Meeting of the Parliament

Meeting date: Wednesday, November 22, 2017

Official Report 884KB pdf

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Burntisland Fabrications

The next item of business is a statement by Keith Brown on Burntisland Fabrications. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions during it.

14:42  

Following the written update that was provided to members at the end of last week on the circumstances surrounding the future of Burntisland Fabrications—BiFab, as it is known—I wanted to take this opportunity to brief Parliament on the outcome of discussions that continued last week and came to a conclusion at the weekend, and on the commitment that the Government has made to support BiFab in the future.

I will first give a little background on the company. BiFab is a major fabrication supplier to the oil and gas sector, to offshore renewables and to wider infrastructure industries. It operates three sites in Scotland—Burntisland and Methil in Fife, and Arnish on the Isle of Lewis in the Outer Hebrides. It has a permanent workforce of about 250 staff, with another 1,100 being employed via agencies to support specific contracts.

On Thursday 9 November, ministers and officials were informed that BiFab was in some financial difficulty. The company contacted my colleague, the Minister for Business, Innovation and Energy, to inform him that it was about to file a notice of intention to appoint administrators the following day in order to protect the company. That notice created a 10-day period during which BiFab could seek a solution to its financial difficulties.

From that initial contact, the Minister for Business, Innovation and Energy and I engaged in extensive discussions with the company, the trade unions, commercial stakeholders and their advisers, and the United Kingdom Government over the course of last week. Through those discussions, we were able to provide enough comfort to the BiFab board for it to delay a decision to place the company in administration immediately, and to secure the space for negotiations to continue and a positive solution to be found.

Those discussions with SSE, the partners in Beatrice Offshore Windfarm Ltd, Siemens, Seaway Heavy Lifting, BiFab and the trade unions—predominantly Unite and the GMB—also provided us with a clearer picture of the nature of the financial position that BiFab was in and the dispute that lay behind its financial difficulties.

Throughout that time, the First Minister was kept fully up to date on all aspects of the situation and she raised the matter with the Prime Minister and engaged directly with SSE and Seaway Heavy Lifting while she was in Bonn for a major international climate change event.

That engagement continued on Thursday, and culminated in two long days of discussions on Friday and Saturday last week, led by the First Minister and including all the key companies that I mentioned. Those discussions helped to broker a commercial agreement between the parties that would relieve the financial pressure on BiFab and ensure continuation of the contract for the construction of jacket substructures for Beatrice Offshore Windfarm Ltd.

Throughout that period I met GMB and Unite and ensured that the unions were informed of the progress of discussions, and the First Minister and BiFab met the unions on Saturday, shortly before the agreement was signed. This morning, the First Minister and Paul Wheelhouse visited BiFab’s Methil site to meet the workforce and to see some of the work that is being undertaken.

The First Minister continues to be impressed by the commitment of the workforce, and expressed to them her determination to identify ways to secure the long-term future of BiFab. I am pleased to say that I will visit BiFab’s Arnish site next week, to meet the management and workforce and to see the great work that is being carried out there.

The agreement that was reached on 18 November lifted the threat of administration and stated that BiFab would receive payments at the beginning of this week to alleviate its immediate cash-flow issues. I am pleased to report that those payments have been made. The agreement also ensures that the contract for the Beatrice project is now fully funded.

As an added security, the Scottish Government has committed to making available to BiFab a loan on a commercial basis, if necessary. That in part reflects our belief that there is a long-term viable future for BiFab, so we will work with the company to support its future prospects. Employees are back at work and are being paid, and money has been made available to BiFab this week to allow it to get on and fulfil the contract.

Work has not stopped at that: additional support to the company is being set up, including from the Scottish manufacturing advisory service, and the Scottish Government will have on-going engagement with the BiFab management. I pledge today that we will continue to work with BiFab, the trade unions and commercial partners to identify ways to secure the long-term future of renewables manufacturing on its sites.

