The endless woes of Ferguson Marine

The travails of Scotland’s only nationalised shipyard are perhaps symptomatic of bigger problems at the heart of the country’s industrial strategy

November 26, 2021
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The “launch” of MV Glen Sannox in 2017. As of today the ferry has yet to enter service. Image: PA Images / Alamy Stock Photo

It began with so much optimism. It was August 2014, a month before Scotland’s referendum on independence. Clyde Blowers—the engineering investment company owned by billionaire Jim McColl—had just been announced as the preferred bidders to take over Ferguson Marine, an ailing shipyard in Inverclyde that had recently fallen into administration.

One week before the referendum, McColl announced he was pledging an immediate £8m investment in the yard, as well as plans to re-hire half the people made redundant the year before. His ambition was growth: with time he wanted to increase the workforce from 70 to 350, start up new apprenticeships for young people in the local area and diversify production into other sectors, like renewables, marine and oil and gas. All things going to plan he intended to make a further £60m investment somewhere down the line. At that same press conference, McColl—Scotland’s richest man and one of the most prominent business leaders to back independence—pointedly said he would continue to invest in the yard regardless of the referendum result. (His comment was perhaps a tacit swipe at the defence secretary Philip Hammond, who back in April had suggested the Ministry of Defence could never build any warships on the Clyde, should the country vote Yes.)

The referendum came and went—and investment at Ferguson Marine, now renamed Ferguson Marine Engineering, did indeed carry on. In 2015 the yard was awarded a major £97m contract by the Scottish government to construct two new passenger ferries for Calmac, the state-run ferry service that provides a vital lifeline to the Hebrides and Western Isles. Other potential contracts, such as frigates for the Royal Navy, were also on the cards.

The message all this activity was supposed to send was clear: here was a place with a future worth investing in. Here was a nation showing confidence in its ability to “do” things—and that one day might find the confidence to think again about independence. But if that message survives at all seven years later, it is only to bring into stark relief the farce that was to follow.

In November 2017 the first of the two Calmac ferries, the Glen Sannox, came off the slipway at a launch attended by Nicola Sturgeon. But the ship was not finished: black boards were put up to hide the fact it did not yet have any windows. In time more problems with its design would be uncovered—such as the fact its bow was not “smooth enough,” meaning it would need to be completely removed and replaced. The second ferry, earmarked to serve Skye, Harris and North Uist, was yet to be unveiled.

As constant delays and design alterations brought the cost of both ferries to £200m, Ferguson buckled. In 2019 the government decided to step in and nationalise the yard to save jobs, which also put responsibility for completing the ferries squarely in the public purse. As of today neither ferry is ready to enter service, both now over three years late and at over double the cost. Meanwhile, the inevitable and prolonged mudslinging between former bedfellows McColl and the SNP has carried on in the background. A government report published in December 2019 blamed the delays on an “absence of project planning” and “weak” engineering processes at the yard. Before a government inquiry in September this year McColl, who no longer backs independence, said he had been nothing but a “pawn” in the SNP government’s political games of 2014.

Just a few weeks after McColl’s remarks, something else happened at Ferguson Marine Engineering as though to top the whole affair with its final crowning humiliation. In a new bid to build two further ferries for Calmac, the yard failed to make the shortlist. Those ferries will instead be built elsewhere, abroad.

For an industry that just shy of a century ago produced more ships than Germany and the United States combined, many will look on Ferguson’s travails as confirmation that Scotland’s shipbuilding heritage belongs in the history books. But the episode also raises fundamental questions about the country’s wider industrial strategy at a time when industry across the world is facing its biggest reckoning. Even as delegates met in Glasgow under the shadow of the old Finnieston Crane on the Clyde, it was clear that world leaders remain unable to present a coherent strategy for a green transition—never mind one that might avoid the loss of jobs and sense of community that has been so characteristic of the post-industrial era.

The future of Scotland’s economy will rest, as it will everywhere else, on how well it can adjust to an ecologically sustainable industrial model. That transition needs to happen fast, but it also needs to happen without the inequality and social deprivation of previous industrial shakeups. This time, the mistakes of the past cannot be repeated; climate change will leave us with no time to learn from them.

