Category Archives: Manufacturing
Andrew Pendleton (New Economics Foundation) reminds us that since Margaret Thatcher first stood on the steps of Number 10 in 1979, successive UK governments have chosen to withdraw all but the barest bones of support from Britain’s foundational industries, of which steel is one. He questions whether any owner of steel manufacturers in the UK could thrive in the hostile environment UK governments have created.
Failed by the current government’s blind faith in markets, Pendleton writes, the people of Scunthorpe and many other places have had no voice whatsoever in how the economy was run, until ‘the blunt instrument of the EU referendum’. The loss of this significant company will intensify the sense of loss that contributed to the Brexit vote
There are risks in selling to the Turkish Military Pension Fund or to the Chinese Jingye Group, about which very little is known, industrially, but the interest of foreign buyers suggests that British Steel is seen as a potentially viable asset.
Many tonnes of steel will be needed to build a cleaner economy – for wind turbines, electric vehicles and the rail lines made in Scunthorpe, critical to a decarbonised economy. As Pendleton points out, steel production is ‘problematic’ for climate change – but steel production in Scunthorpe can be ‘greened’ by investing to reduce its carbon emissions, eventually reaching zero as coal-free production (below) becomes the norm.
In Germany, Thyssenkrupp recently demonstrated running a steel blast furnace completely on hydrogen – opening up the prospect of zero-emissions steel production by using renewable hydrogen.
Hydrogen will become cheaper as current methods, which rely on creating hydrogen fuel from purified water, are superseded by less expensive technologies such as one being developed by Stanford researchers, who have been separating hydrogen and oxygen gas from seawater via electricity.
And millions of tonnes of carbon used in shipping will be saved by using steel close to where it is manufactured
Pendleton sees the current economic model, ‘now the default preference of our policy-makers’, as absurd; in Fife, steel fabrication firm BiFab is in mothballs (right) while energy giant EDF imports the casings for the turbines on its new offshore wind farm from Indonesia.
He points out that Indonesia and some of our European neighbours’ governments habitually intervene to ensure that ‘foundational industries’ have guaranteed supply chains and amply-filled order books.
British Steel owners Greybull, a private investment company which owns many other industries, are unlikely to be seriously affected, but the company’s workforce, its suppliers, Scunthorpe and the wider economy will. It will be a disaster, politically and economically. Andrew Pendleton ends:
“Nothing short of immediate nationalisation is needed; anything less will be a betrayal of a whole town and will send shockwaves through the UK’s industrial heartlands . . .
“It is not too late for the government to step in and take the company over, which would have the immediate effect of keeping people in work and the economy of a town afloat. This is absolutely government’s proper role. But it shouldn’t stop there. After nationalisation should come a three-pronged approach:
- focus on industrial strategy for British Steel in order to secure its supply chains
- fill up its order book with a proactive procurement policy.
- and create a worker owned company who could then benefit from an ownership dividend
“Given the UK’s need to invest and build green infrastructure, such as railways, steel is of national strategic importance”.
Read Andrew Pendleton’s article here.
Dual fuel ferry builders threatened: shouldn’t governments support saving skills and projects reducing emissions?
The last civilian shipyard on the Clyde is threatened by a dispute between the owner of Ferguson Marine Engineering, Jim McColl, founder of Clyde Blowers Capital who saved the shipyard from closure in 2014, and one of Scotland’s leading businessmen and state-owned Caledonian Maritime Assets (FT: 7.7.19).
Ferguson Marine has been able to diversify and Clyde Blowers’ investment of £25m has transformed the yard. It has been retooled, with a new shed for all-weather work and its weekly output capacity increased from 13 tonnes to 150 tonnes a week. It is building a self-propelled hover barge and has won several other contracts, including one to develop a hydrogen-powered ferry fuelled by hydrogen from the Orkney electrolyser.
An odd relationship: Caledonian Maritime Assets (CMal), owned by the Scottish government, was established in 2007 to own and manage the country’s ferries and harbours and its subsidiary, CalMac Ferries, competes to operate ferry routes using vessels owned by CMal.
