, Presiding Officer—and thank you for the opportunity to make the statement.

Parliament will recall that I gave a statement on 22 November 2017 on the circumstances surrounding the future of Burntisland Fabrications—or BiFab, as it is known. Several months have passed since then, and I take this opportunity to return to the chamber to provide an update on the progress that we have made on the commitment that the Government gave to supporting the company in order to fulfil the Beatrice Offshore Windfarm Ltd contract and to try to identify a long-term future for the BiFab yards.

Operating over three sites across Scotland—Burntisland and Methil in Fife, and Arnish on the Isle of Lewis in the Outer Hebrides, BiFab had in November last year a permanent workforce of about 250 staff, with 1,100 more being employed via agencies to support specific contracts. However, as members will recall, in November the company filed a notice of intention to appoint administrators, which triggered a period of intense discussion. Further urgent discussions led to a number of financial commitments being made that gave BiFab the comfort that it needed in order to delay a decision to place the company in administration immediately, and to continue towards completion of the contract that it held for Beatrice Offshore Windfarm Ltd, or BOWL.

All those who have been involved in the discussions—SSE plc, the partners in the BOWL project, Siemens, Seaway Heavy Lifting, BiFab and the trade unions, specifically Unite the Union and GMB Scotland—should be given credit for having taken a very proactive attitude to achieving a solution. As an added security, the Scottish Government committed to make available, if necessary, a commercial loan to BiFab. That collective approach not only provided an opportunity for the continuation of the BOWL contract, but created space for ongoing work to secure third-party investment.

At the time, the First Minister and I both made it clear that we would do everything that we could do to identify a way of bringing in new investment, of giving BiFab the best possible chance of winning new orders and of securing a long-term future for the company. I am delighted to say that that goal has been achieved. Earlier today, one of Canada’s largest independently owned construction companies—JV Driver—acquired BiFab through its subsidiary, DF Barnes.

In a deal that was brokered by the Scottish Government, DF Barnes will combine its financial backing and project expertise with the international profile and skilled workforce of BiFab to secure fabrication and construction contracts in the offshore renewables, marine and wider energy sectors. DF Barnes has been a consistent employer in the oil and gas, fabrication and marine industries for more than 80 years. It has expressed an interest in global expansion and recognises the opportunities that exist in the Scottish market.

As part of the agreement, the Scottish Government will expand the loan facility that was made available to BiFab for completion of the BOWL contract, and will convert that loan to a minority equity stake in the new company. That loan facility has been made on a fully commercial basis. The extent of the shareholding will be determined by the extent to which the loan facility is utilised in completing the BOWL contract. The shareholding will not exceed 38 per cent. Although, by their nature, elements of the agreement are commercially confidential, in the interests of transparency we have shared the details of the loan facility with the Finance and Constitution Committee, and I will be happy to provide it with any further information that it requires.

I pay tribute to the workforce on all three sites—Burntisland, Methil and Arnish. Our focus has been, and remains, on the workers, their families and the surrounding communities. We acknowledge that the past few months have been an anxious time for them, their families and the communities that are involved. I appreciate their support throughout the process, and the contribution that the trade unions—the GMB and Unite—have made to securing the agreement. The First Minister and I met the new owners, the existing management and the unions earlier today at Methil, and everybody there is committed to building a successful future for the yards.

Although we are positive about today’s announcement, the work cannot stop here. Offshore renewable energy and the offshore energy industry in general represent a key strategic opportunity for Scotland’s economy. Renewable energy is already providing significant levels of skilled employment, often in relatively rural or remote areas. However, we all want the supply chain to develop and to grow further.

If we look at Scotland’s oil and gas supply chain, we can see that the sector’s success was not immediate. It took time to build the supply chain, but it is now globally renowned. It employs more than 100,000 people in Scotland, and it exports its expertise to countries all round the world. We now want to create as rapidly as possible a similar success story for offshore renewable energy. That is why we are investing in infrastructure, supporting ambitious companies, promoting research and development, and ensuring that people have the right skills. We want Scotland’s renewable resources to provide skilled employment, as well as sustainable energy, for communities across the country.

There are some real opportunities for the Scottish supply chain, including BiFab, from a number of consented wind projects—for example, Kincardine, Moray east, Inch Cape, Neart na Gaoithe, which was discussed in Parliament earlier, and Seagreen. There are also opportunities further south, for example at Hornsea 2, East Anglia 3 and Dogger Bank. Of course, those are commercial decisions for the developers, but our aim is to secure for Scotland as much work as possible on as many projects as possible. To help to achieve that, we will combine our efforts and those of our enterprise and skills agencies with pressure on the UK Government to recognise the sector, as it develops its industrial strategy.

