Merger talks cast uncertainty over future of shipbuilding

Thursday 13 September 2012

The last thing Scotland's resilient shipbuilding industry needs is uncertainty.

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This once great enterprise that used to stretch along the Clyde and then emerged battered from the upheaval and crisis of the 1970s is now represented by BAE Systems in Govan and Scotstoun. In a difficult market, BAE has proven itself a survivor; it has also invested in the future, taking on apprentices to work on the two aircraft carriers the yard is building for the Ministry of Defence.

Even so, the news that BAE is in merger talks with EADS, Europe's largest aerospace company, will undoubtedly increase the uncertainty in an already unpredictable sector. The first concern will be that the merged operation will immediately seek to make savings, which might include job cuts, and a statement from BAE yesterday has already talked about cost savings.On the face of it, a merger with EADS – a consortium of French, German and Spanish manufacturers – poses less risk of these kind of savings as it does not have widespread shipbuilding interests and, therefore, there is less likely to be duplication in the combined company. Longer term, however, there are more serious concerns over the implications of the merger, particularly for the yards on the Clyde that could after an independence referendum find themselves in a Scotland separate from the rest of the UK. Unionist parties have warned that in such circumstances BAE, which is currently benefiting from a large contract from the MoD, would be much less likely to win work from the UK Government. The SNP have called this scaremongering and certainly, defence contracts are awarded to companies rather than countries and these companies are, in theory, free to place the work in whichever country they choose.It would be hopeless to deny that there is a large political element in the awarding of defence contracts that is just as important as commercial concerns. Should this merger with EADS go ahead, BAE would be dominated by the French and German concerns. In theory, the MoD could award a contract to them, and the work could be done at BAE in an independent Scotland, but the question is: how likely is it that a Government in London would do this? The MoD has already announced that it will be awarding contracts for 13 Type 26 frigates after the result of the referendum is known. Should the answer be in favour of independence, what incentive would there be for the Government in London to award a contract to a foreign-dominated company building in Scotland?All these questions will be creating considerable uncertainty on Clydeside today. The industry supports a highly skilled and motivated workforce that have been through years of turmoil. The question they will be asking is: would a merged company, with BAE as the junior partner, be so concerned about preserving these jobs as a standalone BAE? We must await the result of the merger talks with that worrying question hanging in the air.

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Merger talks cast uncertainty over future of shipbuilding

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