Meeting of the Parliament

Meeting date: Tuesday, November 14, 2023

Official Report 925KB pdf

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Ferguson Marine

The next item of business is a statement by Neil Gray on Ferguson Marine. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

14:17  

Today’s statement maintains, once again, this Government’s commitment to update Parliament on the progress in the building of two new ferries, the MV Glen Sannox and MV Glen Rosa—vessels 801 and 802—at the Ferguson Marine shipyard in Port Glasgow. It also gives me an opportunity to reassure Parliament that we remain committed to doing all that we can to ensure a sustainable future for the yard, and are working with it to find a way forward that will maintain shipbuilding and all the benefits that that provides to the community in and around Inverclyde.

MV Glen Sannox and MV Glen Rosa will provide lifeline connectivity for the community on Arran, ensuring access to healthcare and education services, supporting day-to-day commercial activity and providing a boost to the tourism industry, which contributes so much to the island’s economy.

The delivery of the ferries matters, and I welcome the scrutiny provided by this Parliament and, in particular, by the Net Zero, Energy and Transport Committee and Public Audit Committee. This scrutiny is right and proper, and I want to take this opportunity to reiterate my commitment to being as open and transparent as possible as their work progresses and concludes.

In that regard, I note that the Public Audit Committee wrote to me recently requesting further information on a number of matters. I can give an assurance that that will be provided in a timely manner, wherever it is commercially appropriate to do so.

First, I will provide an update on the delivery of the two vessels. In doing so, I will address issues that have been raised in relation to the certification of the vessels and provide an update on the pathway to their handover to CalMac Ferries.

In his update to the Net Zero, Energy and Transport Committee at the end of September, the chief executive officer of Ferguson Marine indicated that the delivery of the vessels had been complicated by issues related to certification by the Maritime and Coastguard Agency and that, as a result, the estimated costs to deliver both vessels had increased.

The Maritime and Coastguard Agency is a United Kingdom-wide regulator that plays a vitally important role in providing certification to ships and seafarers. It is engaged very early in the delivery of new vessels, particularly those of a first-in-class design, such as the MV Glen Sannox. That is consistent with shipbuilding practice across the world and allows for both refinement and development of designs in response to certifier input. The MCA engagement involves both its Scotland office in Glasgow and its UK office in Southampton.

We understand that the process of engagement between the MCA and Ferguson Marine Engineering Ltd around Glen Sannox and Glen Rosa began back in 2015, with the formal approval process commencing in 2016. I understand from talking to the management at Ferguson Marine that they enjoy good relationships with the organisation as a whole and have worked well together in addressing concerns about the original designs. As reported by the chief executive of Ferguson Marine, a number of modifications have been made to the original design in the past few months in order to secure final MCA approval, including the provision of additional stairways from the upper decks of the ships. Those changes have been made successfully. Although there have been delays and increases to the chief executive’s original cost estimates as a result, it was the right thing to do to make those changes on Glen Sannox, and the modified designs will be adopted for Glen Rosa.

More recent design issues involving below-deck escape trunks were being considered by the MCA. I am pleased to note that the chief executive officer has informed me and the Net Zero, Energy and Transport Committee that that process has been completed, with approval of those design modifications. That means that the vessel will move to phase 1 of the dockside trials before her move to dry dock for the next phase of work on 18 December. Final outfitting will continue when she returns to quayside and before the sea trials that are planned for January. There is further positive news on MV Glen Rosa from the chief executive, who recently announced that the planned slipway launch and naming ceremony has been set for 12 March 2024. I look forward to being kept appraised of that planned milestone.

However, as I said earlier, those changes have consequences. It was with much regret and incredible disappointment that I noted the most recent update from the chief executive, which set out delays to his projections of the delivery dates and an increase of estimated costs around the build of both vessels. His letter puts the total cost of delivering Glen Sannox at £130 million since the point of public ownership and at £100 million for Glen Rosa. That represents an increase of £32 million for Glen Sannox and £4.8 million for Glen Rosa from the cost estimates that were provided in September 2022. Of that, he reported that uncommitted spend at the end of September was £10 million for Glen Sannox and £45 million for Glen Rosa. He made provision of up to an additional £30 million to cover contingency issues that may arise, particularly during the sea trials that need to take place before the final handover to CalMac. He projected the delivery dates as being 31 March 2024 for Glen Sannox and 31 May 2025 for Glen Rosa.

We are currently working with the yard and our external advisers to scrutinise those costs and to do all that we can to assist Ferguson Marine in minimising contingency costs and delays. I will update the Public Audit Committee on the timeline for that work as soon as possible. However, it is worth saying that, on the basis of the information that we have from the chief executive, we remain committed to the delivery of both vessels by Ferguson Marine, and the conclusions that I reached in issuing a written authority earlier this year to continue building Glen Rosa at the yard, with all the benefits that that will bring to the workforce and the community, remain valid.