As the First Minister has done, I pay tribute to the workforce on all three sites—Burntisland, Methil and Arnish. Our focus was, and remains, on the workers, their families and the surrounding communities: we recognise that it must have been an anxious time for them all. However, since the news broke that the company could go into administration, the workforce has handled the situation with great poise and tenacity, which was not lost on the commercial partners.

At the beginning of last week, the workers agreed to continue working on the current order, even though they might not be paid. I met worker representatives on Thursday, during the rally outside the Scottish Parliament, and assured them of the laser-like focus that the Scottish Government would have on retaining the jobs. They were determined to see a resolution and to be themselves part of the solution. I pay tribute to their perseverance.

Only two months ago, the First Minister set out our programme for government, which pledged our continued commitment to maintaining Scotland’s world-leading position as the place for low-carbon and renewable energy development and deployment. That sector has already positioned itself as a key part of the Scottish economy.

In 2015, the low-carbon and renewable energy economy supported 58,500 jobs in Scotland, accounting for about 14 per cent of the total UK employment in the sector, which is much higher than our population share. It has also generated £10.5 billion in turnover, which is also 14 per cent of the total UK turnover in the sector, and higher than our population share would suggest.

We have counted 20,000 companies in Scotland that are active in the sector, and there has been nearly £1 billion of capital investment in renewable power, which has generated nearly £225 million in exports. We want to continue to build on that and to maximise the benefits for Scotland. There are also some real opportunities for the Scottish supply chain, including BiFab, from a number of consented wind projects—for example, Neart na Gaoithe Offshore Wind Ltd’s project and the Moray east project.

We also remain committed to pressing the UK Government, in developing its industrial strategy, to enable the Scottish supply chain to take advantage of growth within the sector. 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, our existing port infrastructure and location, and our innovative academic community.

We have demonstrated, and will continue to demonstrate, our commitment and support for projects that show innovative and world-leading approaches to low-carbon energy and local energy solutions, such as those that are supported by the low-carbon infrastructure transition programme. The programme for government announced a further £60 million to be made available for accelerating innovative low-carbon project delivery by 2020, which will be supported by European Union funding. That builds on the low-carbon infrastructure transition programme, which has already allocated about £50 million to 15 low-carbon capital projects. That funding represents one of the most significant direct energy investments in the past 10 years.

It has been a highly stressful and troubling time for BiFab and the workforce. I again pay tribute, on behalf of the Scottish Government, to the workforce, the company and all the commercial partners. If there was any doubt about what the resolution meant to them, the demeanour of those from the company and the trade unions on Saturday night confirmed the emotional turmoil that they had gone through and their evident relief.

At the very least, the solution will see the contract of the Beatrice wind farm project through to completion. We will continue to pursue a longer-term solution that benefits both the firm and the workforce.

It is very welcome news that agreement has been reached between BiFab and the other parties involved in the Beatrice project. That will come as a huge relief to BiFab’s 1,400 employees and to communities across Fife and Lewis.

As the cabinet secretary has highlighted, that outcome would not have been possible without the hard work, commitment and dedication of the BiFab workers. I also recognise the important role played by the cabinet secretary and the minister in securing that outcome.

In his statement, the cabinet secretary referred to a commercial loan that the Scottish Government has committed to make available to BiFab, if that should be necessary. Will he confirm the amount of the loan? In addition, what commitments has the Scottish Government, or Scottish Enterprise, made to BiFab in the event that it faces administration or other financial difficulties after the completion of the Beatrice contract? What assistance will the Scottish Government and Scottish Enterprise provide to BiFab to ensure that it can compete effectively for contracts to secure its long-term future?

The total sum that might be involved in the loan package is about £50 million. As I said in my statement, that would be loaned on commercial terms and drawn down as necessary. It was quite clear during the discussions that it was necessary to make that offer in order to unlock from the various partners involved the security that the contract could be seen through to its successful conclusion—indeed, that was the purpose of the suggested loan. We will keep Parliament informed about any progress in that regard.