Scotland has the competitive advantage and the building blocks that are critical to more expansion in the renewables sector via the skills of the Scottish workforce. Indeed, that was one of the main drivers for DF Barnes becoming involved in the first place. Our existing ports infrastructure and locations, and our innovative academic community add to that competitive advantage. With such a relatively new industry, things will not always be straightforward and we will not, of course, win every contract. However, as today’s announcement shows, perseverance can achieve results.

Today’s agreement gives the workforce, the company and the Government the best possible chance of securing a vibrant future for the yards. The Scottish Government believes that BiFab can be a thriving business that supports Scotland’s offshore renewables and oil and gas industry as well as competing internationally for work, and we will continue to work with the company to achieve that success. Another key attractor for the company in coming to the decision was the involvement of the Government.

As the current BOWL contract comes to an end, and while efforts go into winning new work, there will continue to be difficult times for the yards and the workforce, but I am confident that the agreement, which will see the Scottish Government become a minority shareholder in the company, will deliver for BiFab’s future in Fife and the Western Isles.

We have just over 20 minutes for questions.

I thank the minister for his statement and for advance sight of it. It is good news for BiFab, the workforce and the wider economies of Fife and Lewis. For months, a dark cloud has hung over the company and the areas affected, so the announcement of the acquisition by DF Barnes today will be warmly welcomed.

I associate myself and my party with the cabinet secretary’s remarks about the workforce and the contribution that has been made by the trade unions in helping to secure the future of the company. Along with a number of my Conservative colleagues, I was happy to join workers and trade union representatives at their recent rally outside Parliament. I also give our support to the Scottish Government’s ambitions for offshore renewable energy and its on-going support for the oil and gas sector.

I have two specific questions arising from the cabinet secretary’s statement. First, what assurances have been given about the number of jobs that will be secured at the three sites of Burntisland, Methil and Arnish, including the permanent workforce of 260 and the additional 1,100 men and women who were previously employed through agencies?

Secondly, although I acknowledge what the cabinet secretary said about the need for commercial confidentiality, can he outline to members the total value of the Scottish Government’s support for the new purchaser?

I thank Murdo Fraser for his initial remarks. He referred to a dark cloud hanging over BiFab. That has certainly been true for each individual employee. That is the human element to the situation, and it is important.

Regarding the work, assurances come only through winning contracts. We have made that clear all the way through the process. We want to grow the workforce, but many of the contract employees that Murdo Fraser refers to no longer work there because their contracts have been wound down.

It was pointed out today that BiFab has in the past had more than 2,000 employees. The determination among all those at today’s announcement to make sure that we grow as many jobs as possible was evident. The fact that that determination is shared by the trade unions, the new owners, the existing management and the general workforce is an encouraging sign. However, jobs will come with winning work and contracts, so we are doing as much as we can within the constraints of the procurement process to help with that.

Unfortunately I cannot give more details about the quantum of money involved; that is commercially confidential. As I have said already, I will share as much information as possible with the Finance and Constitution Committee. I realise that there is an interest in the matter, but the information is commercially confidential.

I thank the cabinet secretary for the advance copy of his statement, and I very much welcome the news about BiFab. I believe that everyone in the chamber wants the deal to work and we salute the efforts of the workers and their trade unions in their unstinting campaign.

The cabinet secretary knows that we believe that too many renewables jobs go abroad, so the deal is a welcome respite. However, redundancy notices still hang over a number of the core workers at BiFab. Can the cabinet secretary confirm whether the new owners will move to lift the threat and retain that skilled labour? Will he ensure that there is a continuing role for the trade unions through recognition agreements and in sitting around the table and helping to secure the future of the yard?

I believe that the Government provided loan funding of £15 million in November 2017 and a further £4 million in March 2018, and will now provide a welcome additional £10 million for restructuring. Will the cabinet secretary confirm that the original £19 million loan is the equity stake in the company? What happens when that is repaid? Will the Government’s interest cease? Over what timeframe is that envisaged?

There were a number of questions in there. The quantum of money that the Government eventually provides will depend on the extent to which it is drawn down as required by the company.

The discussion that we had at BiFab today involved the trade unions, the management and the new owners. It was the first time that the trade unions had formally met the new owners and we left them discussing some of the issues that Jackie Baillie raised. It is for the new owners to take forward those propositions but they have no intention of shedding further staff. They, along with the trade unions and others, are committed to growing the number of staff, but that is a decision for the new owners.