The dispute concerns two dual fuel ferries ordered by CMal from Ferguson Marine under a fixed-price design-and-build contract.
CMal declined to comment on changes recorded by Jim McColl who explained that delays and increased costs on substantial late changes by CMal to the ferries’ original specifications, including:
• one case where CMal had changed the number of seats it wanted. This required 11 structural pillars to be moved
• and a demand that the location for bringing aboard LNG fuel be moved from amidships to the aft section. This required cutting through bulkheads and routing the large vacuum-insulated cryogenic pipe through complex parts of the vessels.
Fine rhetoric about addressing climate change is not enough. It must be supported by the release of funding – perhaps redirected from the uneconomic and technically fraught building of new nuclear power stations – or from HS2.
Sources (links did not transfer)
All those with an interest in Italy’s Fincantieri, Spain’s Navantia, Japan Marine United Corporation, and Daewoo Shipbuilding and Marine Engineering of South Korea – and their British shareholders – will rejoice as the Ministry of Defence decided to put the £1bn contract for the building of fleet solid support ships out to international tender in February.
France and Italy build their own solid support ships, ensuring that the work remains within national borders. Rodney Reid (Financial Times) responds to the news by describing Britain’s approach as ‘muddled’. He recommends that vessels required for use by the Royal Navy should be built in Britain, preserving jobs and skills in this country. A month later Mr Reid reported that Fincantieri and Daewoo Shipbuilding and Marine Engineering had withdrawn due to the ‘significant’ advance funding required.
Unions and shipbuilders have urged that the vessels to be built under this contract with flight decks, advanced weapons systems and extensive dry storage, to carry supplies needed by the carrier fleet when on mission, should – as in France and Italy – be classed as complex warships. This would enable them to be built in the UK, exempted from EU laws preventing protectionism.
Reid asks: “With the Appledore shipyard in Devon, which has built ships for the Royal Navy for well over a century, likely to close at the end of March without any new orders, is it too much to expect joined-up thinking at the MoD to keep valued jobs in the UK and save a valuable shipbuilding asset?”
Admiral Lord West of Spithead points out a few of the advantages of building these ships in Britain:
- the benefits to the exchequer of tax receipts from the firms involved and their workers,
- the lack of exchange rate problems,
- maintenance of highly skilled workers
- versus redundancy and retraining to be shelf-stackers or something similar.
A false economy?
In an earlier FT article, co-authors David Bond, Henry Mance and Peggy Hollinger assert that the MoD wants to cut costs by using the subsidised shipyards of other countries but defence experts say that might be a false economy. Francis Tusa of Defence Analysis said a report commissioned by the unions will show next week that 25% of the spending on the vessels would return to the government in direct taxes.
Admiral West agrees: “The Treasury is deluding itself if it thinks it is cheaper building them abroad. The fleet solid support ships should be built in the UK.”
A call for building strong productive local and regional communities and new trade systems that fulfil human lives without wasting resources and energy
Today the Financial Times (paywall) reports that the number of foreign investment projects has dropped by 14% to 1,782 in the financial year ending March 2019, since the 2016 Brexit referendum. This is the lowest level in six years, according to a report published on Wednesday by the UK’s Department for International Trade.
As multinational profits continue to fly out of the country and taxes are evaded, we return to the valuable 2017 report by Victor Anderson and Rupert Read entitled ‘Brexit and Trade Moving from Globalisation to Self-reliance’, published and launched by Green MEP Molly Scott Cato.
“This report puts on to the political agenda an option for Brexit which goes with the grain of widespread worries about globalisation, and argues for greater local, regional, and national self-sufficiency, reducing international trade and boosting import substitution”.
Colin Hines comments: It details the need for an environmentally sustainable future involving constraints to trade and the rebuilding of local economies. On page 14, the report calls for ‘Progressive Protectionism’:
“Reducing dependence on international trade implies reducing both imports and exports. It is very different from the traditional protectionism of seeking to limit imports whilst expanding exports. It should therefore meet with less hostility from other countries, as it has a very different aim from simply improving the UK’s balance of payments. It could be described as ‘progressive protectionism’, or ‘green protectionism’“.
