Sink or swim time for UK shipbuilders as foreign rivals force them to carve a niche

The Prime Minister’s dreams of creating a superpower out of the sector may soon come up against economic realities

Boris shipbuilding illustration
Boris Johnson, the Prime Minister, 
has pledged to kickstart the 
UK’s shipbuilding industry

Visiting the empty construction halls of Appledore shipyard on the north Devon coast in August, Boris Johnson gave hope to Britain’s ailing shipbuilding industry. Donning orange overalls, the Prime Minister’s presence marked Infrastrata’s £7m purchase of the site, which previous operator Babcock had closed down in 2019 after running out of work.

Having toured the dry dock with John Wood, Infrastrata chief executive, and Appledore’s sole remaining worker, caretaker Clifford Edwards, Johnson set out a bold vision.

“This new chapter for Appledore will create hundreds of jobs and drive forward our ambitions to become a shipbuilding superpower,” the Prime Minister said. He doubled down in his recent party conference speech, saying the Conservatives “aren’t embarrassed to sing old songs about how Britannia rules the waves – in fact, we are even making sense of it with a national shipbuilding strategy that will bring jobs to every part of the UK”.

But for Britain to once again become a shipbuilding superpower would require a massive revival, and mean the sector returning to a position it last held in the early Fifties. “A staggering amount of investment would be needed to make Britain a superpower,” says Paul Stott, senior maritime lecturer at Newcastle University.

Shipbuilding in Britain is hampered by a romanticised view of the historic industry, Stott says. Investment here didn’t match other nations, whose shipyards were often state-subsidised. Many also have lower labour costs. A large number of UK yards are too small to service demand for ever-larger vessels, or located on rivers that limit the size of ships they can handle.

Stott notes that while Harland & Wolff’s No 1 Dock is 1,800ft long, Hyundai Heavy Industries, the world’s largest shipyard, has 10 giant dry docks at its facility in Ulsan.

Hyundai Heavy Industries' No 3 dock in Ulsan, South Korea, can be used to build ships of up to 1m tons Credit: EPA

Global shipbuilding is hamstrung by huge cycles unique to the industry, where orders boom as demand for ships rises, with yards gearing up in response. But the fat years are often followed by long recessions, as supply outstrips demand, leading to order cancellations and redundancies. Smaller shipbuilders struggle to survive such cycles.

“We’re up against the giants in China, Japan and Korea, where governments will gift orders to help companies through the trough years,” says William Fitzalan Howard, transport analyst at Berenberg. “They’ve got cheap labour and steel. We can’t compete.”

But even for the giants, it’s a tough industry. “The shipbuilding industry has had seven good years in the past 40,” says Stott. “Building ships is technically very difficult. Even harder is making money at it.”

But that doesn’t mean the UK’s shipbuilding industry, worth £2bn a year and directly employing 30,000 people, is destined to sink.

Carving a niche

Britain’s warships are required by law to be domestically built to protect the country’s military secrets. The building of two Queen Elizabeth-class aircraft carriers gave a huge boost to the sector, and BAE Systems is currently working on an expected eight-ship order for Type 26 frigates, hailed as the world’s premier anti-submarine warfare vessels.

Babcock is preparing to start work on five Type 31e frigates for the Royal Navy, nicknamed “budget battleships” because of their £250m-a-ship price tag. The Government and Babcock are hoping this price will win export orders. John Howie, chief executive of maritime at Babcock, believes military warships show Britain has a future in shipbuilding.

“Commercial shipbuilding in the UK is gone – China and Korea build on a scale unimaginable here,” he says.

“However, it’s realistic to say Britain could be a superpower when it comes to specialist ships: warships, fleet auxiliaries, fisheries protection vessels and border force ships.”

While going up against China, Korea and Japan may be impossible, Britain has the expertise to produce complex and niche vessels. Howie points to the Sir David Attenborough polar research ship being built at Cammell Laird on the Wirral. The ship presents technical challenges unattractive to yards used to simpler, larger vessels. Being a one-off makes it even less appealing to giant yards geared up to churn out lots of ships of the same design.

Crowds gather for the naming ceremony of the polar research ship RRS Sir David Attenborough at Cammell Laird shipyard in September 2019 Credit: Reuters

And there could be a whole new market for similarly challenging ships as the green energy transition fuels demand for vessels with the equipment to install and service offshore wind turbines. In fact, Infrastrata, which also acquired Harland & Wolff last year, is banking on it.

Announcing its ownership of Appledore, Wood said he was forecasting a £6bn pipeline of orders over the next five years, of which renewable energy formed a large chunk. But that can’t happen if British yards don’t have enough work in the meantime to keep them alive.

Industry veteran Sir John Parker delivered his government-commissioned National Shipbuilding Strategy three years ago, calling for a “regular drumbeat of work” to avoid expensive ramping up and down. The review called for naval vessel construction work to be distributed around yards, with each building blocks that could be transported to a main site and bolted together.

So that yards could keep working, he called for budget warships that were also attractive to export customers – the Type 31e being the result.

Beyond the Navy

Avoiding the boom and bust has led to a bitter fight that has pitted the Government against industry and unions over a new class of ships to provide the Navy’s new carriers with supplies such as ammunition and spares. These Fleet Solid Support ships are operated by the Royal Fleet Auxiliary, meaning the Government does not class them as warships that have to be built domestically.

The contract was tendered internationally, causing howls of protest. Yards warned of job losses if the work went overseas with no other major projects in the pipeline.

However, the Government has reversed its decision on the FSS’s classification, and it looks likely they will be constructed mainly in the UK, effectively meaning commercial shipbuilding is propping up naval shipbuilding. Ian Waddell, general secretary of the CSEU shipbuilding union, says: “The FSS is a bridge for the industry to other work. It going abroad would be terminal for most UK yards.”

He says specialised skills in shipbuilding will not only help create the vessels to install and maintain offshore wind turbines, but could even be a big part of the green energy boom.

“It’s not a big step from propellers to advanced aerofoils on turbines or ships’ machinery to generators in turbines. There’s an opportunity to move into adjacent industries.”

Looking to the future

Bringing shipbuilding home could even be an easy win for ministers, according to Fitzalan Howard. “To claim a victory, all the Government has to do is funnel a few orders to UK shipyards and they can say they have doubled shipbuilding in this country,” he says. “It wouldn’t cost that much.”

However, Stott cautions against the idea that the UK will ever again be a shipbuilding superpower. The industry is one of low margins – 70pc of the value is in the supply chain and not the shipyard – meaning that volume is one of the best ways to remain competitive, an option not available to the UK, and one which comes with its own problems because of the feast and famine cycles.

“The superpower statement is pure jingoism,” Stott says, describing the sector as “uniquely difficult”.

Instead, he encourages British shipbuilding to look forward rather than look back to the 1890s when the nation had an incredible 82pc of the global shipbuilding market.

“Our dominance back then has become a millstone,” Stott says. “There’s a distorted, retrospective view with which we persist in cloaking the industry. What we need to do is draw a line under that and work out where we can go from here.”