The UK government has not stepped in to offer financial support to troubled Belfast shipbuilder Harland and Wolff due to the risk of losing of public money, the UK Business Secretary has said.
The company, which is part of a consortium that landed a major contract to build new Fleet Solid Support ships for the Royal Navy, had applied for a £200m loan guarantee from the UK government as part of efforts to restructure its finances.
In a written statement to Parliament, Business Secretary Jonathan Reynolds explained why the Government had rejected the request to act as a guarantor on fresh lending sought by the company.
Mr Reynolds said the Government would also not offer direct funding to help maintain the company’s liquidity.
“After a detailed review of an application by Harland and Wolff for a UK Export Finance Export Development Guarantee (EDG), His Majesty’s Government has decided not to proceed with the provision of a guarantee,” wrote Mr Reynolds.
“This decision was based on a comprehensive assessment of the company’s financial profile and the criteria set out in our risk policies. We have also decided not to provide any form of emergency liquidity funding,” he said.
“While such a decision is not easy, it is my assessment, following extensive engagement by my officials with market players, that HM Government funding would not necessarily secure our objectives and there is a very substantial risk that taxpayer money would be lost. “The Government believes, in this instance, that the market is best placed to resolve the commercial matters faced by Harland and Wolff,” he added.
Harland and Wolff, which famously built the Titanic, has four sites – one in Belfast, two in Scotland (Methil on the Firth of Forth and Arnish on the Isle of Lewis) and one in England (Appledore in north Devon).
In a statement on Friday confirming that the government loan guarantee had been rejected, the company said it would seek alternative new debt facilities from current lender Riverstone Credit Management.
The company said it was also engaging an investment bank – Rothschild & Co – to assess “strategic options”.
Amid ongoing uncertainty around the shipbuilder’s future, the company also announced that chief executive John Wood was taking a leave of absence with immediate effect.
Harland and Wolff said Russell Downs, an industry expert in refinancing and recapitalisation, would take on the role of interim executive chairman.
Commenting on the company’s move to seek further financing from Riverstone, Mr Reynolds said: “This should allow the business to continue pursuing its short and longer-term objectives, in which the Government continues to take an interest.
“In all our engagements with them, Riverstone Credit Management LLC has recognised the importance of the assets at Harland and Wolff as well as the people who work there, showing a desire to find pragmatic solutions that support HM Government objectives,” he said.
“Harland and Wolff indicates that these discussions on new financing should conclude in the next few days. This will involve the current CEO taking an immediate leave of absence and the onboarding of new management with a focus on recapitalisation and ensuring sustainable finances,” he added.
The Business Secretary said he knew reports over the company’s future will have caused concern among employees, as well as those working in the connected supply chains.
He said he was working with colleagues across government and the devolved administrations to secure a “positive outcome” across all four sites.
“My ministerial team have also reached out to the trade unions represented across the four sites to reassure them that the steps set out by the company appear to me to hold by far the best prospects of ensuring business continuity, job security and the delivery of important existing contracts,” he added.
“My officials will continue to work closely with those in the Ministry of Defence and the National Shipbuilding Office on the Fleet Solid Support contract, for which Harland and Wolff remains a key subcontractor,” he stated.
“Officials in the Ministry of Defence are also well engaged with the prime contractor, Navantia, UK to monitor delivery of this important contract. I welcome potential new financing for Harland and Wolff and the appointment of new management and wish them all the best in their continued efforts to build up this business,” he said.
“Shipbuilding supports 42,600 jobs nationwide, adds £2.4 billion to the economy every single year, and is an important pillar of our civil and defence industrial base. We are committed to supporting vibrant and successful shipbuilding and fabrication industries, and our skilled workforces who deliver them, in all parts of the UK, in which Harland and Wolff has its role to play,” he added.
Unite the union, which represents the majority of the workforce at the company, said that the political focus must be on securing a long-term future for the Belfast shipyard, along with those in Scotland and England.
Unite general secretary Sharon Graham said: “Harland and Wolff’s workforce and the shipyards they work in are of critical strategic importance. Five years after Unite members secured Harland and Wolff’s survival in Belfast, the political focus must now be on attracting stakeholders who are committed to building a long-term future, rather than those looking to turn a quick profit.”
“I have been very clear with ministers that our union will leave no stone unturned to defend these vital assets and Unite has been engaging positively with senior Government officials in order to ensure that this happens,” she added.
Matt Roberts, national officer with the GMB union, added: “These are worrying times for workers and their families in Northern Ireland, Scotland and the South West.
“These yards have been at the heart of UK manufacturing for centuries – from building the Titanic to the ships that defeated the Armada. These yards must be saved and their long-term sustainable future secured,” he added.