The report’s recommendations are summarised under three headings: the environment, globalisation and localisation (below):
- Change trade agreements to allow governments to promote greater national, regional, and local resilience.
- Shift taxes, subsidies, and public expenditure on infrastructure, away from unfairly favouring large and global companies, and redirect them to help build up local economies.
- Link banking directly to local and regional economies rather than to the international financial system.
- Boost the number of places for skills training in sectors where UK production can substitute for imports.
- bring in short-term government subsidies to invest in and develop economic sectors where UK production can be expected to substitute for imports as part of the new strategy. These would not necessarily be ‘infant industries’: they might be old sectors being revived and renewed.
- Introduce or increase tariffs on imports of goods and services, especially those where domestic production is a viable and environmentally sustainable option.
- Democratise English sub-regional devolution arrangements and reform local government finance, so as to provide for effective decentralisation of power.
The globalisation of recent decades has been very one-sided. There have been enormous benefits for large business corporations, financial institutions, and the super-rich. As smaller companies have found it difficult to compete, the multinationals have used a worldwide network of tax havens to escape from taxation and regulation.
‘Brexit and Trade’ sets put a new option for Britain. Instead of removing protective regulations against environmental threats it advocates establishing high Green standards and practical localisation measures. It would address the very real social, economic and environmental problems of globalisation, serving present and future generations well.
Though Cammell Laird’s Birkenhead shipyard won two contracts this month, worth a total of £619 million, to provide spares, repairs and do maintenance work for the Royal Fleet Auxiliary over10 years, news of plans to axe about 40% of the workforce (290 jobs) by the end of March 2019, was given to union representatives and workers today (11th October).
The Unite union is demanding that Cammell Laird sets out the business case for cuts which will see the loss of vital skills and ‘backdoor casualisation’ of the workforce. It fears that the proposed job losses will undermine the shipyard’s ability to fulfil new contracts.
Unite’s assistant general secretary for shipbuilding, Steve Turner, said: “The loss of jobs at Cammell Laird would see skills gone for a generation and be a further blow to the UK’s shipbuilding industry . . . it is clear that the government must and can do more to support UK shipbuilding jobs. This must include the government stepping in and supporting the retention of skills and jobs while shipyards like Cammell Laird wait for new contracts to come on stream”.
Instead of ‘offshoring’, the government should be handing contracts to build the Royal Navy’s new fleet solid support vessels and a £1.25bn contract for Type 31e frigates (maritime security-focused platforms) to UK shipyards, using British made steel as part of an industrial strategy that supports jobs and communities across our four nations.
Yesterday it was reported that MPs had urged civil servants (defence officials) to pick a UK company for the £1billion contract for three Fleet Solid Support vessels for the Royal Fleet Auxiliary. Commons Defence Committee chairman and senior Tory MP Julian Lewis feared that foreign firms subsidised by their governments could undercut British rivals.
Penny-wise, pound foolish?
The MoD’s director general for finance told MPs the department’s biggest concern was “what will deliver the greatest value for money”- meaning the lowest bid – a narrow perspective. But as Labour MP John Spellar pointed out, the Treasury would benefit from tax revenue ploughed into public coffers if the work was carried out in the UK – “a significant return” – which would be multiplied by work given to British steel and component manufacturers.
Steve Turner said that a failure to have these ships made in Britain would be ‘a gross betrayal of UK ship workers and regional economies, putting at risk manufacturing skills vital to our country’.
New Fleet Solid Support ships: cash-strapped MoD should look at the total cost-benefit of building in Britain
Jeremy Corbyn is in Glasgow today, where – reversing New Labour policy – he will call for Navy shipbuilding contracts to stay in the UK.
The contract could lead to over 6,500 jobs in the UK, 1,800 of those in shipyards: “Our proposal would both sustain existing shipbuilding and supply chain jobs and create new ones – right here in Scotland and also across the UK.”
