Ministers have come under pressure to rescue the ferry fiasco shipyard firm they saved with £25m of support - as it as revealed that their advisers supported moves to secure its financial future.
The Scottish Government has withheld financial support for loss-making Ferguson Marine (Port Glasgow) despite government advisers being a catalyst for the support package used to secure its future, it has been revealed.
The board of nationalised FMPG has stated that a failure to get a committed investment of £25m to support future work has cast "significant doubt" on its ability to continue operations.
Now GMB Scotland union, the lead union at the yard, has called for the Inverclyde firm to be directly awarded contracts for future ferries to ensure its survival.
The development comes amid revelations that the commercial wing of Ferguson Marine has made losses of £765,000 over the past two years.
READ MORE: All you need to know about the Ferguson Marine bailout
The Ferguson Marine board have admitted that the lack of investment to upgrade shipyard facilities as part of a five-year business plan puts at risk its hopes of extra work from BAE Systems which is delivering City Class Type 26 frigates on the Clyde.
It also placed uncertainty over its hopes to get the contract from the Scottish Government's Transport Scotland agency for the replacement of up to seven 50m ageing 'loch class' ferries vessels serving the Clyde & Hebrides Ferry Services (CHFS).
It has now emerged that the bid for £25m came after the Scottish Government commissioned a productivity study from consultants First Marine International (FMI) to advise on how to "improve the competitiveness" of the nationalised firm - which is at the centre of the continuing row over the delivery of MV Glen Sannox and MV Glen Rosa which were both due online in the first half of 2018 when Ferguson Marine was under the control of tycoon Jim McColl.
With both now due to serve Arran, they are getting on for six years late. The last estimates suggest the costs of delivery could have more than quadrupled from the original £97m cost.
Ferguson Marine was nationalised at the end of 2019 as Ferguson Marine fell into administration in the wake of the delays and the soaring costs with previous shipyard firm management and Scottish Government-owned ferry owners and procurers Caledonian Maritime Assets Ltd blaming each other.
According to a briefing on the state of the yard sent to wellbeing economy secretary Neil Gray, and copied to the First Minister, the request for the £25m which is central to the shipyard's five-year business plan was based on a combination of the FMI report and FMPG's own analysis.
The Herald has previously revealed that the FMI report said that Ferguson's needed to be three times more productive.
The briefing, seen by the Herald, says that the capital investment request was assessed "with support" from alternative Scottish Government advisers Teneo "in terms of value for money and whether it would meet the 'commercial market operator' (CMO) test, a key legal requirement to demonstrate compliance with the UK subsidy control regime.
The regime takes the place of EU state aid rules which aim to avoid financial assistance given by a government that favours a certain company or commercial group and has the potential to distort business competition.
But the briefing reveals that in August, consultants Teneo provided a revised report which included an evaluation of an updated business case. And ministers concluded that subsequent advice meant that the CMO test is "unlikely to be met" for the £25m investment proposed.
The GMB Scotland union, the lead union at the yard, in a letter supported by various politicians urged the Scottish Government to support the £25m request.
GMB has called on the Scottish Government to review the outcome of the due diligence test it undertook to decide that it could not provide the funding.
It said that investment is "urgently needed" at the yard to allow it to compete commercially and warned crucial financial support should not be jeopardised because of the troubled ferries’ contract.
Ferguson Marine hoped for a heavy involvement in the Small Vessel Replacement Programme which hopes to achieve a substantial renewal of the small vessel fleet by 2031.
They are due to be electric motor-powered modern versions of the three 42m hybrid vessels Ferguson Marine built successfully, on-time and on-budget before nationalisation, between 2012 and 2015.
And the union said ministers should directly award Ferguson’s the contract for seven small CalMac ferries to provide stability while green-lighting the investment needed to secure future contracts.
Gary Cook, GMB Scotland senior organiser in manufacturing, said: “The workers at Ferguson’s have worked with skill and commitment on these two ferries but for years have been blamed for mistakes made by others.
“No one wants these two ferries finished more than the workers and they deserve a secure future built on a pipeline of work.
“That should begin with the direct award of the small ferries but other contracts will only be secured by investing in the infrastructure of the yard to ensure it can compete commercially.
“The size of that investment will be dictated by the business plan but the workers deserve any and all financial backing needed to secure a bright future and ensure the heritage of shipbuilding on the Clyde continues for generations to come.”
Ferguson Marine (Commercial) Limited has registered a post-tax loss of £332,000 in the year to March, 2023, after a £442,000 loss in 2021/22.
In a review of operations it said it had successfully developed a working relationship with BAE Systems for the "mobilisation of surplus labour... on a small scale" throughout 2023. It had an agreement signed in April, 2023, for the firm to build three units for the Type 26 programme as a pilot project.
According to the board's latest financial statement, there is "no financial commitment" beyond a budget to support the build of the two ferries "and therefore any overrun of costs or delay in delivery dates remain a funding risk".
Ferguson Marine has received a letter of comfort from the Scottish Government reaffirming a commitment to supporting a "sustainable future" but there remains a "material uncertainty" that casts "significant doubt" its ability to continue as a going concern.
According to the FMCL board there are also risks and uncertainty" over its future operation.
It said that the letter confirms that the Scottish Government will support Ferguson Marine for a period of 12 months "to maintain adequate financial resources and [enabling it] to meet its obligations. It is understood the 12 month period expires at the end of August, this year.
"The support is with reference to both the completion [of the two ferries] as well as securing a sustainable future for the yard".
The board states: "FMCL has successfully developed a working relationship with BAE Systems...
"With investment from the Scottish Government in upgrading the shipyard facilities, FMCL would be well placed to compete for further larger units upon completion of the pilot project, but as investment remains unconfirmed... these opportunities are at risk."
It also confirmed concerns over the ability to pursue the project to replace the seven ageing 'loch class' ferries vessels while the £25m investment was unconfirmed.
The board has said that for Ferguson Marine to compete competitively for new work to follow on from the delivery of the two ferries, investment by Scottish Government in the shipyard facilities equipment and processes "is required and approval of the plans submitted earlier in 2023 remains outstanding".
The board has confirmed that for the shipyard to improve its efficiency and to be competitive in the broader market it must first secure a pipeline of repeatable work over several years.
Developing a pipeline of £250m in work from the warship programme and future ferries was seen as "strategically important" before it could consider more complex, larger vessels in the future.
A separate Teneo report raised questions about the value for money case for going ahead with ploughing millions into resolving Scotland's ferry fiasco.
Mr Gray admitted in May that the value for money case for delivery of the second of the two ferries Glen Rosa "had not been made" and that it would be cheaper to procure a new ferry, saying increasing costs were "extremely disappointing".
But he gave a rare written authority to plough ahead with supporting the delivery of the ferries, saying it is the "platform upon which future success can be built".
The extra £72m cash for Ferguson Marine for this financial year which began on April 1, 2023 had been under due diligence since September last year over concerns about the soaring costs.
MSPs have been told that the 'value for money' analysis by consultants Teneo – that cost the taxpayer £620,000 – would not be disclosed because it is feared it will jeopardise the future of Ferguson Marine.
The review said it would be cheaper to scrap Glen Rosa and place a new order elsewhere. But the government said continuing the build of the ferry was the fastest way of securing a new ship.
A Scottish Government spokesman said: “The Scottish Government is committed to doing all it can to secure a sustainable future for the yard and its skilled workforce. The Scottish Government’s priorities have always been the completion of the two ferries, securing a sustainable future for the yard and its workers, and supporting our island communities that rely on this type of vessel."
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