Meeting of the Parliament (Hybrid)

Meeting date: Tuesday, November 3, 2020

Official Report 1015KB pdf

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Burntisland Fabrications Ltd

The next item of business is a statement by the Cabinet Secretary for Economy, Fair Work and Culture, Fiona Hyslop, on BiFab.

14:54  

I welcome the opportunity to address Parliament today on the current position facing BiFab. The Government has shown real commitment to BiFab, and we continue to explore all options to secure a future for the Neart na Gaoithe contract in Scotland.

I have been clear throughout the process about our priorities, which have been shared by the majority shareholder, JV Driver: to secure the build-out of the NnG contract in Scotland and to protect the public interest in terms of financial exposure and the jobs that a successful business might support.

Those priorities reflect our aspirations for offshore wind supply chain manufacturing in Scotland, and for Scottish companies and the Scottish workforce to benefit from the build-out of projects through the creation of jobs and the boost to our economy, especially in such challenging times.

Our support for BiFab has been significant—£37.4 million was converted to a 32.4 per cent equity stake, and a loan facility of up to £15 million was provided. That financial support ensured that the Beatrice offshore wind farm, the Moray east pin piles and the FIRST Exploration & Petroleum Development contracts were completed, which created more than 1,000 jobs across the three yards at Arnish, Burntisland and Methil.

As a minority shareholder, we have no role in the business’s day-to-day decisions. We work closely and collaboratively with the majority shareholder, JV Driver, and the BiFab board of directors, but ultimately, it is for the directors to take all necessary decisions on the operations of the business. At this point, I emphasise that I have been disappointed by JV Driver’s lack of financial investment in the business and the zero-risk position that it has adopted as a shareholder. That stance is a key factor in the situation that the business now faces.

The Government backed the strong prospects for the offshore wind supply chain in Scotland and BiFab’s potential role in it. At the start of 2020, BiFab had a strong pipeline of work opportunities, with the potential to secure both the NnG and Seagreen contracts, which would have allowed continuous work from 2020 to 2022. The pandemic delayed both the NnG and Seagreen projects, thereby impacting BiFab’s cash-flow problems.

I am extremely disappointed that SSE did not award the Seagreen contract to BiFab. That decision has been pivotal in the situation that BiFab now faces. The BiFab bid was competitive with all other United Kingdom and European bids. Furthermore, BiFab’s tender included fully procured Scottish steel, and therefore offered SSE an opportunity to demonstrate its support for the Scottish supply chain during these challenging times.

The UK policy context also presents challenges. The UK Government’s damaging contract for difference rules work against Scotland and Scottish supply chains, meaning that companies such as BiFab have limited chances to secure work. The contract for difference auction needs to ensure that project bids are not secured purely on the price per megawatt, and the UK Government must consider the wider economy and our response to the climate emergency.

We very much welcome EDF’s support of BiFab in carving out the contract for delivery of eight jackets from its wider NnG project. That commitment to the development of our Scottish supply chain is a welcome boost, especially as the wider trading circumstances are very difficult. However, the delays to the NnG contract award as a result of the pandemic and SSE’s decision to award the Seagreen contract to companies in China and the middle east, compounded by JV Driver’s continued lack of investment in the business, have greatly weakened BiFab’s cash flow and balance sheet. Those factors bring about a position in which the Scottish Government cannot currently legally continue to provide more financial support to BiFab. I recognise the disappointment that is felt by members across the chamber, the trade unions and the remaining 30 staff who are currently employed by BiFab, and I share that disappointment.

It is not that the Scottish Government does not want to continue to support BiFab—it currently cannot. I have shared with parliamentary colleagues with a constituency or regional interest, whom I met last week, a follow-up briefing that details information on the state aid rules that impact BiFab and Scottish Government support to the business. Ministers are required to operate within the law, and no decision that is taken by ministers can be in contravention of state aid rules or any other legal provision, including international treaties by which Scotland is bound.

I have considered all legal options for Scottish Government continued financial support of BiFab. My conclusion that the Scottish Government can no longer continue to support the business is based on a range of facts, including the current position of the business, its trading forecasts, its prospects for future work and the continued no-risk position of the majority shareholder.

For financial support to be legal, it needs to be provided in line with the market economy investor principle, which is often referred to as “MEIP compliant support”. The key question in determining whether financial support to the business would be possible is whether a market economy investor would do the same. We can act only as a commercial investor would act in our situation. If the majority shareholder is not prepared to invest in the business, it is very challenging to demonstrate that another commercial investor would do so.