The MOD, which is alleged to have ‘lost controls of costs’, hopes for a cheaper option. Its spokesman added: “We are launching a competition for three new Fleet Solid Support ships this year and strongly encourage British yards to take part”.
“Until the new Fleet Solid Support Ships (FSS) arrive, these hardy veterans must stagger on into the mid-2020s”
The three currently supporting ships supply ammunition, food and spares are “antiques built in the late 1970s and saw action in the Falklands War”. Corbyn warns:
“By refusing to help our industry thrive, the Conservatives are continuing their historic trend of hollowing out and closing down British industry. Over the course of the 1980s under the Tories, 75,000 jobs were lost in UK shipyards, leaving just 32,000 remaining.
“Our shipyards used to produce half of all new ships worldwide. Our current market share is now less than half a per cent. The Tories seem hell-bent on accelerating and deepening this industrial decline.”
SNP MSP for Glasgow Anniesland, Bill Kidd, is sceptical, saying: “Workers on the Clyde and people across Scotland haven’t forgotten Labour’s betrayal of the industry in 2014.
Seven years ago, the Stirrer’s correspondent (The Spook) predicted that one day the powers that be will realise that services should be designed and managed by the ‘undoubted experts’ that exist within the council.
S/he explained that they would be more practical and less expensive than those designed by “by cavalier consultants and back room HR boffins who have no conception of delivering a service and are only concerned that “procedures” are followed and “statistics” are recorded, irrespective of how impractical and resource wasting this might be.
Yesterday the Financial Times predicted that Learndirect, a company owned by the private equity arm of Lloyds Bank, is at risk of collapse, following a report by Ofsted. This prompted a data search which revealed 2013-4 as vintage years for complaints about the performance and cost of outsourcing companies.
Last year a survey of 36 strategic public-private partnerships signed between 2000 and 2007 found that 13 of the contracts – ranging from 7 to 15 years and covering IT, back-office functions, property management and highways – have gone back in-house at the end of contract or as a result of early terminations. In more than a third of cases, councils found that delivering services in-house could save more than outsourcing to commercial companies in long-term, multi-service partnerships. A return to designing, staffing and over-seeing services in-house can improve performance, reduce costs and provide stable employment for local people at all levels, with money circulating in the area, instead of going to distant shareholders.
The New Statesman noted that many companies featured on their list of nine spectacular’ council outsourcing failures were said to be looking “excitedly” at the NHS – hoping for “heaps of public money, ditching service the second the contract is framed and delivering huge returns to their shareholders”. Its 2014 article opened:
“One of the many concepts that free marketeers refuse to abandon in the face of all evidence is the idea that the private sector is better at providing public services than the public sector. Private companies have been cashing in on this fable for years at council and government level. As we file this report, another glorious outsourcing triumph is breaking: the Ministry of Justice has asked police to investigate alleged fraudulent behaviour by Serco staff in its Prisoner Escort and Custodial Services contract”. An online search will reveal that this is one of many problems reported in different countries.
Punitive contract ‘get out’ clauses – real or imagined
The article also listed the amount councils have had to spend to get out of private sector contracts and/or to deal with contract disputes and cost overruns. Note Javelin Park – the Gloucester incinerator contract revelation.
Despite these concerns, four years ago Swindon council brought basic ‘commercial’ services such as waste collection, recycling, highways maintenance and grass cutting, back in-house in order to save an estimated £1.8m. Last year, because of performance problems, financial pressures and NHS policy shifts, Swindon also decided not to renew contract with social work provider SEQOL.
Birmingham City Council recently ended the Service Birmingham Joint Venture with Capita which provided the Council’s information technology, ran the council tax and business rates administration service. The process continues with its move to bring waste and recycling collection in-house.
With reference to Serco, G4S and others – Simon Chesterton goes deeper, beyond issues of cost and efficiency:
He asks (left) whether there should be any limits on government capacity to outsource traditionally “public” functions:
“Can and should a government put out to private tender the fulfilment of military, intelligence, and prison services?
Can and should it transfer control of utilities essential to life, such as the supply of water?”