“The biggest problem in my opinion is that the broad approach is far too passive and accepting of a situation where Scottish firms are marginalised,” says Ewan Gibbs, historian and lecturer in global inequalities at the University of Glasgow. He points to wind power as the best example of a major new industry in which “the British and Scottish public stake in the sector is minimal.” Despite hosting some of the greatest potential in Europe for wind power generation, particularly offshore, much of this economic potential has been essentially “outsourced” to international conglomerates over the heads of local people and businesses. Sturgeon herself conceded as much during a talk hosted by the New York Times at COP26, when she admitted that, although international investment was “welcome” in Scotland’s wind sector, “we have not yet captured enough of that benefit in our own jobs and supply chain.”

This phenomenon has roots in policy decisions made during the middle of the last century, many off the back of an influential report on the Scottish economy carried out by John Toothill, then head of the electronics firm Ferranti. In his 1961 report, Toothill characterised Scotland’s economy as too heavily reliant on “staple” sectors like coal, steel and shipbuilding, which had performed sluggishly since the 1930s depression. He argued it was better to invest in new “growth polls” and release this old, staple labour into them—coalminers building cars at Linwood, for example. That advice might sound even more relevant today, but Gibbs argues that Toothill was “essentially advocating a strategy based on displacing not just sectors, but also ownership.”

By the 1970s, UK government policy incentivised the presence of new multinationals in Scotland, many of them US-based, in order to “diversify” industry, in an echo of Toothill’s own recommendations. While these companies did often provide better working conditions and pay than traditional industries, this came at the cost of what Gibbs calls “economic autonomy.” This has led to the situation we are in now, where the benefits of economic activity in Scotland are often held at the mercy of overseas owners, of which many will have little attachment or concern for the country and its people.

What might all of this say about Ferguson Marine? Some might point to the yard’s troubles as a prime example of why the presence of multinational conglomerates is a “necessary evil”: here was a shipyard with its roots firmly planted in the local area, owned by a Scottish parent company, that was unable to do the job assigned to it. Even McColl’s promise to hire more workers from the area had failed to come to fruition. In an update to MSPs this June, the turnaround director of the nationalised yard Tim Hair admitted it had only been able to recruit 40 skilled workers locally, a long way off the 140 it needed. It had resorted to bringing in overseas workers via sub-contractors to fill in the gaps.

But in fact, the situation at Ferguson could perhaps better be understood as another symptom of the wider problem, namely when too many of the benefits of the local economy are not felt locally, but instead reaped abroad. “In the 1970s, Scottish economists such as John Firn began to worry about what they referred to as the ‘branch-plant’ nature of Scotland’s economy,” says Gibbs. This occurred when “manufacturing sectors in Scotland were confined to low value-added production activities,” while “the higher value-added entrepreneurial activities, such as research and development and marketing, were increasingly concentrated elsewhere.” He refers to the rise and fall of the “Silicon Glen,” Scotland’s once-flaunted high-tech sector, as a prime example of the double-edged nature of inward investment. Although international interest had originally bestowed Scotland with Europe’s leading share of computer chip production, by the 1990s and early 2000s wage competition from eastern Europe and east Asia led many companies to move their operations elsewhere. Today, little of that industry remains in Scotland.

Ferguson may never have been such an attractive prospect for international firms. But it could be said that much of the investment put into it seems to have been spurred more by a desire to save what was left than to cultivate something new. Perhaps decades of an economy confined to low-value production activity has left many with the feeling that this kind of work is simply what Scotland “does”—and that innovation should be left for somebody else to foot the bill.

But things don’t have to be that way—and nor does Scotland have to abandon the old wholesale in order to do something different. There is no reason why it can’t, like other parts of Europe, build on the heritage of its industrial landscape. Gibbs points to the Ruhr in Germany, where recent industrial policy was “more attuned to using the existing strengths” of its old coal and steel sectors. The region, home to the engineering conglomerate Thyssenkrupp, is now a key player in renewables.

In the long run it may be that nationalisation proves to be Ferguson’s saving, if somewhat reluctantly undertaken, grace. “We have, in effect, created a functioning shipyard business from a standing start,” Hair told MSPs. Hopefully, the worst is over for the yard. Whatever the case, its recent dilemma should not put us off the virtues that lie in industry being owned locally, or at the very least with a public stake—especially if we are serious about an industrial strategy that is not only “green,” but also just.

“Local ownership holds out the best prospect of sustained rewards through re-investment,” says Gibbs. “It also means that owners have an investment in and are in some way accountable to the community affected, making quick exits or deleterious decision-making harder.”