How can the Ferguson shipyard be given a future? | UK News

In footballing circles it’s sometimes said you’re only as good as your last game. Another version of that saying, it seems, could also be applied to shipbuilding.

The Ferguson shipyard in Port Glasgow has a proud pedigree dating back 122 years, yet it’s now best known for the controversy over two new ferries that are horrendously delayed and over budget.

New Ferguson’s chief executive Graeme Thomson thinks that reputation is unfair.

A story less frequently told is that the last commercial shipyard on the Clyde has built a third of the current CalMac fleet, including six of the 10 largest vessels that make up the backbone of Scotland’s lifeline west coast ferry services.

“The history and legacy that Ferguson’s has is not getting the airtime I think it deserves,” he tells me as we chat in his office overlooking the shipyard.

“Every football team has a bad game. We’re part of this one just now. But that’s not our story and that’s not going to be the legacy going forward.”

That’s a bold ambition given the fragile prospects for the shipyard which has been state-owned since 2019 when, facing administration again, ministers took it over.

Once its latest ferry MV Glen Rosa is completed next year, Ferguson’s has no more ship orders – just some subcontracting work from BAE Systems to keep its welders and platers occupied.

In March it missed out on a vital order to build seven small electric ferries for CalMac, similar to vessels it had built on-time and on-budget in the past, with the contract going abroad to a shipyard in Poland.

Weeks later a deal from private operator Western Ferries to build two small vessels (replacing ones Ferguson’s built in the early 2000s) went to Merseyside firm Cammell Laird, despite word on the street that it was in the bag.

To cap it all, Economy Secretary Kate Forbes, regarded by workers and management as a political friend of the shipyard, announced last month she plans to stand down as an MSP.

One of the big challenges facing Thomson right now is giving both experienced staff and newly-qualified apprentices a reason to keep the faith, to stick with the firm as it charts a new course into the future.

In short, he needs an order for another ship, and soon. How soon? “The sooner the better,” he tells me. “Basically we need it now.”

The saga that led to this point is well-known in Scotland but the reasons underpinning it remain hotly contested.

The ferries Glen Sannox and Glen Rosa were meant to enter service with CalMac in 2018 but the first ship wasn’t delivered until November last year.

The second is due for completion some time in the second quarter of 2026. The total cost of the two ships is at least four times the £97m contract price.

The customer – government-owned ferries agency CMAL – says the chaos began with mistakes made by managers employed by Jim McColl, the businessman who rescued the yard from administration in 2014.

McColl insists that CMAL officials were to blame – messing up the pre-contract design stage, saddling him with almost unbuildable ships and then repeatedly changing their minds about what they wanted while refusing to pay extra costs.

The new man in charge thinks many factors combined to create a “perfect storm”.

They include an innovative fuel system in a ship whose dimensions were constrained by small harbours, Covid, Brexit, management changes and poor decisions which left “legacy challenges throughout the whole build cycle”.

But there is one thing everyone seems to agree on. The mistakes were not made on the shopfloor, by the 300-strong workforce who simply followed instructions.

“The skills and capability here are just as good as the skills and capability I’ve seen in any other shipyards I have worked at, in the UK and abroad,” says Thomson.

Yet it’s those workers and apprentices who now face an uncertain future.

Faced with an alarming lack of orders, one of Thomson’s first acts after starting his new job in May was to write to ministers asking for a direct award of the next big CalMac ferry order, a replacement for MV Lord of the Isles or “Loti” as it’s known.

Ferguson’s built the original Loti, which operates between South Uist and Mallaig on the mainland, in 1989. The new vessel will be smaller and far less complex than the two gas-powered ships which have tarnished its reputation.

The Scottish government is currently mulling over a direct award. A decision is expected within weeks.

But directly awarding the Lord of the Isles contract presents Scottish ministers with a dilemma.

Last year, they ruled out a similar approach for the small ferries, claiming it might breach UK-wide state subsidy laws and prompt a legal challenge from rival firms.

Others, including local politicians from the four biggest political parties, disagree or at least think it’s a small gamble worth taking.

Some might argue against a direct award on grounds there is a duty on public procurement bodies like ferries agency CMAL to get the best value for money.

This normally involves going out to open tender, inviting different shipbuilders to submit bids and then scoring them based on a mix of quality and cost assessments.

But therein lies the problem.

