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How MoD's latest move has left British shipyards floundering

The RFA Fort Austin
Fleet Solid Support ships, such as the RFA Fort Austin (pictured), carry stores such as ammunition and food Credit: PA

In the final hours before Parliament dissolved and purdah began, government ministries rushed announcements out the door before they were shut down until after the election.

One such piece of news was the Ministry of Defence’s terse confirmation it was halting bidding on the competition to build new supply ships for the Royal Navy.

“We can confirm the Fleet Solid Support Ship competition has been stopped, as it is clear the current approach will not deliver the requirement,” the MoD said. “We are now considering the most appropriate way forward.”

Operated by the Royal Fleet Auxiliary, the Navy’s civilian support arm, FSS ships carry stores such as ammunition and food. They are essential to Britain’s ambition of maintaining its status as a global sea power because of their ability to keep warships at sea for long periods, topping up supplies while under way.

The competition to build the ships had become a political football since getting under way two years ago. 

Although operated by the RFA, FSS ships sail with the fleet and to most people would be seen as warships – which must be UK-built. However, the Government has argued that under EU procurement rules FSS vessels did not fall into this category.

This meant the contract to build two, possibly three, 40,000-tonne FSS ships and worth a total of between £1bn and £1.5bn had to be tendered internationally.

Bidders from Japan, Korea, Italy and Spain lined up for the contract against a British consortium dubbed “Team UK” comprising BAE Systems, Babcock, Cammell Laird and Rolls-Royce.

Unions were enraged at the idea of ships serving the Royal Navy being built abroad. Their concerns have proved well-founded: in the spring Babcock’s Appledore yard in Devon has closed down, and since then Harland & Wolff in Northern Ireland has gone bust, while Ferguson has been nationalised by the Scottish government.

Industry insiders say the campaign around the FSS deal contributed to all but Team UK and the Spanish bidder, Navantia, dropping out of competition by the summer. Matters weren’t helped by the Government’s own shipbuilding adviser, Sir John Parker.

Commissioned by ministers to develop a national shipbuilding strategy to protect the industry, his 2017 report recommended building British, spreading work in “blocks” around shipyards for assembly in larger facilities and maintaining a “regular drumbeat” of work. 

This, he said, would end the cycle of peaks and troughs of work which led to skills being lost when orders were thin. This resulted in extra expense when work did materialise, as skills had to be relearned, making Britain an unattractive place to build ships.

Sir John’s point was hammered home last week when the Government released his review of how his strategy had been implemented. He called the decision to offer the work abroad as “contrary to policy in most developed economies, where all defence-funded vessels are built in their home yards”. 

The naval architect and former boss of Harland & Wolff added: “All ships painted grey – like warships – should be built in the UK. Without a steady supply of work to keep shipyards open they risk failing.”

Although the MoD insists the decision to halt the FSS competition was down to value for money concerns – something which has raised eyebrows considering the budget has yet to be confirmed – others see it differently. One who questions the MoD’s explanation is former head of the Navy, Lord West of Spithead. “I’d be surprised if it was about value for money,” he said. 

“With the election politicians are going to be very worried. Imagine them being asked why the UK is going to Spain to build warships – and they are warships. They’ve got ammunition magazines, hardened decks for helicopters, they are not cargo ships.”

One independent defence analyst, Howard Wheeldon, agrees: “The decision has come at the last minute just before an election. It’s totally about politics – imagine being a candidate knocking on doors in Birkenhead where Cammell Laird is?” But before the election was called, there were signs that politicians had read the mood music. During her brief spell as Defence Secretary in the summer, Penny Mordaunt signalled in the press she wanted the FSS contract to go to the UK. Anne-Marie Trevelyan, the defence procurement minister until Parliament was dissolved, is understood to have been fighting hard for the same in corridors of Whitehall.

Politics may not have been the only factor in the decision to halt the competition, say defence insiders who believe value for money was a factor. 

“The FSS specification is very demanding,” said one industry source. “There’s talk of what they want being reined back to make it cheaper.”

This could have fed into the drive to look abroad in the first place. “The bottom line is the MoD is concerned it’s not going to get any more money,” says Lord West. “If they can get the cheapest possible option then that’s what they’ll do – even if it does mean UK Plc losing out with shipyards closing, the country missing out on the taxes that UK companies and their employees would have paid, and unemployment.”

Unions agree. They argue that while the initial cost of buying domestically might be higher, the trickle down benefits more than compensate. An analysis by GMB suggest that, when the supply chain is factored in, building the FSS ships in the UK could support up to 16,000 jobs in the UK.

It’s not like Britain hasn’t been here before. When work on the Navy’s Astute-class submarines started 20 years ago, the lack of regular orders was felt. With Britain not having built a nuclear submarine for over a decade, the workforce with the necessary specialised skills had drifted off into other industries. The result was delays, problems and cost overruns.

“Astute is an example of why we need to keep work flowing through yards,” says Lord West. “It’s probably the best submarine in the world now but the lack of skills meant it was a complete nightmare at the start. It was expensive to regain those skills.”

With the FSS contract halted, the question is what happens next. Launching an entirely new competition will be expensive for bidders and create delays, but simply going to Team UK without a competition would go against the MoD’s need to get the very best price, even if such a route were faster.

However, the FSS contract could signal Britain’s future global intent.

“We’re moving to an age of a post-Brexit, independent Britain,” says Wheeldon. “Building ships here could show that we’re a sovereign power with the ability to build what we need.”