Naval Shipbuilding - UK by Default

I was at the Scottish Parliament’s Cross Party Group on Maritime and Shipbuilding this afternoon to present a report I wrote for Prospect, Design, build and maintain: Effective defence procurement. 

The report describes the current defence procurement regulations and my recommendations for a new approach. This is an explicit UK by default strategy linked to an industrial strategy, with workforce planning and social value at its core. Social Value measures the direct, indirect and induced impact of procurement. Around one-third of defence spending returns to the Treasury, so it makes sense to recognise this in bid evaluation. Procurement should also support public policy considerations, including the real living wage, employment standards, and ending tax dodging. My proposals on this mirrors my work on Scottish procurement legislation, so although defence is reserved, the Scottish Government can lead by example. 

 

Defence spending remains a crucial part of the Scottish economy. The latest data shows jobs have increased by one-third to 33,500 - contributing £3.2bn to the Scottish economy. For Scotland, a big chunk of that investment and employment comes from naval shipbuilding on the Clyde and at Rosyth. Babcock has built a new frigate factory in Rosyth, and BAE Systems is expanding its covered building facility in Govan. 

 

While the frigate programme is a solid work programme, the rest of the National Shipbuilding Strategy is vague regarding timescales and funding. Companies need greater certainty if they are to invest in the necessary facilities, equipment and skills. Potential opportunities are not sufficient. This helpful graphic (from Navy Lookout) takes the plan and highlights the capability gaps towards the end of the decade and into the 2030s. 

Other countries across the world build in greater certainly through local production strategies. The UK has the most open procurement regime in the world. The Royal Navy Fleet Solid Support ships have recently been awarded to a Spanish-led consortium, which benefits from the taxation treatment I recommend in my report. Countries like India, USA, Canada and Türkiye have explicit local procurement strategies. An Australian minister put it even more bluntly, 'We make no apologies for deciding to invest in Australian-built ships, creating Australian jobs and using Australian steel.' They point to research that shows that building ships locally has huge flow-on effects and can help underpin other advanced manufacturing. This graphic explains the security and economic benefits of investing in a domestic defence industry.

Having a shipbuilding strategy is a positive start. However, to make the plan a reality, companies must manage technological developments, the ever-changing political climate, economic uncertainties and a war on the continent of Europe. There are opportunities but plenty of pitfalls. What they need is a more stable procurement framework of the sort that is common worldwide.