I will address some of the media speculation that I have seen.

Scotland remains bound by European Union state aid law, and choosing not to comply is not an option. The Scotland Act 1998 makes that clear, as does the ministerial code.

There has been some suggestion that I should check with UK ministers that I have got it right. To be clear, Scottish ministers’ compliance with state aid law is a matter for Scottish ministers and there is no role for UK ministers in that. However, we sought an urgent meeting with UK ministers in order to establish what support, if any, might be within their powers. This morning, I met the Chancellor of the Duchy of Lancaster to discuss the issues that BiFab faces. The discussion was constructive, and we agreed to form a joint UK and Scottish Government working group to ensure that all possible options are explored.

As a minority shareholder, we have been exhaustive in our consideration of the options that are available to us to financially support BiFab from public funds, and we will continue to explore all options. The UK Government shares our view of the challenges that are presented by state aid rules, but we will work together to do what we can.

In parallel, the Scottish Government continues to work closely with the majority shareholder and others to find a solution to secure delivery of the NnG contract in Scotland. Both I and my officials have been in regular contact with the board of directors to explore options for our shared primary objective—namely, the delivery of NnG in Scotland.

On the back of SSE’s decision on the Seagreen contract, on 18 September I met representatives of the board. I communicated to them the emerging risk that the Scottish Government would not be in a position to continue its financial support to the business. That began a period of close engagement with the board and others to explore options that would still allow for the build-out of the NnG contract. From the point at which the majority shareholder confirmed that it was content for us to engage with the trade unions that have an interest in BiFab, we have done so actively.

We have left no stone unturned in our search for a solution to the challenges that are faced by the business. We are committed to working with all parties to deliver the best outcome for Scotland. In doing so, the Scottish Government must act within the law—on state aid regulations in particular—and should also act in a way that minimises the exposure of the public purse.

In the absence of a detailed proposal from the majority shareholder for the continued operations of the business, it is currently difficult for the Scottish Government to establish a legal and financial case for continued support. Dialogue continues with the BiFab board on a legally compliant solution to securing a future for the company. Significant hurdles remain to be overcome. However, the Government has done and will continue to do everything within its devolved powers to support the business.

I welcome the engagement of members on those important issues—on BiFab and on the wider issues that are faced by the offshore renewables supply chain in Scotland. I recognise the breadth of support from members for our objectives for BiFab and the wider industry.

We remain keen to work with all partners in order to deliver the best outcomes. We will leave no stone unturned, we will explore all options, and we will do so collectively and collaboratively with all key interests.

I will be happy to update Parliament again in due course.

The cabinet secretary will take questions on the issues that have been raised in her statement. I will allow around 20 minutes for that. It would be helpful if members who wish to ask a question would press their request-to-speak button now, please.

I thank the cabinet secretary for advance sight of her statement. I am delighted that she has had constructive discussions with the UK Government, and I look forward to seeing progress in that area.

However, the Scottish National Party keeps making, and breaking, promises on green jobs. Alex Salmond once said that Scotland would become

“the Saudi Arabia of renewable energy”.

In 2010, the SNP Government promised 28,000 green jobs by 2020. Well, it is 2020, and they have not been delivered. The nationalists’ handling of the BiFab fiasco is another sad example of the SNP’s mishandling of Scotland’s green economy.

The former Attorney General, Lord Davidson, said that it is “remarkable” that the SNP Government did not just defer the decision on state aid until after the end of this year.

Can the cabinet secretary clarify the following three points? Does she think that Lord Davidson’s assessment is wrong, and will she commit to full transparency and release the advice that led to the judgment not to defer the decision on state aid? Why were local training and employment clauses not built into the planning consent? How much public money does the SNP Government stand to lose as a result of the fiasco?

The member has covered a number of areas. We are committed to green jobs for Scotland. It would make it far easier to deliver those jobs for Scotland if the key propositions and aspects were held in the hands of the Scottish Government. Not all of them are, so the contract for difference makes a key difference. That is why, despite the very good work by the director at BiFab and despite the proposition that was put forward, the tender for the Seagreen contract could not compete—not by a small margin but by a large margin—with tenders from elsewhere. It was a race to the bottom in relation to cost. There is currently a consultation on the contract for difference. From what Maurice Golden has said, I am sure that he will join others in trying to ensure that changes are made by the UK Government.