We will, of course, continue to monitor and scrutinise the costs and progress associated with the delivery of Glen Sannox and Glen Rosa as part of our due diligence exercise. There is no doubt in my mind that considering a re-procurement would be highly detrimental to the island communities that we serve, because it would likely push the delivery date for Glen Rosa back to 2028. I do not believe that anyone in this Parliament would want me to do that, and I am not prepared to let our communities down in that way.

I am conscious that the Public Audit Committee has asked me to consider what, if any, information from the previous due diligence reports carried out on the forecast costs that were provided in September 2022 could now be made available. I am looking at whether the passage of time has reduced the commercial sensitivity of those reports and will respond to the committee formally by the required date, but some of the content of those reports remains the intellectual property of the commercial advisers. In reaching a decision, I must always be guided by the need to ensure that we do not harm the ability of the shipyard to compete for and secure future work.

I will move on to the future of the yard. In considering the next steps for Ferguson Marine (Port Glasgow) Ltd after delivery of Glen Rosa, we have been very clear that our priorities are to preserve skilled jobs and secure a sustainable future for the shipyard. Earlier this year, we received a business plan and accompanying request for investment from the yard, and we are currently working with it to refine those plans and put together a proposal that will provide the kind of future that we all want to see.

Any such request must meet subsidy control rules, as I have set out previously, and needs to demonstrate value for money and be open to parliamentary scrutiny. Our independent due diligence on the initial capital investment request concluded that the initial business case would not meet the commercial market operator test, which is a key legal requirement if we are to demonstrate compliance with the subsidy control regime, and therefore, we continue to examine options that would be compliant.

At the same time, the markets in which Ferguson Marine operates continue to change, and a key component of the initial case for investment was contingent on winning a specific pipeline of work that the FMPG board and management recently concluded should not be pursued at this time.

We and the yard recognise that it is vital that any investment supports a business plan that reflects evolving circumstances, is genuinely deliverable and meets our legal requirements on subsidy control. We will leave no stone unturned in finding a way forward, and we will consider all options for securing a future based on a promising order book. That will be done at pace, and I expect to report back on progress as soon as possible.

I understand that this may be unsettling for the workforce, but it is important that we get this right, and I hope that I leave no one in any doubt about this Government’s commitment to retaining shipbuilding on the Clyde and providing future opportunities for the new and the future workforce in the local community.

I am committed to ensuring that these vessels are delivered as soon as possible to our island communities. I am also committed to doing all that we can to support the shipyard to secure a route to a sustainable future, and to do so we have committed to provide assistance to the chief executive in the development of a revised business case for investment.

The two ferries, one of which is nearing completion at over 84 per cent cost to complete, will support the Clyde coast communities for future generations. They will increase capacity and provide a boost for the island economy, which will have benefits in ensuring a vibrant future for businesses located there.

The yard remains of vital significance to the local, regional and national economy of Scotland. The progress that I have outlined today delivers on those commitments.

The cabinet secretary will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business. It would be helpful if members who wish to ask a question were to press their request-to-speak button now.

Many people would have been hoping for good news about the future of the yard. Workers will be watching this and feeling a sense of despair.

A cross-party group of MSPs wrote to the cabinet secretary on 7 September saying that investment in a new plating line is essential if the yard is to become competitive. David Tydeman asked for tens of millions of pounds for that—perhaps the cabinet secretary can say what the exact figure is—and he has been clear that a decision is time critical, but the cabinet secretary has said today that he cannot proceed. He talks about securing a future based on a promising order book, but there will be no such order book without that investment.

The cabinet secretary also talks about needing to see a revised business plan. Will he tell us what is lacking from the one that is before him? Does he genuinely think that the yard has a future without the further time-critical investment that has been asked for? It certainly does not feel that way.

Graham Simpson asks me for good news. There is good news in my statement about the declaration from the MCA this morning allowing the Glen Sannox and the Glen Rosa to proceed. That is good news, as is the fact that the chief executive has come forward with a launch date for the Glen Rosa. That demonstrates the progress that is being made by the yard and the workforce in delivering on the commitments and what our island communities need from the vessels.

On the funding request, I set out in my statement the issues around the initial business case. The request for funding is still undergoing development. Any investment that is provided to Ferguson Marine has to comply with regulatory propriety and value-for-money assessments, as well as subsidy control legislation. We will continue to work with the yard on having a finalised application come forward, because it is not clear or definitive as yet.

