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Govan Shipbuilders

Volume 897: debated on Thursday 7 August 1975

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asked the Secretary of State for Industry if it is still his intention to assist with the necessary finance and guarantees to enable Govan Shipbuilders to carry out its investment plans and to take on new orders; and if he will make a statement.

asked the Secretary of State for Industry if he will make a statement about Govan Shipbuilders.

The then Secretary of State for Trade and Industry told the House on 30th June 1972 that the Government would provide adequate financial support for Govan Shipbuilders Limited for a period of five years or until the company attained commercial viability, whichever was the less. The Secretary of State had told the House earlier—28th February 1972—that the cost of this was expected to total £35 million.It was envisaged that this cost would be met by £29·2 million—at 1972 prices—in direct assistance under Section 7 of the Industry Act 1972, the remainder being the sum which, it was estimated, would become due to the company from regional development grants and shipbuilding construction grants. This figure for direct assistance represents £42·2 million at 1975 survey prices, of which £37·5 million had been expended on grants for losses, loans for working capital development, and the purchase of equity in the company by the end of June 1975. The corporate plan which Govan Shipbuilders submitted to my Department earlier this year forecast that the company would not be making profits until 1978, and that further funds would be necessary to allow the company to complete its redevelopment programme and to support it until it achieved viability.After discussion with the company, I have agreed to provide the company with further loans—in addition to the £4·7 million remaining from the existing provision—to enable the company to complete its capital development programme. These further loans will be limited to £6·9 million—at 1975 survey prices.The company clearly cannot expect to continue to receive Government subsidies to cover its losses indefinitely. However, in view of the 5,320 jobs which the company provides in an area of exceptionally high unemployment, and of the company's forecast that it will be making profits in 1978, I have decided to extend the support period to the end of 1979 and to make available funds of up to £10·3 million at 1975 survey prices to cover the losses which the company expects to incur on existing contracts in 1975, 1976 and 1977.This further support will be subject to four conditions. The first two are those which the then Secretary of State for Trade and Industry announced to the House on 30th June 1972: that the agreement on working practices would continue to be respected by both sides, and that contracts for ships would be taken on terms acceptable to the Government. The third is that none of the increased support may applied to the financing of excessive wage settlements; the company will be expected to keep its wage awards within the limits announced in the Government's White Paper on 11th July, and the board has given me an undertaking that this will be done. The fourth is that continued support will be conditional on my continuing to be satisfied with the company's progress—and the Government attach very great importance to its progress towards its productivity targets—as indicated in monitoring information which the company submits to my Department.

If any of these conditions was not fulfilled, and the Government decided before the end of 1979 to give no further support to the company, the Government would ensure that Govan Shipbuilders Ltd. was enabled financially to discharge its outstanding commitments to shipowners and creditors.

With the additional assistance of £17·2 million—at 1975 survey prices—which I have announced today, direct assistance under Section 7 of the Industry Act to Govan will total £59·4 million—at 1975 survey prices. In addition the company will receive statutory grants which may be of the order of £6 million.