DF Barnes, the company that has taken over BiFab, pointed out that it believes that it has had productive relationships with trade unions in Canada. It seeks to continue that productive relationship with the trade unions here, and that sentiment was reciprocated by the trade unions. There is no question but that there is a good basis for collaboration with the trade unions going forward, and there is no intention to de-recognise or get rid of them. There has been a productive start to that relationship.

On Jackie Baillie’s final point, we have said to the company that the Government wants to stay in for the long term—that is one of the reasons why the company was as keen as it was to get involved with BiFab. On the equity stake, we will have to wait to see how things develop, which will depend on a number of different factors. However, we have said that we want to make sure that we do as much as we can, not just for BiFab but for the renewables sector in Scotland.

The company is quite used to working with Governments and is keen to work with this Government. That is one of the reasons why we managed to reach the successful conclusion that we reached had today.

I am delighted with today’s announcement, which secures the future of BiFab and the jobs of many of my constituents. Does the cabinet secretary agree that the deal provides long-term assurances for the company, with opportunities for future growth?

I agree with David Torrance. However, in the short term, the deal secures the work that is there—the company will be able to finish the BOWL contract, which is yet to be finished. It also allows the company to try to secure further work, as David Torrance mentioned, with the backing of an experienced set of new owners—and the financial clout that they bring—and with the knowledge that the Government is invested, quite literally at many different levels. That presents a positive potential future for BiFab.

The crucial point, of course, will be to win those contracts. There are two contracts coming up fairly shortly that BiFab will have an opportunity to win, but there is also other work that we can identify. We can work with the company to try to ensure that it has the best possible chance—again, working within the procurement regulations.

I agree with David Torrance that his constituents, many of whom work at the location, will be hugely relieved by today’s announcement.

I welcome today’s substantial developments for the workforce and for the company. The Scottish Government believes that BiFab can be a thriving business, supporting Scotland’s offshore renewables and oil and gas industry.

In the cabinet secretary’s statement, he indicated that the loan facility would be expanded and converted into a shareholding. Is that a short-term, medium-term or long-term arrangement, and what is the timescale for the disposal of that shareholding to be realised?

As I said in my statement, the loan is on commercial terms and our commitment in terms of that investment and our support for the new owners will be for as long as is required in order to win jobs and work for the company.

It is important at this point that I refer Alexander Stewart back to his previous question on the matter, when he accused me and the First Minister of having said, in December, that we had saved the company. We have never said that, and my statement today does not say that either. We have made sure that the company continues to exist right through to the completion of the BOWL contract. We have helped to facilitate new investment by very credible new owners in that contract. That gives the company the best possible opportunities for the future.

We will stay in it for the long term but we should all be clear—the workforce, the trade unions and everyone else who was there today is clear about this—that there is still a great deal more work to be done. However, the company now has the opportunity to achieve those new contracts and to further grow the workforce.

I very much welcome the positive news about the future of BiFab. I believe that the workforce has shown determination, dignity and a huge commitment to their yards and their communities. Today, they should be proud of what they have achieved.

The cabinet secretary is right to recognise that the work does not stop here. It is now crucial for BiFab to secure new contracts. With the Government now having a minority equity stake in the company of up to 38 per cent, how involved can or will the Government be in supporting the company to secure future contracts, which the cabinet secretary recognises is crucial to the company’s future?

I thank Claire Baker and rest of the group of MSPs who have been involved with the matter as we have gone through the previous months. Those MSPs took an extremely responsible attitude as they went about their business, which has been helpful to the Government and to BiFab in getting to the stage that we are now at. It is true to say that the support that we have had and the fact that it has been united support has also been very helpful to us, both with BiFab and in relation to the substantive point that Claire Baker raises about further opportunities.

I know that the work of that group of MSPs has been mirrored within the Government. The First Minister, Paul Wheelhouse and I have been involved in making sure that we do the work that is required on potential future contract opportunities to make sure that the company is as well placed as possible. We are doing that work within—as I keep saying, and as I have to keep saying—the procurement regulations. However, it has been hugely important that we have been able to have that united front and to talk about some of the potential opportunities with the backing of a substantial company, with financial reserves and experience in the field. To me, that is very encouraging.

However, as Claire Baker rightly said, we know that this is just the next stage. The very important stage that follows is to make sure that BiFab wins that work, and a great deal of effort is going into that.