The member asked about additional support. A number of offers were made, not just by the Scottish Government, to provide support to the management, who had been through a fairly traumatic period, and to provide additional capacity through Scottish Enterprise and anybody else who we think may be able to help in that regard.

I have mentioned the Scottish manufacturing advisory service. Offers of support were made to the company that related to further capital investment and additional advantages for the company as it scoured the prospects of new contracts. Therefore, a substantial level of support has been provided to the company not just by ourselves, but by some of the parties to the agreement that we were able to reach in the end.

When I met the full-time trade union officials and the shop stewards, which was before we struck the agreement, I was asked whether BiFab was viable. I said that I believed it to be viable and that it could have a very strong future. I continue to believe that, and that belief is bolstered by the agreement that we were able to reach at the weekend.

On Saturday, Paul Wheelhouse and I gave the direct commitment to BiFab that we are not walking away thinking that this is job done, by any means. We will continue to engage with the company and we will support it right through the completion of the contract into what we hope will be a bright future.

Scottish Labour applauds the dignity and determination of the BiFab workforce and welcomes the intervention of the Scottish Government in securing the immediate future of 1,400 skilled workers across Fife and Lewis.

I turn to the future. I have three questions to put to the cabinet secretary. First, does he agree that last week’s uncertainty puts the spotlight on the challenges that Scottish businesses and manufacturers face in securing work from the renewables sector? Secondly, does he agree that it raises questions about the extent of redistribution from renewables manufacturing into the Scottish economy? After all, only 4 per cent of the Beatrice wind farm project, which is a £2.6 billion project, is going to Scottish manufacturing. Thirdly, the cabinet secretary talked about the UK industrial strategy, but does he not agree that now is the time for the Scottish Government to work with Scottish Labour to develop an industrial strategy for Scotland that grows and sustains decent jobs and decent pay?

Jackie Baillie mentioned the challenges that companies face in accessing contracts. There is no question but that there are such challenges. It was evident from the discussions that we had that we were talking not just to partners in a consortium to deliver this contract, but to people who were otherwise in competition with one another on a regular basis. I have no hesitation in saying that the competition is very tough. That is the environment in which BiFab and others work.

Over a number of years, we have tried to provide opportunities through not just the Beatrice project, but other forthcoming projects, some of which I mentioned in my statement. However, we cannot put ourselves in the place of private companies. They might face challenges that we cannot help them with. They must tell us about those challenges at an early enough stage to allow us to help to deal with them. In the case of the Beatrice project, we concentrated heavily on the issue of the jobs. The trade union emphasised the importance of that. We were also cognisant of how central the project was to the renewables sector in Scotland and to maintaining the supply chain link.

I have mentioned a number of the things that we have done, and I have acknowledged the fact that there are challenges, but there are also opportunities, particularly on the export side. Some of the export markets are not the obvious ones that people would think of. We are helping companies to overcome the challenges. In my statement, I mentioned the fact that, in generating 14 per cent of total UK turnover in the low-carbon and renewable energy economy, we have vastly exceeded the contribution that would be expected from a country of our size.

Jackie Baillie referred to the industrial strategy. When it came out, I agreed with Scottish Labour that it contained virtually no mention of trade unions or the workforce. I have made that point to the UK Government. We do not control the industrial strategy. As part of the BiFab discussions and in relation to the industrial strategy, I spoke to Greg Clark, who is the Secretary of State for Business, Energy and Industrial Strategy. I put to him the points that are of most importance to us, which have been raised through the Scottish manufacturing advisory service.

We will continue to input to the industrial strategy. If Scottish Labour has suggestions to make over and above the rhetoric that we sometimes hear, I will be more than willing to listen to those. We should get some detail on the industrial strategy over the next few days, when the UK Government makes an announcement on it, and I am more than happy to engage with Scottish Labour on that to see how we can best progress matters.

