British Shipbuilding

Press, Volume CIV, Issue 30901, 6 November 1965, Page 14

British Shipbuilding

The announcement by the British Government of massive financial support for the Scottish firm that is building the inter-island ferry Wahine draws attention in New Zealand to the difficulties of the British shipbuilding industry. Helped by the Government s export credit scheme, orders have been flowing in from abroad at a rate which should keep the shipyards busy for at least two or three years. Yet one shipbuilding company after another finds itself in financial trouble. In September, Swan Hunter, the Tyneside group, said it expected losses in 1965 of more than £1 million; a fortnight ago another Tyneside firm, Hawthorn Leslie, i eported a considerable loss in its latest financial year. One of the leading companies on the Clyde, Fairfield (the concern building the Wahine), is now in the hands of a receiver. The “Financial Times” says the explanation of these events is all too simple: forced to accept fixed-price contracts to meet the fierce competition of other European countries and Japan, the British yards have watched helplessly as their labour and material costs have spiralled upwards during the fulfilment of the contracts. Formerly shipbuilders were able to protect themselves by passing on to their clients any increases in costs incurred before completion of the contract. Because of the shortage of skilled workers, shipbuilders have had to pay more than they expected for labour. Even this has not enabled them to complete contracts on time; default payments have added to both direct costs and interest charges.

Accepting contracts on which there was very little chance of making money was believed to be the only hope of winning back customers who had deserted British yards during the 19505. Such a policy can be justified as a short-term expedient only if it offers real assurance of winning a share of a profitable market in years to come. Is there any such prospect? The world’s capacity to build is far in excess of the demand for ships; and if the British industry is to continue to engage in cut-throat competition until enough yards are forced out of business to bring supply and demand into balance, some dras- • tic reconstruction seems inevitable, in Britain if not elsewhere. If the industry fails to produce some plan for reorganisation, the Government may need to use its powers of persuasion on the companies and the unions to accept more flexible working methods. The latest company reports are a dire warning of a serious malaise that should stir shipbuilders, the unions, and the Government into action.