Ferguson’s bid for the small CalMac ferries contract scored well on quality, but it was beaten on price by its Polish rival Remontowa.

It’s an issue faced not just by Ferguson’s but by all UK-based commercial shipbuilders.

In July Tom Chant, from the Society of Maritime Industries, told MPs that a mix of better state support, tax breaks and cheaper labour costs mean shipyards in countries like Poland and Turkey typically undercut UK shipbuilders by 10-20%.

And it’s not a new problem.

Twenty years ago, the then Ferguson’s owner Alan Dunnet made an impassioned plea to politicians at Holyrood for more to be done to help home grown shipyards.

In a letter to the Herald newspaper he complained that the Labour/Lib Dem administration was driving a nail into the coffin of Scottish shipbuilding by unfairly forcing his yard to compete against state-subsidised rivals in Eastern Europe.

His firm had missed out on £80m of orders to Gdansk-based Remontowa in the previous six months, and Dunnet wanted foreign yards excluded from the bidding for two new fisheries protection vessels.

“Are we expected to fly the Union Flag or Saltire all on our own with no assistance, while the civil servants or politicians are happy to raise the white flag of surrender?” he asked.

His plea was taken up by the SNP, then in opposition, who demanded the fisheries vessels be classed as military or “grey” ships, thereby excluding foreign competition.

They even took a delegation from the shipyard to Strasbourg to lodge an official complaint against Remontowa’s allegedly illegal state subsidies.

But it all came to nothing.

The contract went abroad, prompting Port Glasgow’s Labour MSP Trish Godman to famously rebuke her own party colleagues in government for their “weak-kneed betrayal of the men and women at Ferguson.”

The shipyard limped on with just a few orders to sustain it including a six-year period when it didn’t build any ships at all.

Sail back to the present day and you might be forgiven for getting a sense of déjà vu.

Ferguson’s is once again reeling from the loss of a major contract to the Poles.

Which is why Graeme Thomson and others in the industry argue it’s time for a fundamental rethink.

If a direct award of the new Loti contract doesn’t happen, Thomson’s fallback position is for “social value” to be included in the scoring of competing bids, an approach that goes beyond looking at the headline price on the contract.

“We are creating careers for people. We are creating value within the community,” he explains.

“We would also use local suppliers so there’s a cascade effect of that as well.”

It’s actually part of the UK’s National Shipbuilding Strategy that social value make up at least 10% of the scoring for publicly-funded contracts.

But that might not be straightforward.

A new piece of Westminster legislation, the Procurement Act 2023, mandates public bodies to consider social, economic, and environmental benefits and focus more on social value.

But when I asked CMAL why there was no social value scoring in the small ferries contract award this spring, they told me they were not covered by the new law.

Instead, they follow rules laid out in a pre-Brexit law, the Procurement Reform (Scotland) Act of 2014.

Both laws stress wider economic benefits but the older Scottish law is also guided by an EU directive to treat continental firms on an equal footing.

The UK government has (perhaps mischievously) offered to help extend the reach of its new procurement law into Scotland – but that’s awkward for the SNP which is ideologically committed to taking an independent Scotland back into the EU.

There’s another issue about building ships at Ferguson’s which even those who work there admit. The shipyard is not yet a fully-upgraded, state-of-the art shipbuilding facility.

The Dunnet family kept the faltering flame of shipbuilding alight in Inverclyde through the 1990s and early 2000s but margins were tight and they didn’t have deep enough pockets to afford the new equipment that was so desperately needed.

When businessman Jim McColl rescued Ferguson’s in 2014, the workforce had dwindled to just 70, some cranes were 100 years old and the yard was hauling 20-tonne ship sections around using a Massey Ferguson tractor.

McColl’s firm invested £28m, replacing or renovating old buildings and installing new cranes, but that journey towards becoming a 21st Century shipyard foundered as construction of the big gas-powered ferries ran into the sand.

Now under state ownership, productivity is low compared to competitors both in the UK and abroad, not due to idleness but because workers don’t have the equipment they need to do their job efficiently.

A shopping list of new equipment is ready and waiting – new steel cutting machines, a semi-automated production line and computerised systems that can integrate production with design.

Last year the Scottish government promised £14.2m to fund that transformation but 15 months later only a small amount of money has been handed over.

Trying to get a precise figure from government officials is challenging, to put it mildly, but I understand from sources it’s about £600,000.

