1988 Public subsidy cheaper than closure costs for Harland & Wolff which had by then “not made a profit on work carried out for over 20 years” #20yearrule

Back in the late 1980s, the government conducted an analysis around the closure costs related to the potential privatisation of Harland & Wolff (H&W). At the time, the papers and discussion were badged with a ‘SECRET’ security rating (with much more restrictive access than the normal ‘CONFIDENTIAL’ mark). You can read a sample of the papers in the attached PDF of DED/22/231, or view the originals for free in the Public Record Office.

First, a brief history …

Formed in 1861, the privately-owned shipyard developed a reputation for building innovative ships with flat-bottomed hulls giving the vessels a squarer cross section and stronger iron upper decks (rather than wooden construction). Between 1909 and 1914, the yard built the Olympic, Titanic and Britannic ships. H&W built small warships during the First World War. The Queen’s Island facility was damaged in the Belfast Blitz and produced six aircraft carriers by the end of the Second World War.

While the yard launched the first supertanker in the UK during the 1960s, this was also the period when the British government began to step in with loans and subsidies to protect jobs at the firm, whose sector was coming under pressure from the growth of air transport.

Nationalised in 1977, the company was sold in 1989 to a management/employee buyout in partnership with Fred Olsen. The yard’s last ship-building project was launched in 2003, and H&W diversified into the refit and repair of oil platforms – and notably, the SS Nomadic – as well as wind turbines. In August 2019, H&W’s parent company went into administration, with calls for the yard to be renationalised.

A batch of government papers [DED/22/231] related to the yard from 1988-1991 have now been released to the public with a small number of redactions.An October 1988 economic view provided by UU lecturer Dr Richard T Harrison for an ICTU seminar noted that “Harland & Wolff has not made a profit on work carried out for over 20 years”.

A graph illustrated the lack of profitability, with the average loss assessed to be “about 35% of turnover since 1978” (with some mitigating circumstances in the ‘most recent’ accounts due to a delay caused by a major supplier).Yet its trading loss per employer and trading loss as a percent of turnover was less than British Shipbuilders (the public corporation that owned and managed the nationalised shipbuilding industry in Great Britain from 1977).

The paper considered four options:

• Continued public ownership – “The Government has made it abundantly clear that continued public ownership … is not an option”;
• Privatisation – “two potential buyers are apparently in negotiation with Government”;
• Management/employee buyout – an option whose success would “depend on the availability of firm orders and work to provide the basis for long-term viability”;
• Closure – the only option if privatisation or a buyout failed.

The applied economics lecturer estimated one-off capital costs of £40m in redundancy payments to H&W employees (4,000 jobs), and a further £15-20m to employees of supplier firms (500 jobs in NI, 4,000 in GB) along with likely contractual compensation payments if delivery timescales were lengthened on the final project during the run down of the yard.

The Northern Ireland economy was predicted to see a £17.5m drop in spending power, a £1.5m drop in VAT revenue, and higher Government expenditure on social security payments.

It was estimated that “over a five year period the subsidy to Harland and Wolff would have to exceed £20,000 per employee per year to make closure a more effective option that continued public sector support”. But the report concluded on an optimistic note (when viewed in hindsight):

With industry analysts predicting a significant upturn in the market by the early 1990s, survival for the next five years may be sufficient to provide the base for productive employment in the shipbuilding industry for some time to come.

The Department of Finance & Personnel’s figures in December 1988 estimated a hit of £240m spread over four years. The Department of Economic Development’s assessment from the same month put the figure at £252, along with an additional £52m of additional social security payments and £90-95m of other remedial measures.

Check out Slugger’s further coverage of the official papers released today …

Alan Meban (Alan in Belfast)

Alan Meban. Tweets as @alaninbelfast. Blogs about cinema and theatre over at Alan in Belfast. A freelancer who writes about, reports from, live-tweets and live-streams civic, academic and political events and conferences. He delivers social media training/coaching; produces podcasts and radio programmes; is a FactCheckNI director; a member of Ofcom’s Advisory Committee for Northern Ireland; and a member of the Corrymeela Community.

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