I would like to put on record the commitment and dedication that have been shown by the BiFab workforce and the trade unions over this difficult period to help to secure the future of the company. This morning, it was great to see the appreciation that the workforce at the Methil site showed for the role that the First Minister and the Scottish Government played in securing the future of BiFab.

What can the Scottish Government do to help to secure the long-term future of BiFab and its skilled workforce as major players in the renewables sector in Scotland?

I acknowledge the assistance that we received from David Torrance and other members, including Claire Baker, Jenny Gilruth, Alasdair Allan and Dean Lockhart, all of whom represent areas that are directly impacted by the situation at BiFab.

Along with Scottish Enterprise, we are continuing discussions with the company. I am looking to see how we can help to ensure that BiFab is seen as an attractive option for additional capital investment, which is crucial to the company’s future if it is to win more contracts. As part of the package that was announced at the weekend, we will ensure that further support is provided by Scottish Enterprise and through the Scottish manufacturing advisory service.

More is being done on the issue, which I cannot advise the chamber of because of commercial confidentiality, but as we get more hard and fast information, I will be happy to keep members such as David Torrance updated on the progress of the discussions.

I welcome the intervention that the Scottish Government made to save jobs at BiFab and to respond to the dignity and the unity of the workers.

Everyone in the industry knows that a key way to secure and grow jobs in the offshore renewables supply chain is through cost reduction as part of an industrial strategy. The cabinet secretary mentioned the low-carbon infrastructure transition programme in his statement, but that fund is not open to the offshore renewables sector to bid into. What funds and support are specifically available for cost reduction in the supply chain so that the workers at BiFab can be given long-term livelihoods rather than just short-term salvation?

I thank Mark Ruskell for his remarks and I agree, in particular, with those about the workforce. I have mentioned some of the specific funds that we have available to assist the industry. In addition, we will provide support through Scottish Enterprise, which will include looking at cost reduction, and through other ways in which we can help the company bid for, and win, future contracts. The offshore wind group, which comprises different players in the industry, is currently looking at how best that can be done.

Mark Ruskell will be aware of the reducing cost of providing renewable energy, which has reached an all-time low of late. While the cost of production has reduced, we want the company to be competitive, and that is what the different levels of assistance that I have mentioned are seeking to achieve.

I thank the minister and others for their efforts to save the jobs at BiFab. The workers to whom I have spoken are relieved, but frustrated that it came so close. They reminded me that when Alex Salmond was First Minister, he promised a new industrial revolution based on renewable energy. I am sure that this is not what he had in mind. What are the minister’s plans to grow activities such as design, research, marketing and development to anchor those renewable jobs in Scotland in the future?

Willie Rennie must be absolutely obsessed by Alex Salmond. I noticed that he mentioned him in his question during First Minister’s question time last week.

I mentioned some of the assistance that we can provide. Willie Rennie will also know that we announced a substantial increase in research and development funding in the programme for government, and that is available to the renewables sector. I also mentioned some of the other funds that we are seeking to make available to the company.

I, too, have spoken to large numbers of the workforce and I have received extremely positive feedback about the Government’s intervention, as have many others.

It is important to recognise that BiFab is a private company involved in a private contract. When the Scottish Government became aware of issues in that regard, we acted as quickly as we could to ensure that the contract would be fulfilled and, more important, to ensure that many of the employees, some of whom are from my and Willie Rennie’s constituencies, remained in employment. Last week, they were looking at a Christmas without employment or wages, and we acted quickly to ensure that that did not happen.

With regard to the Scottish Government’s approach, I have received nothing but positive commendations from the company, trade unions and others involved for the commitment that we showed, the time that we gave and the number of people whom we engaged to work on this, including officials as well as ministers. Having put that much effort in, we want to see whether we can maximise the benefits to the industry.

