Sinking feeling as UK shipbuilding contract is awarded to South Korean firm

Posted on 24 Feb 2012

Ministers and unions have come out against the Ministry of Defence’s decision to hand Daewoo Shipbuilding and Marine Engineering a £452m contract for four new Royal Navy vessels.

The new generation of 37,000-tonne Military Afloat Reach and Sustainability (MARS) tankers ordered for the Royal Fleet Auxiliary (RFA) could have been built in the UK.

Prospect union, which represents over 300 BAE Systems staff in Portsmouth, said that the fact no British companies submitted a final bid for the build contract, despite a number taking part in the competition, is an indictment on our capacity which has already reduced and could be reducing further.

MP for Moray Angus Robertson said the decision was a blow for the domestic ship-building industry. “This tendering process began under the last Labour government, who must now explain why these massive contracts are being sent to South Korea. With contracts for the fast jets going to France and the Royal Navy tankers going to South Korea people will be asking where is the Union dividend?”

Keith Hazlewood, national secretary at the union for shipbuilding workers GMB, said: “Once again UK taxpayer’s money is being spent abroad on ships when a proactive UK government could have put a consortium together to build these tankers in the UK.”

Mr Hazlewood commented that serious questions needed to be asked over government policy regarding the White Paper and off the shelf procurement.

However, GMB has stated that it does not believe the contract has been signed so will be fighting to get the tankers deemed as “warlike” ships. Although the current government has recently changed the rules, it is arguing that “warlike” contracts need to be built in the UK as was necessary under previous government defence procurement rules.

The argument is that these ships could be put into a warzone to refuel warships and to provide support for amphibious and land forces and therefore need to be equipped with proper defences to protect the Royal Navy personnel on board.

Mr Hazelwood added: “Maintaining capability is a strategic issue. The MOD is risking UK defence capability by placing this order in Korea.”

Daewoo Shipbuilding and Marine Engineering (DSME) competed against a bid from fellow Korean-based firm Hyundai Heavy Industries and Italy’s Fincantieri. Despite the MOD statement detailing that the DSME bid was of better quality due to the technological prowess of the build, a leaked letter from Fincantieri’s chief executive Giuseppe Bono to Defence Secretary Phillip Hammond has added to the political pressure.

The letter revealed that Mr Bono said that Fincantieri would construct a 37,000-tonne vessel from scratch in a UK shipyard if it won the contract.

The Trieste-based engineering firm promised at least 35% of the work on all four ships would be carried out in the UK, 15% more than winning bid from DSME.

However, one UK firm set to benefit from associated contracts with DSME is design company BMT Defence Services.

Overall, associated contracts could be worth up to £150m, comprising £90m the provision of key equipment, systems, design and support services £60m investment in the UK from customisation, trials and specialist engineering support.