Official Report 434KB pdf
The next item of business is a statement by Stephen Flynn on Ferguson Marine—planned investment and future business.
17:06
I welcome this opportunity to update Parliament on Ferguson Marine. Before I do so, however, it is important for us to remember how we arrived at this point. Ferguson Marine entered public ownership following the collapse of its previous private owners. Without intervention, Scotland could have lost its last commercial shipyard on the Clyde, along with hundreds of skilled jobs and an important industrial capability. Nationalisation protected jobs, retained skills and safeguarded a significant part of Scotland’s industrial base.
Today, Ferguson Marine remains a major employer in Inverclyde and an important contributor to Scotland’s maritime economy. It has built vessels that operate in Scotland and around the world, and it has a well-earned reputation for the skills of its workers and the quality of its apprenticeship scheme.
I am aware of the strong public interest in the yard, and I know that members across the Parliament recognise the importance of retaining industrial capability, preserving vital skills and supporting Inverclyde’s future. Our programme for government reaffirmed our commitment to Ferguson Marine, and today I will update Parliament on the work that is being undertaken to support a sustainable future for the yard.
In March this year, we announced our intention to award contracts for four vessels to Ferguson Marine, subject to detailed due diligence and assurance processes. They comprise two ferries from the small vessel replacement programme, a marine protection vessel and a marine research vessel. The ferries will serve the Sound of Harris and Sound of Barra routes, supporting vital connections for island communities. The marine protection vessel and marine research vessel will support Scotland’s marine environment and wider national priorities.
We expect that each vessel will serve our country for many years to come, and it is therefore right that our technical and procurement experts take the time to conclude robust due diligence. The proposed vessel programme forms part of a wider package of support that is intended to modernise the yard, strengthen its competitiveness and improve its long-term sustainability. Ministers must be satisfied that the programme provides value for money, complies with procurement and subsidy control requirements and represents an appropriate use of public funds.
Since March, alongside procurement activity to develop vessel designs and the governance needed to support timely delivery, Scottish Government officials, Ferguson Marine’s senior leadership team and external advisers have worked intensively to assess the viability of the wider transformation programme. That has included reviewing and challenging the yard’s business plan, testing assumptions, delivery proposals and financial projections, and analysing Ferguson Marine’s contribution to the local and national economy so as to inform an evidence-based case for public investment. Like everyone who cares about Ferguson Marine, I want that work to move forward as quickly as possible.
It is equally important that decisions are evidence based, transparent and capable of withstanding scrutiny. That is why we are taking the necessary specialist advice and doing everything that we can to protect public funds and ensure that decisions are made transparently and responsibly. The Parliament would expect nothing less.
There has been considerable interest in the role of the Competition and Markets Authority in the process. To establish that a subsidy is lawful, the Scottish Government must prepare a detailed principles assessment demonstrating that the policy rationale, economic case and commercial justification align with subsidy control requirements. The technical requirements for each vessel must be developed sufficiently to allow Ferguson Marine to prepare designs, delivery plans and cost estimates. Those estimates are then assessed through independent technical, commercial and financial scrutiny.
Due to the nature and value of the proposed support package, the Subsidy Control Act 2022 requires a mandatory referral to the CMA. The CMA does not approve or reject proposals. Its role is to independently assess the evidence and publish advice, which ministers must carefully consider before reaching a decision. That important safeguard helps to ensure that any support package is supported by credible evidence and robust analysis.
Scottish Government officials continue to engage closely with the CMA and, under the current timetable, we expect the principles assessment to be submitted for formal pre-referral assessment in the coming weeks, with a final submission following thereafter. The resulting report will inform the decision that ministers ultimately take. I will continue to keep Parliament updated on key milestones.
In planning for Ferguson Marine’s long-term future, I am also conscious of the immediate challenges that are facing the business. The MV Glen Rosa is the final vessel that is currently under contract and, once it is delivered, the yard will have no contracted shipbuilding work scheduled for 2027. Without a future pipeline of work, the business faces significant challenges in retaining skills and securing long-term sustainability.