I have mentioned the different things that we intend to do, but it is also worth bearing in mind that this industry is not on its knees. As I mentioned, it accounts for 14 per cent of turnover and 14 per cent of the workforce in the sector. We are doing a good job, but I accept that we have to do more. Many of the measures I announced today are intended to ensure that we have a brighter future in renewables.

Given the importance of offshore renewables to the future of BiFab, is the cabinet secretary in a position to give us an update on when the offshore wind projects in the Firth of Forth and the Firth of Tay, which were held up by the recent legal challenge by the RSPB, which was thrown out by the Supreme Court, are likely to proceed?

Some of those matters have been protracted, especially in relation to the project in the Firth of Forth, which Murdo Fraser mentioned. Each of those cases is going through a different process. We are unable to foreshorten the processes, so it will be around 2019 before those projects come forward.

I echo the words of my colleague, David Torrance, and record my sincere thanks to all those involved in reaching a resolution. What support is being provided to BiFab to ensure that a similar situation will not arise in the future?

In addition to what I have said will be provided, the company is much more aware of the assistance that the Scottish Government can provide. However, we do not want to do that in the kind of crisis environment in which we had to operate last week. I think that the company was about to go into administration on three occasions. I phoned it twice to postpone that so that we could get time and space to work. That is not ideal.

The point underlying Jenny Gilruth’s question is: what can we do to ensure that that does not happen? That is a very important question. I have mentioned the different measures that we have taken. Scottish Enterprise support, seeking further capital investment and looking for further contracts should also be mentioned. I have mentioned joint activities by the Scottish Government and the company, which I am not able to go into more detail on, but I undertake to ensure that Jenny Gilruth and other interested members are kept updated as they progress.

I recognise the commitment, tenacity and determination of the workforce and the community in recent weeks to ensure that a deal could be reached. I understand that the contract is due to be completed in April. How can the Scottish Government and its agencies help to promote and restore confidence in BiFab so that it can exploit upcoming opportunities, secure future work for the yards and maintain vital jobs in Fife?

I thank Claire Baker for her comments about the workforce, which I think that we all agree with.

Two things are central to ensuring the company’s future success, one of which is delivering on the contract. That is extremely important, and we are putting in support to ensure that it is able to do that. Different parties to the contract are also putting in support to ensure that that happens. Seeing that the company can deliver such contracts will build confidence for others to place contracts.

The second thing is winning contracts, which is very important. We want to provide whatever support we can within the rules within which we have to operate to help the company to win future contracts. It is a virtuous circle. If a company wins contracts, confidence will grow, and if it delivers them, its reputation will grow and there will be more chance of winning further contracts. That is what we are trying to achieve.

BiFab plays a major part in the development of the Beatrice offshore wind farm. Can the cabinet secretary confirm that the agreement is also very welcome for many companies and projects that depend on the continuing existence of BiFab? I can see the Beatrice offshore wind farm at night from my garden, so I am close to it and I know how important it is. Is the approach a key part of ensuring that we continue to promote renewable energy and the businesses that depend on it?

Stewart Stevenson makes a very important point about other companies. In particular, NRL also employs people who are dependent on the work continuing, and it will also benefit if we are able to grow what the business currently does by winning future contracts. I acknowledge that BiFab is an extremely important part of the Scottish supply chain.

It was interesting to hear different aspects of the discussions last week and about the extent to which the workforce is seen as the company’s most valuable asset by far. Claire Baker mentioned that. The workforce is internationally recognised for the skills that it has. There is no question but that BiFab needs to have a tougher focus on delivery but, if it can do that, we can continue to see it as a vital part of the Scottish supply chain through its having the opportunity to trade on the reputation of that workforce.

I, too, pay tribute to the workforce during this turbulent time for the company and the locations that it works in and for. Today, the UK Government announced further support for the oil and gas industry through transferable tax relief. What medium and long-term support is the Scottish Government offering BiFab?

