Written evidence submitted by BAE Systems (DIS0030)
BAE Systems submission to Scottish Affairs Committee – Military Shipbuilding in Scotland
May 2022
1.1 At BAE Systems, we provide some of the world's most advanced, technology-led defence, aerospace and security solutions. We have a strong presence in Scotland; and our activity includes our Naval Ships business in Glasgow where we are designing and building the Type 26 frigates at our shipyards at Scotstoun and Govan; our Maritime Services and Defence Information facilities at Hillend; and our Regional Aircraft operations in Prestwick and RAF Lossiemouth, where we provide support and training for the RAF Typhoon fleet.
1.2 BAE Systems (and its predecessor companies) has been at the heart of military shipbuilding in Scotland for over 120 years, and is ingrained in the social and political fabric of Scotland.
1.3 BAE Systems has previously submitted evidence to Scottish Affairs Committee’s wider Defence inquiry, which focused on the Defence Estate in Scotland. As outlined in that submission, BAE Systems’ Naval Ships business, which is based on the River Clyde in Glasgow, is a significant contributor to the economic and social development of Scotland, including through securing export partnerships through the Type 26 Global Combat Ship (GCS) programme. This is a 32-ship worldwide build programme, with the United Kingdom (UK) having already contracted 3 ships with BAE Systems, and negotiations for the final 5 in very advanced stages; Australia has announced it will build 9 of its Hunter Class variant; and Canada will build up to 15 of its Canadian Surface Combatant.
1.4 From its facilities on either side of the River Clyde in Glasgow (Govan and Scotstoun), BAE Systems’ Naval Ships designs, builds and supports entry into service of the Royal Navy’s complex warships. The business also maintains and grows the Royal Navy’s Combat System capabilities across the current surface warship fleet, whilst also adapting its core warship designs for overseas navies, and supporting the build of those warships (with partners).
1.5 BAE Systems employs around 3,500 people across its 2 sites in Glasgow, and continues to invest in bringing new talent into the business. Since construction started on, the first in class, HMS Glasgow in 2017, the business has recruited over 400 apprentices and projects to recruit a further 650 apprentices over the next 5 years. In addition, Naval Ships maintains an annual graduate intake programme, and has also welcomed new recruits through the Movement to Work and Kickstart programmes in recent years. The business is actively recruiting a further c.400 trades roles to support the construction of the Type 26 City Class frigates for the UK Royal Navy.
1.6 More recently, the drive from the Scottish Government to sustain and increase local employment is supported by BAE Systems’ investments in digital infrastructure and high technology skills. BAE Systems has a significant presence in Scotland working with a range of partners, SMEs and academia to progress investment in research and development, such as advanced technology and future skills.
1.7 BAE Systems has a strategic partnership with the University of Strathclyde, recognising its role as a leading International Technological University to support the company with advanced science, technology and manufacturing. As part of this strategic partnership, BAE Systems supports a number of projects and research activities at Strathclyde along with the support of other universities around the UK. These include support to present and future products and new approaches to aiding BAE Systems in decarbonising both the business and products in support of its Net Zero ambitions. Recent projects that BAE Systems has funded at the University include inspection, sensing, space and manufacturing, particularly aiding Naval and Maritime technology and sustainability, often with broad applicability to support decarbonisation of the civil marine sector.
1.8 With the recent export success of the Global Combat Ship (GCS) design internationally the potential further investment into the Type 26 programme and BAE Systems’ commitment to shipbuilding and the development of skills this demonstrates a positive future for Scottish shipbuilding. With much of the design and the procurement of complex equipment from the common supply chain for the Australian and Canadian ship variants remaining within Scotland, there will be wider benefits to the local communities centred on the preservation of a skilled workforce and economic growth resulting from the creation and safeguarding of jobs.
1.9 As a direct result of BAE Systems’ export successes, BAE Systems, and indeed the local area, has benefited from knowledge transfer over recent years, with 53 secondees coming from Australia to BAE Systems’ Scottish sites on the Clyde to learn about the design and build processes and challenges, whilst 11 secondees from the UK are also in Australia sharing their expertise directly. BAE Systems envisages similar benefits to arise from supporting similar activities in Canada as that programme progresses.
1.10 To support the UK Government’s intent to revitalise the UK shipbuilding industry both to meet its own domestic naval requirements and to enable the UK to benefit from export opportunities, plans are underway to invest in BAE Systems’ shipbuilding facilities in Glasgow to provide the essential capability for safe, high quality and efficient ship construction along with increased productivity. This investment will transform the facilities with a new ship build hall: enabling the undercover construction of 2 frigates concurrently, modernising production through advanced processes, technology and toolsets, improving safety and welfare, and increasing productivity and competitiveness.