Let me be clear that the issue is not technical capability. Ferguson Marine retains a highly skilled workforce. The challenge lies in competing in a global market where many overseas shipyards benefit from lower costs and greater scale. That is why vessel opportunities, business transformation and capital investment are being considered as part of a single programme to modernise the yard and strengthen competitiveness. Investment to date has focused on essential repairs, health and safety improvements and targeted equipment upgrades. Any future investment will remain subject to the wider business case and subsidy assessment process and will be directed towards supporting a more sustainable operating model.
I also want to address the voluntary redundancy consultation that is under way at Ferguson Marine. No compulsory redundancies are proposed and participation in the scheme is entirely voluntary. The company considers that the changes will support the transition to a more modern, efficient and competitive operating model. As shareholder, the Scottish Government sought assurances that the proposals were subject to proper governance and oversight and an appropriate business case before consultation commenced. Having received those assurances, I have agreed that the workforce changes are necessary to support the long-term future of the yard.
Separately, officials continue to work with Ferguson Marine’s leadership team to manage the period between completion of the MV Glen Rosa and the proposed direct awards. As part of those discussions, the business has requested working capital to enable it to build a small number of tug boats for subsequent sale into commercial markets. I have agreed that that proposal should be taken forward because I agree with the board that it represents a sensible commercial approach to maintaining productive activity in the yard following delivery of the MV Glen Rosa. It has the potential to retain critical shipbuilding capability and workforce skills during an important period for the business.
I have therefore asked officials to work with the company to progress the necessary commercial, financial and governance arrangements as quickly as possible. That work is separate from the broader programme of vessel opportunities, investment and transformation that is currently under consideration.
I place on the record my thanks to everyone who has taken a constructive interest in Ferguson Marine, including trade unions, local communities, industry partners and members across Parliament. Above all, I thank the workforce. I recognise that this remains a period of uncertainty for many employees and their families. Despite that uncertainty, they continue to demonstrate professionalism, resilience and commitment while delivering the MV Glen Rosa and supporting the future of the yard. The skills that they possess are of enormous value and they matter to the future of Scottish shipbuilding.
I believe that Ferguson Marine can have a strong future as a modern and competitive shipyard. Our ambition is not simply to preserve Ferguson Marine; it is to strengthen Scotland’s shipbuilding capability, to retain critical skills and to ensure that the Clyde continues to play an important role in our maritime and industrial economy.
I also want to be clear to island and coastal communities that delivery of these vessels remains every bit as important as securing a sustainable future for Ferguson Marine. The communities that rely on these services need modern, reliable vessels, and they need them as soon as possible. The work that we are undertaking is intended to achieve both objectives.
This is about more than a single shipyard. It is about retaining the capability that is needed to support ferry services, protect our marine environment and sustain commercial shipbuilding in Scotland for future generations.
I will allow around 20 minutes for questions on the issues that were raised in the cabinet secretary’s statement. Members who wish to ask a question should press their request-to-speak button now.
I thank the cabinet secretary for advance sight of his statement. However, it will come as no comfort to workers at the yard. There is no contracted shipbuilding work for 2027.
We have known about the legal issues around a direct award for years, but, in March this year, Kate Forbes announced the intention to award four vessels to the yard. She called it “a watershed moment” and said that there was a “clear … pipeline of work”. Now, there is no contract, no watershed and no pipeline of work apart from maybe some speculative tug building. Stephen Flynn appears to have rowed back on that announcement. He told us today that the Government does not know whether the programme provides value for money—his statement says that that needs to be assessed—whether it complies with procurement and subsidy control requirements or whether it represents an appropriate use of public funds.
When will workers be told whether there will be a direct award? What happens to the yard if there is no direct award? Where will that work go if it is not offered to the yard? How much working capital is being requested for the tugboat programme and how many vessels are envisaged? Are there customers out there? After years of public ownership and substantial public expenditure, what is the Government’s timetable for Ferguson Marine becoming genuinely competitive and capable of winning commercial contracts?