I have mentioned on a number of occasions the different forms and the nature of the support that we would offer BiFab. On the UK Government’s support, we have asked for a number of years for loan guarantees on the oil and gas side, for example. We were initially told no, we were then told yes, and then nothing happened. That is a vital part of the support for the infrastructure in the oil and gas industry and it leads on through the supply chain.

We are still waiting to find out whether the much-trumpeted ambassador for oil and gas to be appointed by the UK Government is being appointed or sited anywhere near the UK’s oil and gas fields.

We have had frustrations with the UK Government, but there is an opportunity, which Jackie Baillie raised, for us to work closely with it on the industrial strategy to provide further support. However, during topical question time last week, it was made evident by members that it is very important to try to ensure that the company is best placed to help the transition from oil and gas and carbon-based fuels towards renewables. I hope that the UK Government is willing to work with us to ensure that we can further bolster the industry in Scotland.

I welcome the Scottish Government’s commitment to maintain Scotland’s world-leading position as the place for low-carbon and renewable energy development. Does the cabinet secretary agree that the renewables industry is not only important for our long-term environmental goals but has wider community benefits, particularly in my constituency of Caithness, Sutherland and Ross? Might I add that I, too, can see the Beatrice development from my window?

It is good to know that so many people are keeping an eye on Beatrice.

I agree with Gail Ross about the crucial nature of the renewables industry, especially in an area such as the one that she represents, because high-value jobs in rural areas are extremely beneficial. The renewables sector and supply chain are crucial for the future of the Scottish economy more generally, as well as for Gail Ross’s area.

As I have said, the industry already punches above its weight and employs around 58,500 people—I am not sure that that has been evident from some of the questions that have been asked—which is 14 per cent of the UK total, and it has a turnover of around £10.5 billion, which is 14 per cent of the UK total. The Scottish Government is determined to see further growth in the industry for the benefit of areas such as Gail Ross’s and for the Scottish economy more generally.

The cabinet secretary said in his statement that there are some real opportunities for the Scottish supply chain to take advantage of growth in the sector. There have been some missed opportunities for renewables manufacturing in the past, not least in onshore wind manufacturing. Will the cabinet secretary agree to commission a scoping exercise for supply chains so that we can plan strategically to develop jobs in urban and rural areas across all regions in Scotland, building on our industrial strategy, which must be developed as a matter of urgency?

I reassure Claudia Beamish that that work is already being undertaken. There is very important work to be done in terms of collaboration in the supply chain, because the collaboration has not been what it should be up to this point. If the supply chain in Scotland is able to collaborate more effectively, there will be greater chances of winning more business. However, much of the scoping work on that has already been undertaken and I am happy to provide that information to Claudia Beamish. If she remains dissatisfied and wants to come back to me on it, I am more than happy to listen. As I said, much of that work is already under way, which is on top of the success that we already have. However, we want to do more in the future, if possible.

Given my role as parliamentary liaison officer on the economy and my previous career in manufacturing business turnaround, I am well aware of the kind of hard work and imaginative solutions that ministers will have put into the rescue of BiFab. It is one of a long line of successful interventions by the Scottish Government to save manufacturing businesses. How can the lessons learned in those exercises be employed to good effect to support other key businesses in key manufacturing sectors across Scotland to grow and expand?

It is very important that we learn lessons. There are lessons, as there always must be, for the Government as well in terms of how we can respond and become involved earlier in such situations. As I have said to people, if the activity on the fifth floor of St Andrew’s house last Saturday had been filmed, it could have been speeded up to a Benny Hill soundtrack to show the huge amount of activity of different parties talking to different people at different times.

We will learn lessons from that experience, which involved dealing with a number of partners in the consortium and with the trade unions, and ensuring that they were kept up the minute about how things were going. We should learn lessons, but so should Scottish Enterprise and BiFab, and I am sure that they will. What we can do to help that learning process through the work of the Scottish manufacturing advisory service is also crucial. We should all learn lessons from the process.