Lord Davidson acknowledges that his advice was given with a paucity of information. A number of aspects of the advice have been given without an understanding of the situation in which we find ourselves—not least, the fact that decisions by ministers are governed by their legal responsibility at the time. The situation is live and current; it does not relate to some point in the future. We are a minority shareholder, so the context of our decision would apply to another investor in the same position.

I have made it clear that it is not possible under the Scotland Act 1998 and the ministerial code—to which many Opposition members always ensure that ministers adhere—for us to provide the legal advice that was given to us. We can acknowledge that it exists, but we cannot provide it, for understandable reasons.

Local training was not a condition of planning consent because we did not have the legislative powers to do that. The transfer of powers under the Scottish Crown Estate Act 2019 means that for future contracts, such as ScotWind, we now have the ability to ensure that we have such provision and support for communities and local jobs. When we have the powers, we will use them.

I thank the cabinet secretary for advance sight of her statement.

Today, people in Fife want no more diversion of blame or finger pointing. Workers deserve a clear solution and an explanation. Why was the decision to withdraw the guarantee taken at this point, given that EDF had signalled that there would be work and that we are on the brink of changes to state aid rules? Why has it taken so long to engage with the UK Government, given that the crunch meeting with DF Barnes took place on 18 September? The workers who marched on this Parliament and whose jobs are at risk, and the communities that are set to lose out, all deserve better than what we have heard today.

Again, I call on the Scottish Government to make public the legal advice that it has received, because it has made assertions about state aid that are under question. I ask the Government to publish the minutes of the meeting that took place in September. Will the Government explain what attempts to reach a solution were made before the decision to withdraw the guarantee, which has triggered the whole situation? I ask the Government to act now, with urgency, to ensure that the BiFab yards, the workers and their communities have a future.

I appreciate the member’s concerns. I will try to go through a number of the issues.

In my answer to Maurice Golden, I gave an explanation of why, as a minister, I am not able to provide the legal advice that Claire Baker is talking about. I can refer to the fact that it exists but, as I explained, the relationship between the ministerial code and the Scotland Act 1998 means that it is not possible for me to release that advice.

Claire Baker made a point relating to EDF and Saipem being ready to offer the contract. That was exactly the point in time when ministers had to make the judgment; it could not have been made at some point after January, when we do not know what the position will be. Negotiations are still taking place with the EU on future aspects of the level playing field and state aid, and we do not know what aspects of the United Kingdom Internal Market Bill will mean. My decisions and those of the Government are judged on whether they are legal at the point at which they are taken and not speculatively at some point in future.

The member asked about the discussions with JV Driver. We warned JV Driver of risk in September. We have explored and scrutinised multiple options, such as third-party investment and more state ownership, because we are determined to make sure that the energy jobs come to Scotland.

The member also asked why we did not contact the UK Government earlier. Approval for contacting third-party potential investors was with the majority shareholder. Since September, and even before then, JV Driver, as the majority shareholder, has taken responsibility for engaging others to secure the cash flow and working capital that it needs. We agreed with JV Driver that we should contact the UK Government and that has happened. We are setting up a joint working group with the UK Government to explore all options.

On state aid, which the member mentioned, the UK Government’s understanding is the same as ours.

We move to open questions. I was a bit lax with the length of answers to the two front-bench questions, if that could be borne in mind, please.

The BiFab yards of Methil and Burntisland both lie in my constituency. It is clear that lack of capital investment by the owners, JV Driver, has resulted in the withdrawal from the energy contract. I ask the cabinet secretary what potential there is for third-party investment in BiFab. How can the Scottish Government assist the company to secure decommissioning work from the North Sea oil industry?

As I have said, the Scottish Government has been working closely with JV Driver to explore all options to deliver the energy contract in Scotland. We have encouraged the board to explore options for investment in the business from its own resources and from third-party or other resources. Those are choices for the majority shareholder, and I encourage it to do all that it can to ensure such investment.

The next round of offshore wind farm development will come with a form of jobs guarantee through the Crown Estate leasing process. I hope that the east coast of Scotland and BiFab will get a decent share of the jobs that will come from that. Does the cabinet secretary agree that, in order to prepare for those jobs, the Scottish Government needs to shift from being just a disappointed minority shareholder to a position where it has a majority stake in companies such as BiFab and a seat on the board, so that it can make strategic decisions that would maximise the future supply chain opportunities that are just waiting there?

Mark Ruskell makes an important point about how we can prepare to get more jobs. The ScotWind leases—which, unfortunately, are just down the track but are coming—enable that jobs guarantee to take place.