I am a little unsure whether Mr Simpson supports the additional proposals in respect of Ferguson Marine or whether he wants the yard to simply close. [Interruption.] It would be closed if it were not for the Scottish National Party Government and the decisions that we took in years gone by. [Interruption.]
I will come to Mr Simpson’s points, because I think that he has confused my explaining the complex legal process that we must go through in relation to the—[Interruption.]—CMA with my expressing doubt in relation to the four vessels. I did nothing of the sort, and he should listen more carefully—not just in relation to that, but in relation to the points that I have made about the tugboats. We want to offer certainty to the yard, to ensure that it has a pipeline of work into next year. I have agreed that the proposal for the tugboats should be taken forward because I agree with the board that that represents a sensible commercial approach. It would be good to hear from Mr Simpson and his party whether they support investment in Inverclyde.
The cabinet secretary stated that the Government’s actions have been driven by the need to protect jobs. That is why I and others on the Labour benches supported the nationalisation of the yard. Yet, now, up to 70 workers are set to lose their jobs on his watch, and not one of the many ministers who have been responsible for the ferries fiasco has lost theirs.
Why does the cabinet secretary support those redundancies when the GMB has warned that the yard risks losing vital experience and that goes against the Government’s previously stated aim? The GMB is also warning that it will take a year to cut the steel for the four vessels that are designated for direct award. Does the cabinet secretary therefore accept the urgency of the situation for islanders and workers? Is he confident that he will deliver on the Government’s promise of direct award to the yard?
I am glad that someone on the Opposition benches recognises the purposeful and right decision that we made to nationalise the yard in order to protect it long into the future.
With regard to the point that I think Mr Bibby was making about what happens next, I outlined clearly the process that we must comply with in relation to the Subsidy Control Act 2022 and the CMA. Those requirements are set down by the United Kingdom Parliament and we are responding to them accordingly. I will update the Parliament as swiftly as I can, as I outlined in my statement, once I know the answers to the points that the CMA will likely make in respect of the desire to make the direct award.
The workforce will welcome the announcement that I made about the opportunity to move into a commercial space with regard to the tugboats, because it will give them the opportunity to put their expert skills to use and to provide evidence that the yard can be turned around and be commercially viable long into the future. Through the tugboats and the four future vessels, we are investing in Ferguson’s to ensure that the yard can deliver for Inverclyde and Scotland long into the future. I am sure that Mr Bibby will agree with those sentiments.
I welcome the announcement of the funding for tugboats and see it as an interim measure towards a brighter and more sustainable future for the yard. The cabinet secretary spoke about the four vessels that were previously announced. To be frank, any work going to the yard is good news if it helps to maintain not only experienced workers but the apprentices, so that, when we get more work, we will have a workforce that can deliver.
Does the future investment mentioned in the cabinet secretary’s statement include the £14.2 million of capital investment that the Government previously announced or is it additional money? Once the principles assessment is submitted for pre-referral assessment, what is the timescale for information coming back from the CMA?
Mr McMillan has been a fierce advocate for Ferguson’s over many years. That is reflected in the support that he has in his local community.
The £14.2 million of outstanding investment to upgrade infrastructure in the yard is very much still on the table. It is directly related to the future delivery of the four vessels that will happen as part of the direct award. It is important that those things happen in tandem, to support productivity at the yard.
It is important that I be clear with members that I do not decide the timeline for the CMA’s answers to us. However, I advise members that I will take the CMA’s response very seriously. That is why we are putting a significant amount of work into providing it with all the details that it requires.
The Greens, too, welcomed the action that was taken to save the yard. We want modernisation to work so that the yard is not only viable but thriving into the future. However, I remain a little unclear about the Government’s long-term intentions. Is the cabinet secretary’s view that such a business should remain in public hands only while it is struggling and in need of support, or should a future vibrant and successful yard remain in public hands so that, in the long term, it operates in the interests of the public sector and the workforce?
I appreciate Mr Harvie’s desire to talk long into the future and discuss what the yard’s future could look like at an unspecified date. However, he will appreciate that my focus right now is on ensuring that we work closely with the board of Ferguson’s to deliver on the tugboat proposal that it has put to us and to get on and deliver the four vessels that are required, to ensure that the yard can properly evidence that it has a viable, vibrant commercial future. I am sure that we can revisit the wider discussion in the future.
