Written evidence submitted by Professor Trevor Taylor, Royal United Services Institute (RUSI) (DIS0033)

Written evidence to the Scottish Affairs Committee Inquiry into Military Shipbuilding in Scotland

18 May 2022

Trevor Taylor

RUSI

1. The policy that the UK should be able to design and build its own warships has several dimensions within its justification:

1. The Government sees the UK as having global interests that need protection and asserts the need for operational independence with regard to the use of its armed forces.  The 2012 National Security Through Technology included that. 

53. Freedom of action is the ability to determine our internal and external affairs and act in the country’s interests free from intervention by other states or entities, in accordance with our legal obligations. This freedom is the essence of national sovereignty. It is also essential to be able to use a capability effectively, although not at any cost.

54. For national security capabilities in general, freedom of action rests on the assurance that we will be able to use them – or continue to use them – whenever we need to; and that when we do so, they will perform as we require. In the field of defence, freedom of action includes being able to conduct combat operations at a time and place of our choosing

There should be awareness that such freedom to use but also to modify and upgrade a system is rarely possible with an imported platform or even a national platform with multiple imported sub-systems.

2. From 2015 the Ministry of Defence, like other departments of state, has been under direction to contribute to national prosperity.  By 2021 defence responsibilities had been widened to contributing to the ‘levelling up’ agenda and economic recovery from Covid. The abandonment or even neglect of UK warship building capabilities would cause significant local and regional economic disruption and cause a reduction in the well-being of employees in the surviving military shipbuilding sector. On the positive side, a shipbuilding sector that can generate exports provides a further boost to the economy.

3. The existence of a capable national defence industrial sector, able to deliver complex problems, can be viewed as a source of soft power, underlining the country’s capacity to deliver demanding projects (which should also have export possibilities).

The Minister for Defence Procurement summarised these points when he said:

In my view, the Defence sector is the crewel in the crown of our country’s economy – maintaining hundreds of thousands of jobs, developing rich skill bases and boosting our global influence.[1]

2. As a result of the restructuring and shrinkage of the UK’s military shipbuilding sector, the UK’s current industrial capacity for the integration and construction of such warships is located in central Scotland at three facilities at Scotstoun, Govan and Rosyth which are however linked to design and sub-system industrial capability across the UK as a whole.

3. The National Shipbuilding Strategy, including the ‘Refresh’ document issued in 2022, is concerned to regenerate shipbuilding activity across the country as a whole and sees the potential of Government projects to promote that.  In the past 30 years or more, commercial shipbuilding has declined significantly and the number of yards capable of building warships has declined to two.  The NSS argues for the revitalisation of past capabilities to meet a wide range of government needs. The main candidates for regeneration include that Swan Hunter on the Tyne, Harland & Wolff in Belfast and Cammell Laird on the Mersey, which have all built military vessels in the past but not in recent years. Cammell Laird currently supports the Tide class of RFA tankers, built the Sir David Attenborough (at a significant loss), and was BAE Systems’ associate on its bid for the T.31. Harland & Wolff finished its last Ministry of Defence ship in 2003 and has since experienced liquidation and ownership changes.  However in 2019 it was bought for £6 million by a London-based company InfraStrata which has bought the Appledore yard in Devon when that was sold by Babcock after completion of Appledore’s carrier work.  Harland & Wolff also includes among its sites two Scottish facilities at Merhill on the east coast and Arnish point on the Island of Lewis, both of which have some fabrication capabilities.[2]  Swan Hunter today is focused on offshore and underwater engineering products and services. [3]   The Ferguson yard in Glasgow should also be noted as a member of one of the teams competing to build the Fleet Solid Ships (see below).

4. Scotland cannot thus expect any specific preference for wider work unless it can demonstrate particular promise or (perhaps) if contracts for non-combat military vessels can be accepted as necessary for the maintenance of industrial capability in a period of gaps in warship orders.  The orders that BAE Systems received for five offshore patrol vessels from 2014 reflected such considerations. While the Defence and Security Industrial Strategy argued that that defence procurement should ‘bolster the Union’, in shipbuilding terms this has strong relevance to Northern Ireland (and the possible revival of Harland & Wolff) as well Scotland. The Government is not concerned with boosting shipbuilding in Scotland per se, but in the UK as a whole.