We are going through quite an economically turbulent time because of Covid. Not least because of that, we should look at the role of Government equity stakes in future. One of the missions of the Scottish National Investment Bank is a green mission, and ensuring that we are delivering net zero. There are different options that we can look at in future, but the member will appreciate that my absolute focus at this minute is on trying to secure the energy contract.

I am afraid that the statement is just a long list of excuses. It is no comfort to the workers at BiFab, who, not so long ago, heard ministers boasting that they had saved the company. The work is already under way off the Fife coast—we can see the surveying work for the wind farm—so to explore all options at this stage is just too late. Can the economy secretary be honest with us? What, seriously, is she going to do to bring those jobs to Scotland now?

I have been clear on what is required. There is an issue around the financial situation of the company and whether it can be resolved in the short term, but if it can demonstrate that there is a future for the business, that makes it much easier for us to provide the financial support that we want to but currently, legally—as the member says, it is live and current—it is not possible for us to do that.

We are continuous in our exploration of the options and as the consideration of the DEME Offshore claim is in a couple of weeks’ time, that will potentially provide more security in the short term in relation to working capital, but the issue still remains about the future of the business, and that requires a detailed proposition from the company. That is not unreasonable, but is it doable in the time? The window is still potentially open with EDF and Saipen, and I have spoken to them to ensure that they understand our commitment and our recognition of their commitment to Scotland. That is where we are and I continue to make sure that we fight for those jobs if we can get them. That is live, that is current and that is now.

As I am the member for the Cowdenbeath constituency, it is a source of great anger to me that BiFab workers have been let down by SSE—the majority shareholder that refused to step up to the plate—and by the UK Government’s contracts for difference rules, which work against the Scottish supply chain. Nonetheless, can the cabinet secretary offer, in circumstances that are evidently beyond her control, any hope for the future of the BiFab workforce?

We have the skills, but we need to secure the jobs to ensure that those skills and the skilled workforce have a future, and that we can build in Scotland circumstances in which we can benefit from North Sea wind farms and the energy that they can provide.

The problems that the company faces are complex and cumulative; that is the issue. I have explained that a combination of factors has put particular financial pressure on the company, and that the lack of investment from the majority shareholder is problematic.

When we are considering potential options for the future, we need to be able to unlock not only developments for Buckhaven, Methil and Burntisland, but for Arnish, because there are opportunities in all those yards that are not being realised. That will take not only a financial plan, a legal position and assurances on underwriting, but the investment that is required in order that we benefit from the types of business that will be needed for the offshore sector in the future. It is about long-term investment. That is the challenge that we have in relation to the majority shareholder’s current position.

In her statement, the cabinet secretary indicated that

“Those priorities reflect our aspirations for offshore wind supply chain manufacturing in Scotland”,

but the just transition commission has warned that the switch

“to a low-carbon economy could be undermined if”

the Scottish Government fails “to secure manufacturing jobs.” Are the commission’s findings justified, because that switch would kick-start the local economy and secure jobs at BiFab?

I have great respect for the just transition commission. It is essential, in our move to net zero emissions, that we have those manufacturing jobs, but the Scottish Government is not on the board of BiFab and we are not the business of BiFab; we are a minority shareholder. Securing the jobs involves a number of factors. We have worked to try to secure the supply chain for some big contracts, and we have impressed on SSE the importance of it committing to the supply chain, but unfortunately it was not able to do that. I commend EDF for its position, but we have to find a way to have the financial security that allows the legal support for the Scottish Government to support the NnG jobs.

The cabinet secretary is aware that the council and the community in the Western Isles want to decouple Arnish from BiFab because of the failure to provide any work there. The terms of the lease of Arnish stipulate care and maintenance of the publicly owned infrastructure there. BiFab and, therefore, the Scottish Government are now in breach of that clause, because BiFab has paid off the care and maintenance staff. Will BiFab now give up its lease and allow the community to bid for work in its own right and bring work to the islands?

Rhoda Grant has made an important point, which was also raised at the meeting that I held with MSPs, MPs and council leaders from the relevant council areas. What she suggests might be an option, if BiFab chooses to go down that route. The lease operator is Highlands and Islands Enterprise. The lease deserves careful examination to identify whether there is an opportunity, if BiFab is not using Arnish, for it to be used by others, because we know that there is a desire in others that are not part of the BiFab situation to use the yard now.