1.11 BAE Systems also intends to establish an industry-led National Applied Shipbuilding Academy that will deliver capabilities at scale to ensure that current and future employees within the industry can perform, innovate, and grow in priority areas of strategic importance to the Shipbuilding and Maritime industry. This will deliver a step change in applied shipbuilding skills, from trades to business management and everything in between, helping the sector compete and collaborate to deliver the successful and sustainable industry the Government seeks.
2.1 The Scottish shipbuilding industry has a proud heritage over many decades, in which BAE Systems has played a significant part. The current stability that the company enjoys dates back to the implementation of the 2005 Defence Industrial Strategy, which preserved the capability within BAE Systems’ Maritime sector to design, build and integrate complex warship programmes, ultimately leading to the successful bid for the Type 26 Global Combat Ship programme.
2.2 For many years, the military shipbuilding industry across the UK has existed in a cycle of feast and famine. There have been periods where ships have been commissioned and shipyards given enough work to sustain them for several years, followed by long periods where programmes have had to be extended in order to sustain the skills capability required for the next generation. This discourages investment, increases costs, drives-up programme risk, and makes it extremely difficult for industry to plan.
2.3 The publication of the National Shipbuilding Strategy (NSBS) refresh has been welcomed by BAE Systems (and across industry) for signposting the next potential phase of shipbuilding in the UK (and by association, in Scotland). The NSBS provides a means for industry to plan and implement in the long-term, ensuring business success, but also benefits for the areas surrounding our shipyards, for communities, infrastructure, and long-term employment.
2.4 In addition, the creation of the National Shipbuilding Office and the associated Skills Office demonstrated the Government’s commitment to ensuring the preservation and development of skills required for military shipbuilding.
2.5 The devolved nature of responsibilities/initiatives for skills investment across the UK creates a layer of complexity when referring to the implementation of a national strategy, such as the NSBS. Therefore, we would caution that the relevant bodies from across the devolved nations and central Government in Westminster are aligned on their respective areas of industrial strategy, in order to lead to the successful development of the future skills and manufacturing base across the UK . BAE Systems in Scotland has been part of the initial engagement between the NSBS Skills Office and Skills Development Scotland, and other devolved areas, and we welcome the opportunity to continue to support these positive collaborations.
2.6 BAE Systems is committed to working together with industry colleagues, across all levels of government, and with the skills sector to ensure we develop the next generation of skilled workers who will be able to meet the ambition of the NSBS. As set out in the NSBS, an initial exploration is already underway to see how those businesses along the River Clyde can collaborate better to provide joint benefit.
2.7 Ultimately, the NSBS approach to skills and industry requirements will have to be adaptable, and will need to encompass the whole of the shipbuilding industry, not just military shipbuilding. Therefore, there will be aspects of the non-military parts of the NSBS that can be used to sustain Scottish military shipbuilding.
2.8 As stated by the Prime Minister in his introduction to the NSBS, there is a responsibility for industry to respond to the opportunity of the NSBS. An initial example of this has been the engagement of Maritime businesses on the Clyde to try and identify areas where we can collaborate for mutual benefit, with an initial focus on skills.
2.9 If the benefit of the NSBS is to be gained by industry, deeper working at a Place/Local/Cluster level will be necessary to enable the industrial base of the UK to meet the projected demand through more collaborative working.
3.1 In 2017, BAE Systems was awarded the Manufacturing Contract to start construction on the first batch of 3 Type 26 ships. The programme continues to progress, with construction now underway on the first 3 City Class Type 26 frigates. All units of first of class HMS Glasgow have completed fabrication and the forward and aft blocks have been joined with the outfit of the ship now being the main area of focus. The second of class, HMS Cardiff, now has around 80% of her units in construction. HMS Belfast, third of class, entered the manufacturing phase at Govan shipyard in June 2021 at a ceremony led by HRH Duke of Cambridge.
3.2 The business is in final stages of negotiations for the second batch of 5 ships to take the order to 8 Type 26 to be built in Glasgow, and contract talks continue to progress well.
4.1 It is for Government to determine the most appropriate strategy for procurement of naval vessels, and whilst the UK Government recognises the importance of maintaining an indigenous warship building industry, the prospect of procuring warships overseas could introduce risk to the deliverability of the NSBS. That said, BAE Systems has had significant success in a keenly competitive export market, and the introduction of social value recognises the wider value UK based companies can provide to the UK.