The people of Inverclyde and the people of Scotland want a competitive shipbuilding industry. International benchmarking agents have made recommendations, and cross-party and cross-sector representations have been made for infrastructure investment in the yard. There has already been a catalogue of mistakes by management and the Scottish Government relating to Ferguson Marine. Does the Scottish Government accept that there can be no further delay and that it cannot stand back and sabotage the shipyard by preventing it from competing competitively?

I agree with Katy Clark that we want to see competitive commercial shipbuilding on the Clyde. We agree on that. That is why we are doing all that we can to support the yard on the delivery of the vessels—which is critical for island communities, the workforce and the reputation of the yard—and on coming forward with a business plan on what the investment in the yard will look like and be prioritised towards. As I said, the market has moved and the investments that the yard would want to see in order to get access to contracts have changed. We will continue to support the yard as it comes forward with a revised business case.

I welcome the update from the cabinet secretary on the progress that has been made with the work taking place at Ferguson’s and his recognition of the importance of securing a long-term future for the yard and the sector in Scotland. What work has the Scottish Government done to seek out industrial partners to bring investment, technology and expertise to help to secure the yard’s long-term future?

As I set out, my officials have worked closely with the board and the chief executive to identify possible areas for investment and upgrade. Shipbuilding is a highly specialised industrial area, so we have to contract with specialist advisers to assist in identifying a path to a sustainable future, and that work is on-going. As part of our work to support the yard and develop a revised business plan for the request for capex, we are considering all options, including potential partnership opportunities. Obviously, that work is on-going. We will do what we can to ensure that that is made public as soon as considerations have concluded.

How much did Ferguson Marine request for a new plating line?

The business case and the request for capital investment in the yard have been set out previously in correspondence and discussions that I have had with the committee. We are now in the situation in which that has been revised—[Interruption.]

Please resume your seat, cabinet secretary.

The cabinet secretary has been asked a question. The person who has the floor should be able to provide an answer without there being any sedentary chuntering.

I have set out very clearly that the application for capital investment is changing. We will support the yard in coming forward with a business case and we will do what we can within the subsidy control legislation to ensure that, whatever capital investment is required to help to make the yard competitive, it will remain competitive.

I pay tribute to the workers, who have often found themselves at the mercy of ever-changing leadership, ownership and political rhetoric. The only way to sustain the yard’s future is by ensuring that it can compete for contracts on merit. Can the cabinet secretary advise whether the yard is, indeed, becoming more competitive and how we can complete that journey?

On Kate Forbes’s initial point, I absolutely and whole-heartedly agree. I enjoy a positive working relationship with the shop stewards who represent the workers at the yard. For the reasons that Kate Forbes set out, I pay tribute to the work of the workers and the unions that have been representing them.

Officials are working with the yard to develop and refine the business case to ensure that the yard can continue to be competitive. Any investment that is provided to Ferguson Marine must comply with regularity, propriety and value-for-money assessments, as well as subsidy control legislation. Failure to comply would leave any award of investment open to legal challenge. My team and I are working together with the yard to do everything that we can to ensure that the yard is competitive for future work and to target areas where that might be possible.

The cabinet secretary has said that he must be guided by the need to ensure that we do not harm the shipyard’s ability to compete for and secure future work. On that, we certainly agree.

It is also agreed that, as verified by consultants, to be competitive, the shipyard needs capital investment, particularly in a new panel line supplied by Pemamek of Finland. Other shipyards in the UK, such as Harland & Wolff in Belfast, are investing in such technologies. It also fits well with the UK Government’s national shipbuilding strategy refresh.

Will the Scottish Government consider creating a programme of investment, perhaps through the Scottish National Investment Bank and Scottish Enterprise, that is available to all shipbuilding activity in Scotland regardless of ownership, and which will allow for such capital investments to be made to achieve the national strategic objective of growing a shipbuilding industry? That would get round the restrictions of the commercial market operator test, which the cabinet secretary identified. Will he consider that measure?

We are considering all avenues for supporting the yard and maintaining commercial shipbuilding on the Clyde. That is the whole reason why we stepped in and brought forward public ownership—we did that so that we could do everything that we can, with the powers and resources that are available, to deliver the ferries and maintain a future for commercial shipbuilding as best we can. We will consider all potential options for investment in the yard to ensure that it maintains competitiveness.

The cabinet secretary said that the Scottish Government remains committed to doing all that it can to ensure a sustainable future for the yard. On 12 March 2024, when the Glen Rosa is launched, the building of new ships will become even more essential. When will the Scottish Government announce an update about the small-vessels programme? With or without any new investment, will a decision be made on direct award, which would safeguard the future of the yard and the jobs in my community?

I thank Stuart McMillan for his on-going stout advocacy for his constituents in the workforce and for the yard, which is in his constituency.

