Scottish government 'ready' to nationalise Ferguson shipyard By Douglas Fraser

Business and economy editor, Scotland Published duration 12 August 2019

image copyright Getty Images image caption The shipyard in Port Glasgow is expected to be in administration by the end of the week

The Scottish government is "ready and willing" to take Ferguson shipyard into public ownership, Economy Secretary Derek Mackay has announced.

He said this was to avert the yard's closure with the loss of 350 jobs, and to complete two ferries being built there for Cal Mac west coast services.

The move follows legal notice being served that the business faces administration by the end of this week.

Mr Mackay said the government remained open to other investors.

But in a statement, he added that it was essential to act without delay, to secure the yard, its workforce and the unfinished ships.

A letter has been sent to Ferguson Marine, and its sole shareholder, industrialist Jim McColl, saying the Scottish government is hopeful that directors and creditors "recognise the importance of completing that transfer as quickly and smoothly as possible".

However, on Friday, Ferguson's chief executive, Gerry Marshall, said directors would support Mr McColl and the Scottish government in trying to reach a positive outcome for the business and its employees.

Since then 60 workers have stopped working there, due to the withdrawal of contract agencies, in a bid to protect their financial position. That has taken the workforce below 300.

Mr Mackay said: "The Scottish government has been working for over two years to find a resolution to the difficulties at Ferguson Marine Engineering Ltd.

"Throughout that time, our preference has been to identify viable commercial options to keep the yard going and to finish the vessels. No such solutions have come forward.

"The Scottish government has now indicated to all relevant parties that we are ready and willing to take Ferguson Marine into public ownership and deliver the ferries to secure the continued employment of the workforce in the yard."

image copyright Getty Images image caption An order for CalMac ferries has been at the centre of a very public dispute

He added: "There remains a process to go through to secure the transfer of the yard to the Scottish government, and we are hopeful that all parties recognise the importance of completing that transfer as quickly and as smoothly as possible.

"While we are open to engaging with any parties with a serious interest in investing in and securing a future for the shipyard, it is essential the government acts now to secure the completion of the ferries and continuity of employment at Ferguson's."

'Due diligence'

Mr Mackay told BBC Radio's Good Morning Scotland programme the government was unwilling to "hand over a cheque" to complete the ferries because it would be "illegal" and would flout state aid rules.

Under European Union rules it is illegal for countries to give financial help to some companies in a way that would give them unfair advantage over others.

Mr Mackay said: "The £97m has already been spent on vessels that are not complete. Once we conduct due diligence and if we're in public ownership we'll have sight as to what is required to complete those vessels.

"The alternative is for the government to walk away, the company goes into administration, the jobs are lost, the vessels are not complete."

The government's takeover of the yard follows Mr McColl's rescue of the yard from administration five years ago. The shipyard's main contract since then has been for two ferries, due to serve Arran and the Outer Hebrides.

To support it, the Scottish government loaned it £45m, in two tranches. That gives it priority over other creditors in taking control of the yard - except for the issuer of a £25m bond, which Ferguson required to secure the Cal Mac ferries contract.

The fixed price contract was for £97m. However, Ferguson now estimates the cost has risen to double that, and the ships are behind schedule. That is being blamed on numerous changes to the design, many of them linked to an innovative dual-fuel engine, using both diesel and liquefied natural gas.

Yard 'has a future'

Unwilling to fund the difference from his investment firm, Clyde Blowers Capital, Mr McColl sought a deal to share the overrun costs with the Scottish government, but that was rejected.

General secretary of the GMB Union in Scotland Gary Smith told BBC Scotland the yard did have a future.

"There has been a problem with two contracts but the truth is we are going to have to renew the fleet of CalMac ferries because frankly they're clapped out," he said.

"We know there are other commercial opportunities out there and we know that Ferguson's is at the cutting edge of hydrogen technology and above all, the greatest asset at the yard that we've got is the workforce.