5. While this inquiry is focused on the economic and social aspects of Scottish shipbuilding, it needs to rest on awareness of the features of a modern fighting vessel. Put simply, a modern warship is marked by

• Sub-systems that propel it and enable accurate navigation over thousands of nautical miles;
• Sub-systems that meet the rest, sustenance, personal hygiene, medical and recreational needs of its crew;
• Sub-systems that, using a range of sensors, detect and track potential threats as well as friendly objects in the ship’s environment;
• A Combat Management System that links information about potential threats with decision making about the appropriate responses;
• Secure communication systems (enabling voice, video and data transmission and reception) both within the ship and linking the ship with other relevant parties.
• Weapon systems (effectors) that can be used in response to threat from under, below or above the surface of the sea
• Defensive sub-systems to prevent or limit the impact of an attack on the ship.
• Speed, agility and stealth aspects that enable it to respond quickly and minimise the chance of a successful attack on it. 

Given the changing and advancing threats to surface ships from potential adversaries, the generation of a modern warship is demanding and requires a broad and deep range of expertise in multiple businesses as well as extensive infrastructure and access to capital.  Warships, like many other military systems, are deriving ever more of their capabilities from electronics and computing systems rather than the guns and armour that traditionally defined a warship. Looking forwards, whereas the last complex warship procured by MoD (the Type 45) saw construction accounting for less than 40 per cent of its costs, the next such warship is likely to involve sub-systems accounting for perhaps 70% of the cost. It is the capacity to develop, integrate within a platform and modify such sub-systems which lies at the core of the operational independence that the Government seeks for its armed forces.

6. Scottish yards which provide the core of military ship-building capability in the UK have assured work in terms of being on contract only towards the early 2030s. More contracts should follow but only if the firms are perceived in Government as performing will in the face of the challenges and risks placed on them.  Future Governments will have the option of abandoning or modifying the commitments in the National Shipbuilding Strategy. Precisely how Scotland would benefit from military shipbuilding must also take account of the current trend to build vessels in kitted out blocks, often in different locations, and then to join up the blocks in the final yard.  Rosyth was used for the final assembly of the QE class. Thus it is possible that some of the Type 31 will be put together by Harland & Wolf (which was part of the Babcock-led team.

Queen Elizabeth Class Aircraft Carrier Block Move - UK Airshow Review Forums (airshows.co.uk)

7. This author would argue that the original NSS and its Refresh version in 2022 placed more emphasis on the benefits of competitive tendering than was justified if a key aim is to maintain and develop the industrial capability in the UK to deliver advanced warships.  This aim needs the government to acknowledge that, as RAND Corporation studies underlined more than 15 years ago,[4]  a viable industry needs a timed drumbeat of orders so that workforces are not disrupted by a feast and famine cycle of work. The creation of a National Shipbuilding Office will be able to monitor shipbuilding and its supply chains in the UK, but it is not clear how it will be able to shape the procurement choices that will be made by individuals departments and other organisations.
8. The Government has opted explicitly for a competitive approach to the procurement of the three Fleet Solid Support ships and has awarded contracts of £5 million each to allow four consortia to refine their proposals.  ‘The four consortia awarded Competitive Procurement Phase contracts are (in alphabetical order):

•   Larsen & Toubro, which includes UK company Leidos Innovations.
•   Serco /Damen, which includes UK company Serco.
•   Team Resolute, which includes UK companies Harland & Wolff and BMT.
•   Team UK, which includes UK companies Babcock and BAE Systems.’[5]

Only one of these bidders includes an offering that is likely to benefit Scotland. It is also notable that the successful bidder for the MoD’s last contract award, Daewoo of South Korea, is not involved.  It failed to deliver the vessels on time and went into liquidation making the effort. [6]

9. Technically the terms of the Social Value implementation guide discriminate against incumbents in that bidders must spell out the new jobs that will be created in the event of a successful offer.  There is no opportunity to argue how many existing employees will be able to be given continuity of employment.[7]

10. However, in 2022 the authors of the National Shipbuilding Strategy Refresh were optimistic about Scotland’s potential and prospects:

Scotland is also renowned for its rich shipbuilding heritage, spanning hundreds of years. Scotland has given the world some of its best-known maritime names and remains the location of a significant proportion of the UK's shipbuilding capacity. Much of this can be found around the river Clyde in central Scotland. The Clyde and its immediate environs have a strong maritime cluster with significant infrastructure, skills, training and academic resources creating expertise in both naval and civil shipbuilding and engineering. The Clyde Mission initiative is seeking to leverage these strengths by working with key shipbuilding partners such as BAE Systems to bring together industry, academia and the public sector to develop the wider potential of the area.

Shipbuilding is also thriving in Rosyth where Babcock are building the Type 31 frigates. Babcock are leading an initiative to develop a Campus for Advanced Manufacturing and Technology at Rosyth. As part of this initiative the BEIS-funded Engineering and Physical Sciences Research Council have invested £4.1 million in the Babcock and University of Edinburgh FASTBLADE facility to develop a state of the art composites testing facility. This will provide rapid cyclic testing for new composite blade designs.

