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State may intervene but nationalisation is likely off the cards

It clearly matters to the current workforce of about 130 people that the Harland and Wolff shipyard could be about to close its gates for good.

Something would also be lost to Northern Ireland if the name of Harland and Wolff, which goes back to the 1860s, was lost.

But what went wrong?

It had seemed that under the ownership of the Norwegian parent company the yard had made a successful transformation into the fields of ship and other marine repair, as well as renewable technologies.

Sales collapsed during 2015/16. Turnover fell from £67m to only £8m and H&W moved into loss. While we do not have any published accounts since 2016, it looks like any recovery has been incomplete. What could be done?

Some have talked about nationalisation and certainly the old shipyard was under state control during 1977 to 1989.

During that period and before, H&W received a very substantial amount of state aid in the form of grants and soft loans: £600m in the money of the day or around £2.5bn in today's money.

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It is precisely because of that previous history that the Government may be reluctant to make what might become another long-term and potentially expensive commitment.

It has also been argued that the yard should be kept going with a view to bidding for future Royal Navy work involving frigates and destroyers.

The problem is that this strategy is somewhat conjectural.

H&W built its last ship, a supply ship for the Ministry of Defence, as long ago as 2003. Admittedly, H&W might be helped a bit by the fact that ships are now increasingly made in modules that are spread across a range of locations before being brought together for final assembly.

H&W did miss out on some big orders of the last few decades, such as the Queen Mary 2 liner in 2003 and then two aircraft carriers for the Royal Navy.

Perhaps there may be some limited role for the Government in providing short-term assistance, which could tide the yard through the rest of the summer and perhaps win some more orders later in the year as well as find a private buyer. EU state aid rules do apply, but repayable loans would perhaps be permitted.

One particular cost area which should perhaps be looked at is the deficit on the H&W pension, which in actuarial terms has reached £32m.

That deficit would have to be assumed by any purchaser of the yard and so would be a major disincentive against taking over ownership.

Could government underwrite some or all of that liability?

Dr Esmond Birnie is senior economist at Ulster University's Business School

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