I reiterate that the Scottish Government is not the business and is not on the board of BiFab, but it is a minority shareholder. The point that Rhoda Grant makes, like the point that Councillor Roddie Mackay made last week, is worth examining, because such decoupling might provide opportunities for jobs that have not been realised because of the lack of investment and the zero-risk approach that the majority shareholder and the BiFab board have taken to date.

I draw the cabinet secretary’s attention to the action for Arnish campaign, one of whose requests is that the Government consider potential uses for the yard at Arnish, other than only the BiFab option. Can the cabinet secretary speak to that and offer any assurances to the action for Arnish campaign on that?

I share Alasdair Allan’s desire to see the full potential of the strategic site at Arnish being achieved. As a minority shareholder, the Government is not involved in operational management decisions relating to BiFab. It will be a matter for BiFab, as the leaseholder, to take decisions on future utilisation of the site.

However, we will continue to press the majority shareholder for its plan for the future, which might include allowing the Arnish yard to be used in other ways or—in relation to my previous answer—looking at the lease for Arnish, which might have potential. We should explore all options for the site to be better used in a different arrangement.

On the issue that the cabinet secretary has just mentioned, what discussions has the Scottish Government had with the JV Driver Group about its long-term plans for the Arnish site on Lewis? The workforce there remains deeply concerned about its future and will be even more anxious after today’s news.

We have been pressing JV Driver on the plans for the yards and the business. As far back as the summer, I was impressing on the company the importance of setting out its long-term plans and its immediate issues in relation to Seagreen Wind Energy and NnG. As Donald Cameron suggests, we need a commitment to the sites from the company. If that commitment is not forthcoming, it is important that we look at other options.

Can the cabinet secretary expand on what levers currently rest with Westminster that the Scottish Government would, if those levers were devolved, use to support the sector?

There are three obvious areas in which the UK Government could change its position on powers that we could use, if they were devolved to Scotland. The first is in relation to the options, which came up in the question from Mark Ruskell. Were we to have capability through powers being devolved on leases that are coming up in Scotland, we could address the jobs guarantee aspects that people are concerned about.

The other areas are the costs of development and the costs of transmission. It is outrageous that it costs more to develop and transmit from the North Sea than it does from areas that are closer to the south of England.

Those are obvious areas, and I have already—and continuously—raised them with the UK Government in my discussions with UK Minister for Business and Industry Nadhim Zahawi. I have said to him that the UK Government will, if he wants to ensure that it realises its climate change commitments, have to change its position.

It is not just about investment and money, although that is one thing; it is also about policy and regulation. The UK Government has levers and powers that it could use. In the joint working that I agreed to do with Michael Gove in my conversation with him this morning, those aspects of regulation and policy as well as investment should be on the table for exploration.

I believe that ministers have made the wrong decision. They say that the judgment was based on the legal advice that they received. Therefore, surely it is in the public interest to publish that advice. Where did it come from and who commissioned it? Why on earth did it take until last week for ministers to contact the UK Government, when both Governments should be working together to bring jobs to Scotland through the renewables sector? Why wait until last week, and will the Government publish the legal advice?

On the point about discussions with the UK Government, obviously the discussions in the past week have not been the only ones that we have had about investment in the offshore industry. It is not the first time we have discussed issues about regulation of transmission, as I just said. We have had regular discussions; we will continue to have discussions, and we will intensify them.

On the legal advice, I have said repeatedly that the ministerial code and the Scotland Act 1998 prevent us from issuing that advice. It is not necessarily in the public interest to do so. Mr Rowley will remember that, for many years, Labour Governments adopted the same position, and not just here, as the Scottish Executive, but at Westminster—except for one time. The one time that I recall the Labour Party issuing legal advice was advice on the Iraq war.

What engagement has the Scottish Government had with affected workers, and what support can be provided to them?

Since the majority shareholder and the board agreed that we could do so, we have engaged actively with the trade unions and will continue to do that. We have related to BiFab that it should actively engage with the 30 current permanent members of staff to ensure that they are recognised.

At the end of the day, the issue that brings all members together is the interests of the workforce and the constituents who are represented by MSPs. We should focus on them to ensure that they have the just transition that we have talked about, and that they have confidence to retrain. That should also apply to people in other sectors. I want to work collaboratively and co-operatively with members from across the chamber to secure the long-term future, as well as the short-term future, and the potential that still exists for NnG jobs.

That concludes questions on the ministerial statement on BiFab. I remind all members that social distancing measures are in place, so please take care when entering and leaving the chamber and moving around the Holyrood campus.