This is either gross ministerial incompetence or a con by the SNP’s spin machine. We knew all of this six months ago, when, just before the election, it was made to sound as if the orders were in the bag and the yard’s future was secure, as was referenced earlier. It was a watershed moment. However, as many of us said would be the case, not one contract has been awarded—there was no submission to the CMA and no work for the yard in 2027, and now redundancies have been announced. What exactly has the SNP Government been doing for the past six months, apart from conning the good people of Inverclyde?
I am not sure from Stephen Kerr’s remarks whether he is supportive of the proposals that I have put on the table today to ensure that the yard has work next year. That was missing from his comments. What was also missing was the reality that we have to comply with the UK’s Subsidy Control Act 2022 and the CMA. I do not know whether Mr Kerr is intimating that we should ignore those aspects, just as we should ignore the good news that has been announced in relation to tugboats. Mr Kerr seems very angry on both of those points, Mr Speaker—I mean Presiding Officer—but I am sure that he will clarify things in the future.
Mr Speaker or Presiding Officer—I am confused. I call Willie Rennie.
It is now clear that the Government had failed to carry out all the appropriate legal checks before it told the chamber, before the election, that it would make a direct award to Ferguson’s yard. The consequences of that are now being felt by a third of the workforce, who have lost their jobs at Ferguson’s as a result of the Government’s negligence. The cabinet secretary must have some clue about that. The workers deserve to not have to wait another minute, so at what point does he think that the Government will make a decision?
I contend furiously the point that Mr Rennie has made. As an esteemed member of the Parliament and a parliamentarian of many years, he knows that, when it comes to direct awards, we have to comply with the Subsidy Control Act 2022 and the provisions that are set out by the CMA. If he is suggesting that he is unaware of our duties in that respect, that is on him and not on us.
A member from each party has asked a question and we are 12 minutes in. Many members will not be able to ask questions unless we have shorter and sharper questions and responses.
I hope that everybody here wants Ferguson Marine to have a sustainable future. Will the £14.2 million of capital investment be invested in modernising the yard while we await the CMA’s recommendations? I hope that we will be able to get that in place before the four direct awards are made to Ferguson Marine.
I thank Alan Brown for his interest in this important topic. As I outlined earlier and as my predecessors have outlined on many occasions, it is important that those two things happen in tandem, because the productivity benefits that will be gained from the £14.2 million of investment are directly linked to the delivery of the four vessels.
Most of the workers at Ferguson Marine are on temporary contracts. Is the fact that Ferguson Marine has reduced the number of full-time employees and replaced them with temporary contractors not a clear statement that it does not have confidence that the Government will award it the contract?
I am afraid that the issue of individual contracts is a matter for the Ferguson Marine board. I am sure that David Smith will take up that matter directly with it to get the clarity that he—surprisingly—needs.
I want to make the important point—which I did not make in response to Mr Bibby’s question, which was perhaps unfair—that we did not want to be in a position in which voluntary redundancy was put on the table. We want the yard to be successful, which is why I have announced that we are moving forward with the tugboats and the direct awards. Safeguarding the jobs of the people of Inverclyde is paramount to the future success of the company.
I thank the cabinet secretary for his statement. I absolutely agree that the delivery of vessels is as important to our island and coastal communities as ensuring that we secure a sustainable future for Ferguson Marine. Will the cabinet secretary advise whether, in order to support the pipeline of work that he mentioned, the Government might consider further direct awards, given the points around the Subsidy Control Act 2022, in relation to, for example, in my constituency, the Dunoon and Gourock route and the Campbeltown route?
I thank Jenni Minto for raising a very important point as to what happens next. I can advise her and other members that we will continue to monitor whether we can make direct interventions to support the yard and—this is incredibly important—ensure that the communities that she and others in the chamber represent have the reliable ferries that they need in order to get around in their daily lives. That is important to me and to the Government, and we will continue to work to that end.