We will consider future vessel contracts from public agencies case by case, and we will consider whether it might be legally possible and appropriate to use direct awards. Under procurement rules, direct award is possible only in limited circumstances, and breaching those rules could lead to legal challenge, which would cost the taxpayer money and cause delay. We will give all the options serious consideration.

Parliament will be forgiven for not celebrating the Glen Rosa’s launch date, because Nicola Sturgeon’s pretend christening of the Glen Sannox six years ago came with painted-on windows, fake engines and the wrong bow. It was enough to make Kim Jong-un blush.

Still our island communities suffer. David Tydeman, who is Ferguson Marine’s chief executive officer, believes that the boats will be worth just £70 million apiece when they are finally finished. That is a fraction of the £360 million of taxpayers’ money that has been spent on their construction. Will the cabinet secretary confirm that that is also the Government’s assessment of the ferries’ market value? Why has no Scottish National Party minister ever resigned over a scandal that can be seen from space?

Alex Cole-Hamilton misunderstands the process by which shipbuilding happens. A launch date is the first opportunity for a ship to reach the water for the next stage of its build. That is the next stage for the Glen Rosa and is a normal part of the process to make progress on the building works.

Assessment of the vessels’ value and how that is reported in the accounts will be part of the work that is done. That will all be publicly available when the work is completed.

Given recent cancellations on the Brodick ferry route due to the weather and technical problems, what discussions has the cabinet secretary had with Ferguson Marine about the increased reliability and resilience that the Glen Sannox and the Glen Rosa will deliver when they enter service? When is that expected to be? The latter is the question that islanders are asking.

The issues on the Arran route have a material impact on the constituents whom Kenneth Gibson represents, which he does so doughtily in the chamber. The new vessels and the related port works have been designed to improve capacity, reliability and resilience on that route. Port works at Brodick are complete, temporary works at Troon are nearing completion, and work is continuing on the review of the business case and costs for upgrades at Ardrossan.

As was set out in the yard’s latest update to the Parliament’s Net Zero, Energy and Transport Committee, it is due to deliver MV Glen Sannox by 31 March 2024. The vessel’s deployment on the Arran route is expected to be in the summer, subject to completion of the build and successful sea trials. The final date for its entry into service is for CalMac to decide. However, everything that we and Ferguson Marine are doing is working towards Glen Sannox being operational on the summer timetable.

We know that ferries are vital for island communities and their economies. However, we also know that many ferry services require upgrading or replacing. Does the cabinet secretary agree that we need a long-term strategy for ferry procurement, manufacture, maintenance and replacement, as we learn the lessons from the Ferguson Marine issues? We need community engagement, secure jobs, the decarbonisation of fleets, and a rolling programme of build and refurbishment for all our island communities. If he does agree, will those elements form part of the forthcoming green industrial strategy?

In my answer to earlier questions on direct award and procurement of vessels I set out that we need to work with procuring authorities in that regard and to ensure that decisions are proportionate and subject to the subsidy control elements. We will do everything that we can to ensure that there is certainty for island communities in the future. I will be happy to set that out in more detail in my regular meetings and updates with Green colleagues.

Today sees the publication of Audit Scotland’s report on Ferguson Marine’s annual accounts, which says that it is uncertain whether the yard can continue as a going concern. It also says that bonuses had been paid without the approval of the Scottish Government. According to the cabinet secretary, the board does not believe that the business case is based on work that it can possibly win, so it has asked for £40 million—I think that that is the figure that the cabinet secretary is looking for—to do something that it believes is not worth investing in. What will the business case be based on? What amount of money will be needed to keep this vital yard in operation?

I thank Edward Mountain, the convener of the NZET Committee, for his question. As I said in my statement, I also thank him and his committee for their work in scrutinising the matter and ensuring that ministers and Ferguson’s are held accountable for delivering the vital ferries for the island communities that need them so badly.

As I set out, the business case is now subject to change. We are working with Ferguson’s and supporting it in that to ensure that it is responsive to changing market conditions and the areas of work that it is attempting to win. We will continue to do so, because we are committed to ensuring, as far as we can, that there is a sustainable commercial shipbuilding operation on the Clyde.

It is clear that inflationary and other significant pressures could increase the costs of completing the vessels. Will the cabinet secretary outline what on-going control and scrutiny there will be to ensure that remaining costs will be tightly controlled?

Yes, I will, because such control will be critical. Ferguson Marine is required to submit monthly financial reports to the sponsor directorate of the Scottish Government. Those are scrutinised by our technical advisers, by CMAL and by our finance teams to ensure that they are necessary and represent good value

That concludes the ministerial statement. There will be a short pause before we move on to the next item of business, to allow front-bench teams to change positions, should they so wish.