Given the significant links between the Royal Navy and shipbuilding and support industry in Scotland, the Royal Navy has committed funding to support a comprehensive cross-sectoral analysis of the maritime enterprise in Scotland. The aim of the study is to identify shared challenges, priorities and ambitions in the maritime sector in Scotland and to identify options for future Royal Navy and MOD participation and investment. This may include shared funding for a Maritime Enterprise Scotland Centre as a physical showcase for world-leading maritime training, education, innovation, technology and industry in Scotland. Maritime Enterprise Scotland will link diverse centres of excellence for maritime research, innovation, energy, manufacturing, education, skills and training across Scotland to grow a sustainable, thriving and world-leading maritime sector, which is vital to the UK and Scotland's prosperity and to the UK's role in the world. 

11. Both the Type 26 and the Type 31 have enjoyed some export success already although not for shipbuilding work. Australia has bought the Type 26 design as the basis for its eight future Hunter class ships, and Canada has selected the design for its planned 15 Future Surface Combatants.  BAE Systems Australia is responsible for the delivery of the Australian order. In Canada, Lockheed-Martin partnered with BAE Systems to offer the Type 26 design plus modifications and the vessels will be built by Irving,  the Canadian shipyard in Halifax, Nova Scotia. Both the Australian and Canadian platforms will include substantial sub-systems of UK origin. Clearly the implementation of both these projects is placing and will place additional demands on BAE Systems’ UK staff.   As for the Type 31, Poland (three ships)[8] and Indonesia (two ships) have opted for its design[9], with both wanting to build the ships in their own yards.  Again dealing with Polish and Indonesian companies has workload implications for British staff particularly within Babcock International.  These deals constitute progress to date and clearly other sales are possible over the next years but sub-system and design exports appear more likely than ship construction work. 

12. Military procurement and shipbuilding face a cost escalation challenge similar to that found in the aircraft and even land sectors. In the early 1980s the US defence industrialist Norman Augustine asserted that if current cost increase trends continued, the entire US defence budget in 2054 would be devoted to the purchase of a single aircraft.  Inter-generational combat aircraft costs have consistently risen in real terms faster than have defence budgets. However, advanced warships have experienced a similar issue.  Research in 2010 revealed that the Type 14 frigate in 1956 cost £32 million at 2009 prices while the Type 23 cost £183 million, again at 2009 prices.[10]  The Type 45 destroyers cost £1 billion each in round numbers with the first one coming into service in 2007.  The contract price for the first three 26 frigates was £3.7 billion[11] (although later ships may cost less).  The MoD’s response to this in part has been to opt for simpler but still useful ships, the Type 31s, and to transfer significant equipment from retiring Type 23s into these new vessels. [12]  Thus, it is hoped to keep to the public target of keeping new costs to £250 million a ship.

13. A broad question for the shipbuilding sector concerns the extent to which it can control cost growth.  There is a view in industry that the best way to reduce costs is to exploit the scale and learning associated with longer production runs.  However it is notable that the MoD has contracted for only three Type 26s in the first instance, giving itself the option to make other arrangements for the other five ships.  Babcock have a contract for five Type 31s but no assured work for a follow-on vessel, the Type 32.  Viewed through a purely technological lens, there can be hope that use digital engineering and what is being called the fourth industrial revolution to contain cost growth.  In simple terms digital engineering offers the prospect of using computer-based models to develop comprehensive designs with a comprehensive data set to test, sub-assemble, construct, operate, support and speedily modify combat ships. But this would seemingly imply a readiness to spend more money early in a programme’s life to generate longer-term savings. Thus there is the issue of how the MoD could incentivise the private sector to take on the burden and risks of pursuing all the gains that digital engineering could offer.

14. In terms of what the Government could further do for Scottish and indeed UK shipbuilding, a rapid but deep inquiry into why delivery of the ferries from the Ferguson yard has proved so difficult would make a valuable contribution in lesson learning and the highlighting of challenges that would need careful handling in other cases. Major errors with the lengths of cables has been identified as the immediate problem but why this should have been the case and the root causes of other disruptions should be identified. [13]   Such an inquiry should not be led by a legal figure but by a project management and engineering expert with the purpose of generating understanding rather than apportioning blame.

15. While the NSS Refresh offered a long list of governmental projects in the maritime space, it did not venture into whether the aim should be to sustain one or two companies (or more) capable of delivering advanced warships capable of dealing defensively and offensively with the forces of a potential UK adversary.  This is a vital matter for companies in Scotland, not least when they are contemplating long-term investments in infrastructure, manufacturing technology and of course people.

May 2022