4.2 The inclusion of social value as a favourable measure of 10 or 20 % in future tenders will act as a catalyst for industry to react to the market opportunity presented by the NSBS with increased confidence of success by concentrating its efforts in this key area. Lack of certainty of weighting given to UK content has hampered the ability to undertake such activity.
4.3 Industry awaits the effective implementation of the new social value requirements within procurement for all ships, including those procured by the Devolved Governments. Recent examples of ship procurement (as specified within the NSBS) have so far been unable to apply the scoring due to procurement rules.
5.1 BAE Systems has a strong track record of exporting military ships from its Clyde facility, with recent orders providing continuity of work on the Clyde through the peaks and troughs of UK MoD procurement programmes, sustaining the capability in the business and securing jobs.
5.2 As demonstrated most recently with the successful Global Combat Ship, and articulated as a case study in the NSBS document itself, exports can (and do) have a great impact on the country from which they are exported. The GCS design has been sold to both Australia and Canada where the ships will be built to the modified standard of the respective governments; Australia will build 9 ships, whilst Canada has proposed up to 15. Whilst the physical ship construction will take place overseas, much of the design work, and procurement of the complex equipment from the common supply chain, will be carried out in Scotland. This work is not only important for demonstrating how the Type 26 programme is helping to support the Government’s intelligence partnerships like Five Eyes, but it is also important for the BAE Systems’ workforce in Scotland as it provides continuity of engineering work/skills utilisation throughout and beyond the completion of the UK Type 26 programme. Currently, the Australian and Canadian contracts are supporting over 400 jobs at BAE Systems Glasgow facilities.
5.3 Knowledge transfer clearly provides benefit to the receiving nation, in this case Australia, however the process also provides for the UK/Scotland, which ultimately acts as a catalyst for BAE Systems and its suppliers, to continually advance capabilities in developing tools, techniques and digital processes. As part of the tri-nation working between the UK, Australia and Canada we are now scoping options to provide similar knowledge transfer opportunities with Canada as is underway with Australia.
5.4 To maximise the benefit from future exports to Scotland, the creation of IP through onshore designs will be critical to ensuring the success of securing GCS orders continues on future programmes, both military and commercial. This will maximise the potential to design in a local supply chain to allow the local content to be maximised in export orders.
6.1 The NSBS states that “for national security reasons, the UK needs to maintain a maritime enterprise with the industrial capabilities to design, manufacture, integrate, modify and support current and future naval ships (both Royal Navy and Royal Fleet Auxiliary).”
6.2 These industrial capabilities are best preserved through a structured Key Industrial Capabilities (KIC) national plan where the projected demand for naval ships is used to determine and maintain the different skillsets required in industry across the plan period. Such an initiative has worked successfully in the past between the MOD and BVT Surface Fleet Solutions (now BAE Systems Naval Ships) and could be used as a model for broader industry participation. Any plan should be long-term in nature and would require commitment from all parties to maintain the capability.
6.3 Certainty of this approach would also act as a catalyst to plot technology demonstrators and de-risking paths for new technologies through the NSBS pipeline for future military ships. Novel green propulsion is an example, where an approach to understand the implementation of such technology through the commercial market for a military shipbuilding business would allow it to gain the knowledge and expertise to apply these technologies to the design of military ships with confidence. This would therefore mitigate the long gap in design activity currently seen between complex warship programmes in the UK, sustaining the KIC and enabling joint working in industry.
6.4 The NSBS’ intention to foster industry to ‘cluster’ at a more local level can play a role in ensuring Scotland maximises access to the potential workload the strategy lays out. Enabling businesses to bid jointly for programmes in new partnerships, sharing capacity and unlocking dormant capacity locally, should all form part of the evaluation process of potential capacity in the country to deliver NSBS workload.
6.5 A thriving commercial shipbuilding sector across the country will only enhance this. Key to ensuring military shipbuilding can access aforementioned technology pathways will be the maximisation of the onshore capability to undertake design work for shipbuilding programmes in the UK. At present, the barrier to private companies financing the establishment of a first of class design undertaken onshore is prohibitive and will not happen. Government has a strategic role to play in providing the financing of such activity, with the reward of security of supply on IP for application to military ships enhanced by the ability for the UK to export its designs; and indeed build these same ships where possible, such as with GCS.
May 2022