THE SWANSONG OF A GREAT INDUSTRY

Martin Vander Weyer reveals how

Tyneside's last shipbuilder was scuttled by the Government

IN 1907, Swan Hunter's Wallsend and Nep- tune yards on north Tyneside built 15 per cent of the world's new tonnage of shipping. A dozen passenger and cargo vessels, at various stages of construction, cluttered the quays, sheds and slipways. The largest of them was the Mauretania, the great Cunard transatlantic liner, perhaps the most cele- brated ship ever built on the Tyne. Nowadays, the entire British shipbuilding industry accounts for much less than 1 per cent of world production. Next Thursday, what seems very likely to be the last ship ever built on the Tyne, the Type 23 anti- submarine frigate HMS Richmond, will sail from Wallsend to a forlorn cheer from for- mer Swan Hunter men and their families invited back for the occasion. The rem- nants of the workforce will receive their redundancy papers, and that will almost certainly be an end of it: another famous industrial name effaced, another ripple in Tyneside's unemployment statistics, anoth- er site for a superstore or perhaps (as in nearby Hartlepool) a Heritage Quay. lent of sailing the dazzlingly technological Richmond straight out into the North Sea and scuttling her, for lack of a strategy and for want of a hap'orth of tar.

`The silence is deafening,' says Eddie Darke, convener of the Confederation of Shipbuilding and Engineering Unions, 31 years with Swan Hunter and now about to clear his desk. He is referring not to gov- ernment intransigence over the 18 months in which the yard has been in receivership, but to the eerie atmosphere of its cathe- dral-sized steel fabrication shed, a relic of the supertanker era of the 1960s.

Here the keel was laid for the Esso Northumbria — built to carry 70 million gallons of oil and so long that she had to be launched diagonally — and dozens of other tankers, and later for the aircraft car- riers Illustrious and Ark Royal. Now no one works here at all, and the only reminders of the building's purpose are a few discarded segments of the wooden patterns used to form hulls. At one end, incongruously bright, is a truck converted into a silver swan as a carnival float.

`The first round of redundancies was the worst time,' Eddie says. 'Now it's all finished, almost everyone's gone.' All that remains to be done is the distribution of unfair dismissal awards, at £560 each. The Swan Hunter pay- roll used to contribute £1 million a week to the local economy; neighbouring engineering employers have also been cutting back, whilst the much-vaunted Japanese, Korean and Taiwanese assembly plants are some dis- tance away, clustered south of the Tyne or further north at Morpeth. Here along the river in Wallsend and east Newcastle, the rate of male unemployment is 45 pei cent.

Outside the sheds, a single seagull wheels around the giant, stooping cranes, visible from every terraced street in Wallsend. All the paraphernalia of the shipyard is neatly stacked, crated and useless. Among the handful of remaining workers, impenetra- ble Geordie banter about the forthcoming Newcastle United-Atletico Bilbao game floats away on the breeze. The only task in hand is the shifting of stores on board the completed Richmond, moored at the quay- side. Packed with sophisticated electronics she may be, but in relation to the scale of the yard itself the frigate looks tiny. It is hard to comprehend that the receivers' break-up valuation of the whole of Swan Hunter, £7.3 million, is a mere fraction of the contract price of its last ship.

The final contract figure was in fact £57.7 million, covering completion work on Richmond and two sister ships, West- minster and Northumberland, during the receivership period. The £700,000 on the end of that sum has a special significance in the final part of this story, but first let us delve into earlier chapters.

It is part of Swan Hunter's misfortune to have been specifically categorised over the past decade as a warship builder. But for most of its 130 years, in which it built more than 1,600 ships of every shape and size, naval vessels have been a minor part of its output. The founders of the Neptune yard, the Wigham Richardson family, were Quakers who did not want to build fighting ships at all, and it was not until the first world war, long after their merger with the neighbouring C.S. Swan and Hunter Ltd, that they started to do so.

