The last civilian shipyard on the Clyde has announced plans to go into administration after a Scottish state company refused to cover extra costs that the yard incurred on a bitterly disputed contract to build two high-tech ferries.

Jim McColl, founder of Clyde Blowers Capital and one of Scotland’s leading businessmen, rescued the Ferguson Marine Engineering yard in 2014 but told the Financial Times recently that failure to resolve the dispute would wipe out his investment and tens of millions of pounds in Scottish government loans. 

The 116-year-old yard announced on Friday evening that its directors had served notice to appoint an administrator. Clyde Blowers Capital blamed the Scottish government and state-owned company Caledonian Maritime Assets, which owns and manages ferries and harbours. 

“This decision . . . is fundamentally due to CMal and the Scottish government’s inability to find a resolution to the additional costs encountered during the build of the two prototype [liquefied natural gas] dual-fuelled ferries,” Clyde Blowers said in a statement. 

“As shareholder we have provided a number of viable proposals to avoid the process of administration and save the jobs of 350 employees,” it said. “However, CMal and the Scottish government have consistently refused to participate in productive discussions.” 

The collapse of the yard, the last remnant of what was once one of the world’s most powerful civilian shipbuilding industries, would be a heavy blow to the Port Glasgow area, which lies west of Scotland’s largest city, and also a deep embarrassment to the Scottish National party government. 

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On Twitter, Nicola Sturgeon, first minister, said the government was “determined to find a solution that will protect jobs and secure the future of the yard”. 

“We will be continuing work over the weekend to find a way forward,” Ms Sturgeon said. 

A person familiar with the yard said it was still possible that administration could be avoided if there was a change of attitude from the government and CMal. 

The state company has refused to meet Ferguson Marine’s demand to cover more than £61m in extra costs to be added to its £97m contract to build two ferries. Mr McColl claimed in his interview with the FT that letting the yard fail would end up costing CMal much more.

The vessels were ordered under a fixed-price design-and-build contract. But Mr McColl blamed the delays and increased costs on substantial late changes by CMal to the ferries’ original specifications. 

After an independent review ordered by the government broadly backed CMal’s position on the dispute, Clyde Blowers asked the government to invest in the yard but was rebuffed. 

Stuart McMillan, SNP member of the Scottish parliament for the constituency that includes Port Glasgow, said the yard should continue to build ships. 

“Today’s action is not the end, but it ensures dialogue to find a successful outcome continues,” Mr McMillan stated.

The dispute and long delays to construction the two ferries have fuelled worries about the reliability of Scotland island ferry services. State-owned ferry operator CalMac Ferries has warned that the age of its fleet is straining services, with a number of vessels on lifeline routes more than three decades old.

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