Belfast Telegraph

Paul Gosling: This is the way the world ends, not with a bang but a whimper

Harland & Wolff succumbed to the inevitable on Monday, sliding into administration after 158 years. But the roots of its terminal decline lie far beyond Belfast, argues Paul Gosling

Harland & Wolff shipyard workers finish for the day as the massive Sea Quest dominates the skyline in 1966
Harland & Wolff shipyard workers finish for the day as the massive Sea Quest dominates the skyline in 1966
SS Titanic

By Paul Gosling

The decline of the shipbuilding industry is more than a tragedy for east Belfast. It symbolises a wider malaise across UK manufacturing. Sir John Parker, the former chief executive of Harland and Wolff, has lamented that he was unable to persuade the government of Margaret Thatcher in the 1980s to support a possible shift from the low-margin production of oil tankers and bulk carriers to an emerging - and higher margin - business constructing cruise liners. It was, he said later, "one of my big industrial disappointments".

Others argue that the shipbuilding industry was already beyond saving by then. Yards across the UK were nationalised in 1977 - and lost a fortune. According to an academic study by Duncan Connors, under nationalised ownership the yards produced "supertankers no longer in demand for purchase at a heavily subsidised price by shipping lines that would place the vessels into immediate and long-term storage."

Another academic - Paul Stott of Newcastle University - reached a similar conclusion, writing: "The final decline of Britain's shipbuilding industry was already well underway when Margaret Thatcher came to power in 1979. Our market share had been declining over the whole 20th century and by the early 80s there was little we - or Margaret Thatcher - could have done to save it."

Statistics provide a clear illustration of what happened. In 1963, the UK produced 17.5% of world merchant vessels. By 1980, this had fallen to 3.3%. Today it is slightly above 0%.

The loss of UK shipbuilding has gone much beyond Harland and Wolff. Shipyards on the rivers Clyde, Thames, Wear, Tyne and Tees have also closed. In England's north east, the industrial decline has never been overcome, leaving a region that is weak and rated officially as one of the poorest in northern Europe.

As UK shipbuilding declined, the centres of production moved east, initially to South Korea and Japan, then increasingly to China, which is now the largest shipbuilding nation. A range of factors led to the UK losing its once-dominant position. Not the least of these was the failure to invest sufficiently as demand evolved - mega oil tankers required giant shipyards that were larger than any in the UK.

This coincided with the shipping industry itself moving east, away from Europe. Meanwhile, productivity and labour relations in many of the old UK yards were poor.

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Nor was this shift only about oil tanker fleets. Military production also moved. Even the Royal Navy buys ships on the global market, procuring a tanker from South Korea in 2012 and currently considering tenders for a new vessel worth around £1bn from Japan and Spain, as well as the UK.

The global market is also facing challenges. Demand halved between 2010 and 2016, while the number of fully functioning shipyards suffered a near collapse, from 700 globally in 2007 to just over 100 two years ago. Analysts at Clarksons Research described the market as dealing with a "perfect storm" from declining demand, following a bout of over-supply.

Faced with these pressures, governments are evaluating strategies and considering whether shipbuilding needs to be protected. France and Italy have put their political differences at government level to one side to agree a joint venture between France's state-owned Naval Group and Italy's Fincantieri, with the intention of together producing warships for European navies.

Less than two years ago, the UK Government proclaimed in its National Shipbuilding Strategy an aspiration to recreate a shipbuilding industry. "Our vision is of an even more modern, efficient, productive and competitive marine sector growing on the Clyde and on the Forth, in Belfast and in Barrow, and in the North East, North West and South West of England," it stated.

While this ambition seemed to be sailing into headwinds, some analysts continue to believe that shipbuilding has a future - including in the UK. A study published last year by IBISWorld predicted that the industry would grow steadily at around 5%, with the UK potentially benefiting in terms of competitiveness from the weak pound. UK shipyards focused on refitting and rebuilding were better placed to win orders than for new builds, it said.

But the signs are that this is too late for Harland and Wolff. There has been no shipbuilding in Belfast since the Ministry of Defence's MV Anvil Point launched 16 years ago.

Harland and Wolff was bought out of nationalisation in 1989 under the ownership of shipping line Olsen. As part of Fred Olsen Energy, Harland and Wolff specialised in the manufacture of offshore wind and tidal turbines in place of shipbuilding, while still undertaking ship repair and maintenance.

But Fred Olsen Energy became Dolphin Drilling, which filed for bankruptcy last month and has been restructured without Harland and Wolff under the ownership of its creditors. The business's core drilling operations lost demand following the collapse in oil prices in 2014.

Based on its balance sheet, Harland and Wolff offers an unattractive picture. In the year ending December 2016, Harland and Wolff Heavy Industries (the business undertaking the core engineering work) reported a loss of £5.8m on a turnover of £8.3m. A pension fund deficit calculated at £38m turns a very bad situation into a terrible one.

Labour's Shadow Chancellor, John McDonnell, visited Harland and Wolff on Monday, pledging his party's support for the workers' call for a reprieve through nationalisation - perhaps on a temporary basis until a possible new order is placed by the Royal Navy. There is no sign that the Government is interested, with even the DUP not echoing Labour's call.

Harland and Wolff, Belfast shipbuilding and the jobs of 130 people, on a site where 35,000 worked in the 1920s, are now set to go. In the shadow of the behemoths of Samson and Goliath, the once-giant industry is petering out.

Current and former workers are likely to feel sad and despondent, as decades of decline look like coming to an end. In the words of T S Eliot's The Hollow Men: "This is the way the world ends, not with a bang but a whimper."

Belfast Telegraph


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