I join colleagues from across Fife in welcoming the news and congratulating all who are involved. What opportunities does the cabinet secretary think that there are now for BiFab as the renewables industry continues to expand, particularly in the context of the wider Fife economy?

I mentioned the opportunities that we are aware of, but other opportunities will, of course, come along. I thank Jenny Gilruth, who is one of the MSPs whose support for BiFab and the Government’s actions over the previous months I referred to. Even as recently as this morning, new opportunities were being discussed with the company that had not been fully explored up to this point. That tells me that the company is very hungry for the work. It is interested in not just renewables work, which it is very interested in—that is the main reason why DF Barnes came here in the first place, as well as the excellence of the workforce and its expertise—but oil and gas, which is a very important sector in this country, and a number of other engineering projects. The work may not all be in renewables, but even in renewables the opportunities that I have mentioned already are not an exhaustive list. There is plenty of opportunity out there, and our job now is to make sure that BiFab takes opportunities when they arise.

Today is certainly a great day of hope for the communities in Fife and the Western Isles who fought so hard to protect their livelihoods in recent months, but it is clear that we are going to need investment to turn this day of hope into a secure future for those communities. When will Scottish Enterprise be able to finalise its investment plans for the yards, to make sure that we have a competitive supply chain and competitive yards? Also, what work is the cabinet secretary doing with Baroness Brown to ensure that a sector deal for offshore wind comes from the United Kingdom Government?

As part of today’s statement, although I cannot go into too much detail, I can say that investment is being made already by Scottish Enterprise and Highlands and Islands Enterprise to make sure that the deal moves forward and that the new owners of the company are able to take best advantage of the opportunities. The Government has made substantial investment, the investment by Scottish Enterprise and HIE adds to that and we will, of course, look at what else it is possible to do. However, we have a purpose in trying to get a company such as DF Barnes involved. It has the expertise and knows exactly what equipment and facilities it needs to win the work. It has the experts and is the owner of the company, and we will work with it.

Mark Ruskell may be aware of our frustrations in relation to the consultation and collaboration with the UK Government on the sector deals. However, the Economy, Jobs and Fair Work Committee has the chance to question Greg Clark on Thursday when he appears before it. I imagine that Mark Ruskell will want to take up that question with the UK Government. For our part, we are very keen to engage with that important sector. I add that Mark Ruskell was one of the MSPs who provided support, and I am grateful to him for that.

I thank the minister for advance sight of his statement. He is right to be measured about today’s progress. It is, indeed, good news for BiFab workers in Lewis and Fife, but, as he said in his statement, there will continue to be difficult times ahead. Can the minister set out in a wee bit more detail some of the pressure points and milestones—the order gaps that he is predicting—and how the company and the Government intend to address those?

I thank Willie Rennie for his question and acknowledge the role that he, too, has played in the support from that group of MSPs who have been most involved. The company is well aware of some of the pressure points. Willie Rennie is right to say that it is a very encouraging and positive statement, and if he wants any confirmation of that he can check with the shop stewards and employees. The First Minister met employees across the site this afternoon, and the relief and positivity among them was palpable.

One of the pressure points is the need to make sure that the BOWL contract is finished. That is crucial if we are to move on. Two other immediate pressure points—if I can call them that—are the two contracts that I have mentioned, which we are obviously very keen to see BiFab succeed with. Beyond that, other opportunities will come up that are perhaps not pressure points. Those three things are landmark events for the company. Making sure that the BOWL contract is completed will help with the reputation building that we will have to do to win further contracts, and there are the two immediate contracts that are in front of the company.

The cabinet secretary mentioned oil and gas in his statement and in his answer to Jenny Gilruth. What opportunities to expand into that sector has he discussed with BiFab? It would only be a positive thing for BiFab to bring its knowledge of the renewables sector into the oil and gas sector. I see opportunities for the oil and gas sector to learn from the expertise in BiFab as the sector expands into renewables, too. Will the cabinet secretary give me a little more information on what support BiFab will get to access those markets?

BiFab will get every support that it is possible for us to provide in addition to the financial and other support that we have already provided.

Gillian Martin makes a good point about some of the opportunities. If DF Barnes met her, the company would tell her that it is keen not just to conserve some of the contracts that I mentioned but to export the expertise that BiFab has built up over a number of years. As I said, it has global ambitions.

