What does the Ferguson shipyard story tell us about the SNP’s economic strategy?

Literally minutes after I posted this article I noticed that the Scottish government has now reached an agreement with administrators to take control of the yard. That decision does not negate the issues raised here.

The hybrid-powered Glen Sannox shortly after launch in 2017 – still unfinished

© Copyright Thomas Nugent and licensed for reuse under a Creative Commons Licence

Many years ago, I was charged with supporting a group seeking to build economic relations between the North East of Scotland and Calgary in Canada (Calgary is Canada’s ‘oil capital’ as Aberdeen is Scotland’s). I was present when a mixed private-public sector group visited Alberta on a trade mission to sign a formal agreement and get things moving. One of the less successful events was a business breakfast hosted by the Calgary Chamber of Commerce. Our Regional Council convenor gave a short presentation which included memorable words to the effect that:

We are proud, yes I say proud, to promote our traditional industries. Even now, my council is providing financial support to a struggling textile company that provides vital jobs in one of our small towns.

There was a sharp intake of breath from the assembled Calgarians. They could read straight past the script to the truth – here was old Europe using taxpayers’ money to subsidise a dying industry and provide unfair competition. And they were right.

On the face of it, the SNP avoided that sort of mistake the last time they made their pitch to voters at a Holyrood election when they said:

At the heart of the economic agenda of a re-elected SNP government will be a focus on transforming our productivity as a country. Innovation is key to achieving this ambition and, coupled with our efforts to boost entrepreneurship, will drive our approach to strengthening the economy. (SNP Manifesto 2016 p.19)

Note those key words – transforming, productivity, innovation and entrepreneurship.

Fast forward three years and the SNP government are talking of nationalising shipbuilder Ferguson Marine Engineering Ltd.

Ferguson is the last builder of merchant ships on the Clyde. If nationalisation goes ahead it will be the sad and sorry culmination of several years of government involvement with the shipyard. The yard had already had a chequered history of ownership when businessman Jim McColl took it over after it became bankrupt. He had supported Scottish independence in the 2014 referendum and is still a member of the first minister’s council of economic advisers. Ferguson’s main work since McColl bought the company has been a contract for two vessels for the Scottish Government-owned ferry operator CalMac, a contract supported by loans from that government totalling £45 million. The vessels are supposed to have a new dual-fuel power system so they can run on diesel or LNG (liquid natural gas). The contract was struck at a fixed-price of just under £100 million but Ferguson has said it can only be completed at a cost of double that sum. The dual-fuel system is said to be a major factor in the problems the yard has encountered with the contract. An impasse between company and government has led to the current talk of nationalisation.

All these facts have been reported in the media. I suspect that many misjudgements by both company and government have been made along the way in what has happened, although no suggestions have appeared of any wrongdoing.

Note however, the recurrent theme in the tale so far. A government supporter and adviser purchased the yard. A government agency placed the order for the vessels. The government provided loans to allow the contract to be undertaken. I suspect the government was keen for the vessels to have the innovative dual-fuel system to burnish their green credentials. And the government looks as if it’s going to take the yard into public ownership.

Now contrast what has happened with the SNP’s aspirations for the Scottish economy – transforming, productivity, innovation and entrepreneurship.

Hard as it is for the employees and Port Glasgow, where Ferguson is based, support for a small company in a near-dead industry is hardly transforming. I cannot see how maintaining the yard helps with our national productivity. If there was innovation through the dual-fuel system for the vessels, it was clearly the wrong sort of innovation that could not be delivered at the price negotiated. Mr McColl is undoubtedly a successful businessman, but he’s one who is close to government and the public support in various ways throughout his ownership of Ferguson is hardly entrepreneurial in any real sense.

The Ferguson saga is not the only one where public money has been used to prop up a faltering business. Prestwick airport was bought by the government for £1 six years ago, currently has a debt to the government of £38 million, and is up for sale again; the wrong airport in the wrong place, stumbling on with a few Ryanair flights each day.

These are tough cases for politicians of any party, with factors of all kinds pulling in different directions – sentimental attachment to former great industries; current and potential future viability of a company or even a whole industry; saving or even creating jobs, often in depressed areas; impact on government finances; the foregoing of alternative ways to spend public money; rules constraining state aid to business; and, whisper it not, perhaps even electoral advantage.

The Ferguson case brings these factors into stark prominence and presents the government with a judgement call. How might their decision measure against their own aspirations – transformation, productivity, innovation and entrepreneurship, not to mention their recent attachment to prioritising ‘wellbeing’ in economic development?

You may remember how this article started, with a politician proud to provide financial support for a struggling textile company in a small town in the North East. You may also have guessed how that story ended. Within a few years the company concerned went out of business and an estimated 200 jobs were lost.

There may be a warning there for the SNP government’s stated wish to nationalise the yard. They have a difficult problem. But it is one of their own making.

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1 Response to What does the Ferguson shipyard story tell us about the SNP’s economic strategy?

  1. Allan Thompson says:

    Westminster must be to blame somewhere in there, I’m sure Nicola ” will leave no stone unturned ” in her efforts to do just that.

    Liked by 1 person

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