Ferguson Marine: Fears for future of shipyard over lack of work

It comes as details of Ferguson Marine board discussions have emerged, revealing concerns about its solvency without a pipeline of significant extra work.

And serious questions have also been raised over the legality over Ferguson Marine receiving a vital direct award from the Scottish Government for the construction of up to seven small 'loch class' ferries for CalMac.

Meanwhile vital contract work it has landed with BAE Systems has been valued at just £2m.

Former Ferguson Marine owner, tycoon Jim McColl said that the shipyard firm would be insolvent without the taxpayer millions that was being pumped in by the Scottish Government, describing it as a "disaster" and saying there is a "big black hole" on its future.

Ferguson Marine sources have admitted that the BAE contract was "modest" but it was hoped that it would lead to bigger contracts "once Ferguson proves it can do the job"

Ministers recently sanctioned a cash injection of £61m for the yard as Ferguson Marine tries to deliver the two long-delayed and hugely over-budget ferries for CalMac.

READ MORE: Ministers do not rule out more public money millions over ferry crisis

They decided to press ahead with the second ferry, known only as Hull 802, despite learning it was not value for taxpayer money and that it would be cheaper to scrap the vessel and tender for a new one.

The cost to the taxpayer of supporting Ferguson Marine both before and after its nationalisation has soared to more than £450m.

But Scottish Government documents reveal serious questions were raised on Ferguson Marine being able to get any direct award from ministers on constructing vessels, as questions were raised over why contracts for four larger ferries were given to a shipyard in Turkey.

A briefing note to ministers about the Turkey contracts said that a direct award of the vessels "is not legal" but they would still be "looking at future contracts".

Details of Ferguson Marine board discussions from February have raised further concerns about the future.

According to an official account of discussions, non-executive director Christopher Mackay, an experienced construction and projects lawyer. warned that the board "have to have an eye on the solvency issue with [Ferguson Marine] if we do not have a workstream."

It was noted that a secret report from consultancy firm First Marine International (FMI) had said the yard needed to be "three times more productive".

Chief executive David Tydeman in an update on the 'loch class' ferry project said the Scottish Government-owned ferry owner and contract awarder CMAL would like to start the public procurement process in the spring "if there is no appetite for a direct award before then".

According to an official account of discussions, Kate Hall, deputy director of the strategic commercial assets division of the Scottish Government said there were direct award productivity assessments and it was "a complex issue".

It said: "The Scottish Government do look at social economic benefits when looking at decisions. Productivity in the yard needs to be higher."

Mr McColl said: "Ferguson Marine won't get anything from BAE other than small fabrication work. It is not a commercially run yard. It is a disaster.

"They are unlikely to get any work of quantum because it is a very inefficient low productivity operation. What they have is some simple fabrication work. It is nothing."

He said he would be unlikely to take the yard over if it was put back into private hands by the Scottish Government.

Mr McColl said: "The people at risk here are the workforce. They are in a position where the government have made it so uncompetitive and uncommercial it is difficult to see how it can be turned round."

READ MORE: ScotGov grants £60m+ extra spend on fiasco ferries despite value fail

The Ferguson board of directors say that they are working with the Scottish Government to "continue to develop our strategy and processes to deliver a sustainable business model which will secure the long-term position of the company".

The Scottish Government said its priorities were to complete the ferries and secure the yard's future.

Ferguson Marine say the BAE contract involving fabrication work for just one of the Type 26 vessels being built on the Clyde is around five per cent of the value of what the yard might secure if it completes what was a pilot project well.