Those things have to be worked through and the work must be won, but the potential exists for DF Barnes to take BiFab to an even greater level than it previously reached not only in the renewables industry but in oil and gas. The oil and gas sector is important in Canada as well as in Scotland. There is no harm at all—in fact, there is a great deal of benefit—in a company with that background coming into the oil and gas supply chain. There are major opportunities.

DF Barnes has been a consistent employer in the oil and gas, fabrication and marine industries for more than 80 years. It is a positive investment that will ensure that BiFab can build on its reputation in both of the sectors.

The cabinet secretary rightly said that the enterprise and skills agencies are extremely important in the development of industrial strategy. Will he include universities and colleges in that strategy, given their increasing importance in innovation and the training of a dedicated, skilled and flexible workforce?

Our universities and colleges are fundamentally involved in the skills strategy that we have produced, but we want that expertise to be deployed for the particular area that we are discussing. It will be the responsibility of the enterprise agencies and the skills agencies to ensure that that support exists. If the situation develops as we all want it to and there is an increasing workforce, the demand for those skills will increase over time. It is important that we anticipate that and provide every support possible to facilitate it.

The cabinet secretary referred to the potential opportunities that are presented to BiFab by consented offshore wind farm developments in the North Sea, including the Inch Cape development, which is off the coast of my constituency. For those opportunities to be fully realised, the developments will require a contract for difference and most do not have that at present. Will the cabinet secretary join me in encouraging the UK Government to play its part in supporting the Inch Cape development and others—and, potentially, BiFab—by providing that contract for difference backing?

I repeat that we are confident that BiFab has a bright future. It is currently tendering for a number of contracts that will need to be secured in a competitive process. It is not within the Scottish Government’s gift to award such contracts, but I am confident that the expertise of the workforce across the three yards and the knowledge, skill and track record that DF Barnes brings will ensure that any bid that BiFab makes in the future is competitive.

The group of MSPs that has been referred to—as well as many others, including the Scottish Government—have made representations to the UK Government in that respect. It is in the UK Government’s interest for the industry to thrive, and I hope that positive support for that will continue. I also hope that the UK Government will be receptive to some of the requests that MSPs and others—including the company and trade unions—have made to ensure that we have the best possible situation for BiFab going forward.

Jobs in the offshore industry matter in Fife, in Lewis and throughout Scotland. For example, the world’s largest wind turbine is about to be commissioned in Aberdeen bay. Does the cabinet secretary expect DF Barnes to be interested in fabrication or decommissioning—or both—in the oil and gas sector? Will he tell us whether a minority shareholding will in any way involve the Government in decisions about where the company will bid and for what across the energy sectors?

On the first part of Lewis Macdonald’s question, I think that DF Barnes will want to look across a range of activities and take advantage of opportunities when it finds them. I have mentioned that its background is in oil and gas application, and it will, of course, be interested in decommissioning if that fits its skill set.

It is not for the Government to place any limits or strictures on what DF Barnes wants to compete for—that is a decision for the company. The same applies to the issue of the Government’s becoming too involved. We are not the experts; we are not seeking to run the company. We recognise that somebody from the private sector, with the background that DF Barnes has, is best placed to do that—the decisions are its to make. That does not mean that the Government is going to be a disinterested party. Obviously we are not, as we have shown by what we have done up to this point. However, the company that is taking over BiFab is best placed to take advantage of the opportunities.

As a member of the Scottish skills task force, whose work contributed to the successful purchase by Liberty Steel of the Clydebridge and Dalzell mills, I know that the dedication and the collaboration of all who have been involved—the workforce, the unions, the Government, local government and the community—will have contributed to the successful result that we have heard about today. I wish everyone well in that regard.

What investment is the Government making now to ensure that manufacturing in all of the sectors that have been mentioned this afternoon will have a viable and competitive future?

As Clare Adamson knows, we have developed and implemented a wide range of policies with our industrial and economic ambitions at the core. Those include city deals, phase 2 of the enterprise and skills review, the manufacturing action plan and the “Scotland CAN DO: Boosting Scotland’s Innovation Performance” innovation action plan. In particular, we have recognised Scotland’s strengths in manufacturing, not least in relation to the examples that Clare Adamson has given. That is why we and our partners have delivered £65 million for the national manufacturing institute for Scotland, which will be located in Renfrewshire. It is also why the strategic board for enterprise and skills has been tasked with focusing billions of pounds of investment in key sectors and harnessing the knowledge of our universities and colleges. Further, it is why the Scottish Government has shown a commitment to getting to the position that we are in today.

This is a good day for Fife and the Western Isles, and it is a very good day for employees of BiFab.