Will the Type31e be the end of shipbuilding on an independent Clyde?

The news that BAE systems has decided not to lead a bid on the Type 31e frigate, and instead opt to work with Cammell Laird, who will prime on the bid, has sent ructions through the UK shipbuilding industry. Scottish unions have reacted with dismay, seeing ‘a betrayal’ in the reduction of work they felt had been promised to the Clydes yards, with only 8, rather 13 ships being built now.

While this news may have upset many in Glasgow, it in fact represents good news for the UK shipbuilding industry, as it is now all but certain that Type 31e will be built elsewhere in the UK. In the medium to long term, this is very good news for the UK Government and taxpayer.

The move over the last few years to consolidate the UK military surface ship building industry has seen heavy concentration of resources in Scotland, where shipyards in both Rosyth and Glasgow have delivered the Type 45 and CVF programmes. There is currently no alternate yard in the UK building surface warships for the RN, although Appledore continues to have considerable success in the OPV market (but is limited by size of its yard in the type of ships it can build).

Given the growing demands for independence in Scotland, and the not inconceivable possibility that a second referendum may occur within the next 10-15 years, the UK would potentially find itself left without a yard capable of building large surface warships.

The fact that Type31e will be built elsewhere will no doubt cause a sigh of relief to be heard across Whitehall. It will send skilled jobs to other communities that are economically challenged, and if the build model proposed by the National Shipbuilding Strategy of almost continuous build, then export second hand quickly as replacements commission continues then the yard will be well placed to pick up surface work in future.

From a strategic perspective, in the (hopefully unlikely) event of Scotland becoming independent, the existence of a T31e yard in the UK will be vital in maintaining strategic capabilities. More importantly, Humphrey would argue that if Type 31e is built outside of Scotland, it will pose a credible threat to the long term future of the Clyde in an independent Scotland.

Why a Threat?

The existence of a yard that is in the middle of serial production of ships in the UK means it is significantly easier (but not necessarily cheap) to shift production there from other locations. If Scotland did become independent, BAE would have an existing relationship with Cammell Laird, and be well placed to further upgrade the yard. If more Type 26 frigates were being built, production could relatively easily shift south (albeit at some cost), and it is likely that BAE could tempt some of the Clyde workforce to come with them.

Assuming the NSS recommendation of continuous serial production is adopted, then a resurgent Cammell Laird would be the very definition of a ‘frigate factory’ producing Type31e on a regular basis. It would be well placed to compete for international competitions as there would be economies of scale gained from foreign buyers ordering and building Type 31e in the UK, rather than having a smaller order built elsewhere.

The challenge for Scotland and the Clyde would be simple – what can they build and for whom? The Type 26 design would be a UK owned sovereign design, and heavily reliant on UK technology. It is certain that no UK politician would countenance an order going to an independent Scotland, particularly if there is a shipyard in Birkenhead capable of doing the job.

Therefore, in the event of independence, it is reasonable to assume that no further Type 26 will be built for the UK on the Clyde. The Scottish Government may seek to build more, but that is dependent on the terms of the independence package – an SNP government playing hardball over Faslane may find that the UK government refuses technology transfers to the newly independent state.

Not only would such a move prevent Scotland from building their own Type 26, but it would also prevent them from competing on the open market to build them for others, as they would not be able to licence the design or acquire the equipment necessary to fit out the hull. Why would any country in the market for a frigate want to build a knock off that isn’t properly fitted out, when they could go south of the border and buy the real thing?

The wider problem too is that its hard to see where Clyde shipbuilding goes in the event of independence. A Scottish Navy won’t need new ships for some time, and they won’t be able to design new classes without establishing an expensive design capability (not for nothing has the UK insisted on keeping ship design capability in business  - this is what really matters when considering a new ship, arguably far more than the yard itself).

The overseas export market for frigates and corvettes is not enormous, and countries will either seek to build at home – particularly if they are trying to develop their own industry, or they will go to an established builder in France, Italy, Russia, China or (hopefully) the UK. All of whom have, or will have, established export designs under construction with strong governmental support and access to indigenous technology transfer.

By contrast the Clyde won’t have any of this – its costs will be higher until it enters serial production, and an independent Scotland will have little in the way of a defence industry to provide technology transfer of real value (e.g. missiles, combat systems and so on).

The Clyde yards could compete for OPV business, simple ships to build and limited issues with tech transfer. The problem here is that the sort of nations in the market for an OPV will either build one locally, or if forced to look overseas will be in the market for an attractive package, likely including offsets and return on their investments.

The cheap OPV market is not easy to break into, particularly when there is a plethora of builders out there with established designs. It will be hard for Scotland to convince nations in the market to either pay more, or to buy from a country that has relatively little to offer in terms of offsets. A foreign warship order is partly an influence game – you buy from the people you want to build and sustain a good relationship with, and the question for these countries has to be ‘why Scotland and not X’?

It is hard therefore to see where an independent Scotland yards could go in the future – a relatively small market to compete in and not enough ability to design and export ships that other countries will want to buy. Any country buying a ship that is capable of providing the bulk of the equipment for fitting out is probably already building its own warships anyway.

What Future in the UK?

While the Clyde may be angry at ‘losing’ 5 frigates, it still has a positive future to play in the UK build programme. Over the next 15-20 years, the UK will be ordering (on current plans) 8 large cruiser sized frigates, various RFA support ship programmes (and these will be large vessels), a series of replacements for the Bay, Albion, Argus and other classes and work will begin on replacing the Waves and thinking about the T45 replacement too. A very rough estimate is that there is likely to be at least 15-20 large warships or RFAs that need to be built, and the Clyde is well placed to win this work that will guarantee a long term sustainable future for shipbuilding there. They may have lost Type 31e, but they have got a long term and very bright future ahead of them as British shipbuilders.