In announcing the Scottish Government’s plan for direct awards in March, the then Deputy First Minister, Kate Forbes, said that a lot of the scoping work and the work relating to legal advice had already been done, but that an application needed to be made to the Competition and Markets Authority. Was that correct? Today, the cabinet secretary seems to be going backwards. We were told that there would be a pipeline of work. Will the cabinet secretary commit to fighting for the award of those contracts and confirm that the promise made in March will be kept?
I appreciate that members might have pre-prepared questions, but I cannot keep reiterating the same point. When it comes to the 2022 act and the CMA, we are working through a complex legal process. I cannot be any more clear with the Parliament than I am being in that regard.
Opposition members seem to be ignoring the fact that we are seeking to provide certainty for the yard during the gap between the delivery of the Glen Rosa and the award of the new contracts by making sure that we have a commercial alternative in place with the tugboats. That is to be welcomed, but there is a shortage of welcome coming from Opposition members.
Will the cabinet secretary tell me more about the expected timeline for the delivery of upcoming vessels and the benefits of the pipeline of work?
It is important to, once again, reiterate the Government’s commitment to delivering those four vessels. That is why we are putting the effort into making sure that we can comply, through the 2022 act, with the provisions that could be placed on us by the CMA. We need the process to be as robust as it can be, but that award is not enough in and of itself, which is why I am pleased to have been able to come to the chamber to outline our intentions in respect of tugboats.
Ferguson Marine must remain competitive, and I welcome the cabinet secretary’s commitment to that principle, but, at a bare minimum, it must also be able to tender for contracts. In the longer term, the yard’s lack of activity and track record of build history will only hamper its ability to tender for work. We saw that directly with the ineligibility to tender for the MV Lord of the Isles that was procured by Caledonian Maritime Assets Ltd.
Does the cabinet secretary acknowledge that liability to Ferguson Marine? How will he overcome that barrier to ensure that it is competitive beyond Government contracts?
Government contracts give Ferguson Marine the opportunity to say to the wider commercial market, “This is what we can do and this is what we can deliver.” When it has delivered on those contracts, I hope that Ferguson Marine will secure the commercial orders that will be essential to its vibrant future. I believe that the tugboats proposal can play a key part in that process.
Will the cabinet secretary provide further information on the Scottish Government’s latest conversations with the Ferguson Marine workforce and the trade unions in the light of the outlined investment in the shipyard’s future? What steps are being taken by the Scottish Government to ensure good planning, cost control and delivery on site?
I thank Dawn Black for raising those very important points. It is vital that we continue to have positive discussions with the workforce and the trade unions. I met the trade unions on 8 July, when I was in Glasgow, and the First Minister had the opportunity to speak with unions and the workforce on 24 August. It is my intention to go to the yard in the very near future to meet both. I am sure that they will welcome the announcements that I have made in the Parliament today.
Does the cabinet secretary accept that the fundamental issue is that we do not have competitive shipbuilding finance in Scotland, which hampers any shipyard in Scotland in winning commercial work? Does he agree that we should be exploring section 45 of the Subsidy Control Act 2022 and its national security provision, and will he write to UK defence ministers on that issue? Has the Pemamek panel line been ordered yet, because that is a critical piece of machinery with a long lead time for installation?
I assure Mr Sweeney that my officials remain in constant dialogue with the UK Government on a host of matters, one of which is certainly the Subsidy Control Act 2022. If there is an opportunity for me to have a discussion with the UK defence secretary at some point in the future, I am more than happy to take up that particular order with him.
I assume that the finance question relates to the written questions that Mr Sweeney has posed to me about the regimes that exist elsewhere, particularly in Spain, and its ability to procure contracts through the Canary Islands. I gently say to Mr Sweeney that I have looked at that matter in great detail, and I am not sure that his colleagues in Westminster would welcome us pursuing that approach, given the ability of the Canary Islands to operate with a significantly reduced tax rate.
This is the only shareholder statement that I have ever read that includes zero financial information. Will the cabinet secretary please explain why?
I am sure that Lord Offord will get the opportunity during the budget process to look at the numbers that the Government operates under.
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