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Naval gazing

Douglas Fraser | 10:08 UK time, Monday, 13 September 2010

At Holyrood, only the Greens have any doubts about the building of two new aircraft carriers.

The other parties are today banding together to present a united front against cancellation of the orders, fearing that would cost at least 4,000 jobs at Govan and Scotstoun yards on the Clyde.

There will be jobs also at Rosyth in Fife, where the bits of ship are to be assembled, though much of the workforce on the Forth will be the same people.

The two remaining Clyde yards carry a powerful iconic firepower in Scottish history and its economy, so they also carry real resonance in politics.

It's hard to see cross-party agreement on the importance of saving multiples of the jobs under threat if they are in government, councils, quangoes and police forces over the next few years.

Not having responsibility for defence, it's unlikely any of those at today's cross-party talks will be asking too many questions about the point of having two gigantic new carriers.

But just as the opposition to renewal of the nuclear deterrent features the questions of what it's for, who it could be used against and whether it's value for money when other parts of defence spending are being squeezed and could be seen as requiring a higher priority, the same can be asked of the carriers. That seems to be what's going on in the Treasury.

Too late to cancel?

While the latest fears have arisen from BAe Systems' shipbuilding boss saying the company has been asked to tell the UK government what it would cost to cancel one or both of the ships, happily for the Scottish economic lobby, it may be too late to cancel.

Much is made of the £1.25bn in contracts already signed by the ships' builders. But that's just the sub-contracts. That figure ignores the overall contract between the Ministry of Defence and the contractors themselves, and that contract is for £5.2bn in total. The break clauses could be colossal, going far beyond the carriers contract itself.

The deal was agreed with the shipbuilders in the context of a wider Memorandum of Understanding that BAe Systems will scale down its shipbuilding capacity - possibly including the closure of one of its yards - in exchange for a flow of work long after these so-called super-carriers are in service.

They've already spending substantial sums on designing the next generation of surface ships, for deployment 15 years from now. The hope is that they can have a generic design which could be applied to contracts for other countries' navies.

This is just what British shipbuilding has failed to do so far. It builds very high-tech ships, which are hard to adapt for foreigners' lower-tech requirements.

Long-term game plan

But it's recognised that and is trying to change it. Indeed, BAe Systems is now in the business of selling its designs and expertise to other countries, for them to do the shipbuilding.

In Thailand, patrol boats are now being built to the company's specifications, similar to those recently launched on the Clyde for Trinidad and Tobago.

So there is a long-term game-plan for the remains of British shipbuilding. But without the carrier contract, it's hard to see what shipbuilding capacity there could be by the middle of next decade with which to build anything for the Royal Navy. The skills can't be kept in place while the workforce is dispersed.

While the Ministry of Defence, under pressure from the Treasury, is bound to ask searching questions of its contracts, particularly because they are notorious for going over-budget, it seems much more likely that the cuts can be forced in the kit that goes on the carriers.

It's not yet clear which and how many planes are to be deployed on them and, along with the weapons system, the firepower represents more cost than these floating platforms.

So the Royal Navy could be left with the biggest and most impressive ships it has ever owned, but without the firepower that was intended to go on them.

The Bilbao Billions

Alex Salmond is missing the shipbuilding talks today, as he had a pre-arranged visit to Bilbao in the Basque Country.

There, he's at the headquarters of Iberdrola, the Spanish energy giant that owns Scottish Power, as well as lobbying for finance jobs from Santander and BBVA.

New contracts can be expected from Iberdrola to extend its huge renewables portfolio in Scotland.

The first minister has moved from calls to protect Scottish Power when Iberdrola bought it in 2006 to an enthusiastic embrace for Iberdrola's decentralised form of management, leaving much of its renewables business in expert Scottish hands.

The argument is that companies based in the devolved parts of the larger countries emulate government behaviour with corporate decentralisation.

Would that extend to Korean National Oil Corporation control of Dana Petroleum? I haven't heard any Scottish politician having anything to say about that near-certain takeover.

But a word of warning on the claims that Iberdrola's spending the lion's share of £4bn UK spending in Scotland over the next two years.

Some of that is investment, but a lot is not. Quite a bit is the cost of running its power stations, including coal-burning Cockenzie and Longannet.

So just as Iberdola's spending generously in Scotland, it's also billing us for it.

Comments

  • Comment number 1.

    The reason that the First Minister is now adopting a different attitude to Iberdrola and indeed to the Korean state takeover of Dana is that he probably realises that our financial institutions are the most industrially treacherous, self centred, short termist, risk averse and greedy on the planet and that they are simply not interested in helping Scottish industry and so he's forced to go elsewhere.

  • Comment number 2.

    Only the British state broadcaster,funded by tax enforcement, could cast a shadow on the Iberdrola deal.

  • Comment number 3.

    I suspect that the weaponry for the carriers has already been chosen, and since our own manufacturers seem incapable of building aircraft at a reasonable cost and standard , the aircraft required will be purchased from the only reliable source, the US; might be's in partnership with Europe are unlikely to provide aircraft fit for purpose. The systems will have to be designed and installed here but no doubt if the technology is not good enough here, then the US will probably supply second best to theirs at a reasonable cost

  • Comment number 4.

    #3

    If you don't invest you don't get new technology. We don't invest.

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