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Fears grow as Harland & Wolff nears administration, risking royal navy ship contract

September 16, 2024

Harland & Wolff, the historic Belfast shipyard known for building the Titanic, is on the brink of administration, putting a £1.6 billion contract to build three Royal Navy warships at risk.

The troubled shipyard, which is expected to file for administration as early as Monday, faces a cash shortfall by the end of this month, raising fears that the Fleet Solid Support (FSS) ships may end up being built abroad—a first for Royal Navy warships.

The administration crisis threatens to invalidate Harland & Wolff’s contract to assemble the vessels, which are critical for supporting Britain’s aircraft carriers on global deployments. Although company bosses claim that placing Harland & Wolff Holdings Plc into administration will not impact the operation of its yards, there are concerns that the contract may have to go back out to tender.

Industry experts warn that the situation could force the Ministry of Defence (MoD) to rely on Navantia, the Madrid-based primary contractor that partnered with Harland & Wolff, to complete the work in Spain. This would mark a significant departure from the UK’s tradition of building its warships domestically.

Harland & Wolff had planned to share the fabrication of the ship hulls with Navantia, with final assembly in Belfast. However, insiders say that administration could result in Navantia acquiring Harland & Wolff’s Belfast yard, possibly cutting loose its other sites in Appledore, Devon, and Arnish and Methil in Scotland—a move that unions fear could lead to substantial job losses.

The GMB union has urged the government not to allow prospective buyers to “cherry pick” Harland & Wolff’s assets, arguing that all four sites play vital roles in the UK’s defence and renewable energy sectors. Matt Roberts, GMB’s national officer, warned that losing the contract would represent “one of the greatest betrayals in Northern Ireland’s industrial history.”

Russell Downs, the restructuring expert recently appointed as executive chairman at Harland & Wolff, insists that all four sites remain viable and that the company is still capable of fulfilling its share of the Navy contract. However, the uncertainty has prompted calls for alternative arrangements, such as a deal involving other UK shipyard operators like BAE Systems and Babcock, who were previously in the running for the contract.

Francis Tusa, an independent defence consultant, criticised the MoD’s decision to award the contract to Harland & Wolff and Navantia in 2022, pointing out that Harland & Wolff had not built a full-sized ship for about 20 years. He expressed doubt over the yard’s ability to handle such a significant project, describing the decision as overly optimistic.

Labour peer Lord Beamish has urged ministers to devise a rescue plan for the FSS programme, emphasising the importance of adhering to the national shipbuilding strategy and ensuring that the ships are built in the UK to support the regeneration of domestic shipbuilding. He highlighted the critical role of the support ships for the Royal Navy, calling them “vitally important.”

Harland & Wolff’s financial troubles deepened after Business Secretary Jonathan Reynolds declined to support a £200 million refinancing request in July, citing the high risk of losing taxpayer funds. Further complicating the situation, the company recently revealed it is investigating a potential “misapplication” of £25 million of corporate funds under previous management. Former CEO John Wood, who was ousted in July, dismissed the allegation as “ridiculous.”

The government has stated that it is working extensively with all parties to find a solution that preserves UK shipbuilding and protects jobs. However, it maintains that the market is best positioned to resolve the crisis and that public funding would pose a significant risk of financial loss. A government spokesman encouraged all parties to engage with trade unions before making further decisions, acknowledging the concerns of workers amid the ongoing uncertainty.

As Harland & Wolff’s future hangs in the balance, the potential fallout extends beyond job losses, with significant implications for the UK’s defence capabilities and industrial strategy. The crisis underscores the challenges of maintaining domestic shipbuilding in a competitive global market, and the need for a coordinated response to safeguard the industry’s legacy and future.