The defence giant BAE is conducting a review, which could see it end shipbuilding in Portsmouth, which employs around 1,500 people, or close its entire operation there at the cost of 3,000 jobs The remaining 1,500 BAE staff in Portsmouth are engaged in ship maintenance, a more profitable division which is responsible for looking after the dockyard and ships for the Royal Navy.
At present Portsmouth is building sections of the Queen Elizabeth class Aircraft Carriers, the sections are then transported to Scotland for assembling; BAE is also building six Type 45 warships and has been given the contract to design the new Type 26 frigate, likely to be in production until 2030. However, BAE has other shipbuilding capability in the UK – in Scotstoun and Govan in Scotland. But Union sources have identified the Portsmouth division as the most at risk of closure.
A spokesman for the Ministry of Defence declined to comment on BAE’s potential move. However, sources said the Royal Navy could be forced to reconsider its own presence at the dockyard if BAE pulls out altogether.
BAE has appointed LEK Consulting to review its shipbuilding operations, in accordance with the terms of a business agreement it signed with the government in 2009. The agreement aims to ensure Britain’s dockyards remain viable, consolidating if necessary, rather than losing the country’s shipbuilding skills.
If the shipbuilding is wound down, the Ministry of Defence will have to bear costs that could run into hundreds of millions of pounds under an agreement the MoD signed with the company in 2009. This guaranteed BAE a minimum of £230m a year in shipbuilding and support work over 15 years. The agreement can be cancelled at any time but the MoD would be “liable for remaining industry closure costs and compensation to BAE Systems for their lost investment”.
In 2010, the cancellation cost was estimated to be £630 million.
BAE has had a monopoly on British warship construction since 2009, when it bought the shipbuilding arm of VT Group in 2009, formerly known as Vosper Thornycroft.
If Shipbuilding in Portsmouth ends then that would throw the future of the other sites in England, Cammell Laird at Birkenhead and A&P Tyne at Jarrow, into doubt.
The result of this could be that all warship building in the UK is located in Scotland, and, if Scotland goes for independence it would mean that all Royal Navy warships would be built in a foreign country! Not a good position for any Navy to be in!