But when Swan Hunter was eventually nationalised by the Callaghan government, it was designated primarily as a warship yard within the British Shipbuilders conglomer- ate, and when it was privatised again in Jan- uary, 1986, by a £5-million management buy-out, that designation was crucial. Under the EC's Fifth Directive on aid to shipbuild- ing — a response to the lack of demand for new tonnage which followed the second oil crisis in the early 1980s — 'intervention' funding for merchant shipyards was permis- sible by member governments only if allied to cuts in capacity. Many yards were closed, even efficient ones like North East Ship- builders in Sunderland, so that others could legitimately be subsidised. But warship yards were excluded from the calculation, neither eligible for subsidy nor subject to EC pres- sure for closure.

It was a bargain which Swan Hunter's management often had cause to regret, according to its former managing director Peter Vaughan, but it was the only basis on which the government would allow the yard to be privatised. The buy-out team started with a combination of disadvan- tages. Their initial order-book was entirely dependent on the MoD, but defence cuts made the future more and more uncertain. It was essential to re-establish Swan's as a mixed shipbuilder — but the European and Asian yards against which it would have to compete for civilian orders all had access to subsidy. The company's balance sheet was weak, and it was without the cash-flow advantage enjoyed by its chief competitor, VSEL at Barrow-in-Furness, which benefited from Trident submarine orders negotiated at what the industry con- siders to have been a generous price.

Nevertheless, Swan Hunter made progress. By 1991, a quarter of its order- book was non-MoD work. Its computer- aided design team had established a worldwide reputation — only the Danes (but none of the Far Eastern nations) are more advanced than the British in this kind of work. Its trade unions had accept- ed radical agreements on flexible working. Among the naval orders completed, the frigate Chatham was delivered without a single recorded 'shipbuilder's liability defect': literally faultless.

The Royal Fleet Auxiliary oiler replenish- ment vessel, Fort George, was one of the biggest ships built on the Tyne since the supertankers, and was expected to be the first of a series. But the second one, the Fort Victoria, was directed by the government to Harland & Wolff in Belfast, and Options for Change put paid to the rest. An order for three more Type 23 frigates went to another rival, the Yarrow yard on Clydeside.

Much investment, meanwhile, went into design and marketing for export orders, but again ministerial maladroitness was at hand. The possibility of a niche in the feeder-container ship market was ruled out by another piece of EC horse-trading, in which (during the British presidency of the Council of Ministers in mid-1992) it was accepted that Chancellor Kohl's gov- ernment could subsidise former East Ger- man shipyards, well capable of building such vessels, by as much as 36 per cent. Another target market was coastal patrol boats, but when an order was finally secured from Oman, Swan Hunter was already in receivership and the Omanis demanded a British government guarantee to support the contract. Whitehall refused and the order was lost. the management buy-out. As a "warship builder" we were always under the Gov- ernment's thumb — they always had the power to wind us down. In the end they just seemed to want us out of the way.' If that is really so, the Government's hid- den agenda seems about to be fulfilled. One more possible buyer, the OMS consor- tium, came and went, having declined to put cash on the table by the receiver's deadline. The Neptune yard and the Heb- burn dry dock across the river have been bought by ship-repair firms. The design team has been dispersed and their 'intellec- tual property' — computer programmes and three-dimensional blueprints — will probably be sold separately. The receiver, Gordon Horsfield, is still looking for a buyer for the Wallsend yard, and claims that to abandon hope of ships ever being built there again is 'too gloomy a view'. But the chances must now be very slim indeed. That the Government should have wished this to happen, or even acquiesced in it, remains hard to understand. In pure free-market terms, Swan Hunter has gone under because it failed to bid competitive- ly, at home and abroad. But shipbuilding is not a free market: it is entangled with national interests at every level. It is an industry in which, if the Government had been prepared to take a strategic view, Britain (like Denmark, which is now the third largest shipbuilding nation) might have re-established a significant position. It certainly merits some more subtle thinking than is displayed by MoD spokes- men, who stick to their `value for money' as the paramount consideration in defence procurement. That value is supposed to be ensured by competitive tendering, but another irony of this story is that there may shortly be no competition at all in British warship building: without Swan Hunter, VSEL will be the only yard capa- ble of building anything larger than a frigate, and Yarrow will be VSEL's only competitor for frigates. But VSEL is about to be bought either by British Aerospace or by GEC (which already owns Yarrow).

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