The reason? It seems the yard is expected to win a new order before it is allowed to draw down the cash.

Is that a prudent plan or a case of Catch 22?

Thomson seems fairly relaxed about it but others in the industry I’ve spoken to say that, given the long delivery times for such equipment, it’s bewildering.

The irony of Ferguson’s situation is that it comes at a time when elsewhere Scottish shipbuilding is booming.

For years larger shipyards like BAE Systems in Glasgow and Babcock at Rosyth were kept afloat by “grey ship” Royal Navy orders, where traditionally overseas competitors are excluded.

Those sheltered waters allowed them to modernise their facilities with the kind of equipment Ferguson’s is now looking to buy, raising productivity until they were ready to venture back out into the open seas of international competition.

That investment began paying real dividends this month with a £10bn order to build frigates for the Norwegian navy at BAE Systems yards in Glasgow, while Babcock could be poised to win similar orders from Denmark and Sweden.

Vladimir Putin’s actions in Ukraine have created a new geopolitical reality, and western Europe is re-arming.

Some argue that we can ill-afford to lose strategic assets like Ferguson’s and the nearby Inchgreen dry dock, a huge facility which has lain dormant for a decade

Ferguson’s could benefit indirectly – it already has a small subcontracting order to build units for the frigate HMS Birmingham – but the demand might go further.

The mood music among the military is that investing more in huge, astronomically expensive vessels like aircraft carriers is risky when they could be taken out by new weaponry like hypersonic missiles or drone ships.

Instead, the thinking has veered towards smaller vessels in greater numbers that can be repurposed for different roles.

That will include ships to monitor and protect undersea cables and pipelines, possibly of a size that Ferguson’s is well-suited to build.

There is also talk of a new generation of civilian ships, designed so they can easily be modified and pressed into service for military roles.

The definition of a “grey ship” may be loosening, and there are plenty of other opportunities for a small shipyard like Ferguson’s – including ferries.

The drive to renew the CalMac ferry fleet alone could keep the yard going for years if it got those orders.

Then there’s fisheries vessels, border protection craft, ships to support Scotland’s offshore wind industry, new ferries for Orkney… all are potential markets if Ferguson’s can put the ferries saga behind it.

Alex Logan started to learn his trade as a shipbuilder at the age of 16 and has spent his entire working life at the Ferguson shipyard as a plater.

He’s watched the unfolding story of the last 10 years with a mixture of optimism and, more often, dismay.

Since nationalisation a procession of highly-paid consultants and managers have come and gone including “turnaround director” Tim Hair, appointed by Scottish ministers after a 15-minute phone interview on a daily rate of more than £2,500.

When he left in 2022 (eased on his way by the then Finance Secretary Kate Forbes after a mutiny by the workers) he had billed the government nearly £2m for 595 days work.

The Ferguson workers, who typically earn between £14 and £17 an hour, used to joke that the only turning around that happened during this period was that Glen Sannox was turned from pointing downriver to upriver.

Throughout this long saga Logan and his now retired fellow GMB union rep John McMunagle worked steadfastly to keep shipbuilding alive in Port Glasgow, not for themselves but for generations to come.

“When I left school there was plenty of work. A boy could get a place at the Lithgows training school then onto one of the yards,” he remembers.

“For girls there was work at the industrial estate, for firms like Playtex or Black’s Tents.”

Hollowed out by decades of industrial decline, parts of Inverclyde are among the most deprived areas in Scotland.

Recently it lost another 1,200 jobs in the space of 18 months as EE, IBM, Amazon and plastics firm Berry’s either closed or shifted their operations elsewhere.

After 47 years of shipbuilding, Logan, is thinking about retirement and spending more time with his young granddaughter.

For him, “social value” is not just a phrase – it has a human face.

“Like me, a lot of men and women working here have grandkids now and we’re looking for a future for them,” he says .

The real cost of Scotland’s ferries saga is undoubtedly far higher than the £460m spent on the two ships at the heart of it.

Add in damage to island economies and soaring maintenance bills for ferries that should have been replaced by now, a figure of a billion pounds is not far-fetched.

Decisions being taken in the coming weeks could determine whether that huge waste of public money has all been in vain.

Value for money for the taxpayer vs investing in Scotland. Are these two arguments impossible to reconcile?

That’s now a matter for politicians to decide.