Thank you for this opportunity to speak to you today.
Britain is a maritime nation and we have a proud history on the seas. Although ship building has declined significantly over recent years, the industry currently employs around 30,000 people and contributes £1.5 billion to our economy every year. The industry has of course faced huge challenges over the years. In the 1980s, the rise of shipbuilding in South Korea and Japan led to increased competition, and in the 1990s the reduction in the Soviet threat led to a decrease in the requirements for the Royal Navy.
But military orders remain vital to British shipbuilding.
Every year the MOD spends about £16billion on equipment, and this large annual spend makes the defence industry an important contributor to the British economy. It is estimated that an investment of £100m in the defence industry will generate an increase in gross output of £227m, reflecting the strong UK-based supply chain. In terms of employment, this means that for every two jobs in the defence industry, just over 3 jobs are created additionally in the economy.
I want to see the Government use our defence strategy to support a thriving British shipbuilding industry. Military exports are a significant proportion of UK manufacturing, totalling over £7bn in 2010. As countries across the world seek to reduce their defence budgets in the coming years, we will have to work even harder to win this work. We need a clear plan about how our home grown skills will be maintained and developed, and key to that is an active industrial policy that puts British business first.
The Government should be doing everything they can to promote the UK based defence industry, but the lack of a clear strategy has led to missed opportunities.
Consider the recent contract to build the Royal Fleet Auxillliary’s refuelling tankers. There were high level discussions about constructing at least one of the tankers in the UK, which would have seen significant work given to UK companies. But instead, the MOD have announced that the South Korean firm Daewoo Shipbuilding and Marine Engineering is the preferred bidder.
Warm words about British manufacturing are not good enough if when it comes to the crunch, the Government is sending British contracts overseas.
I am proud that the last Labour Government embarked on the largest shipbuilding programme for the Royal Navy in many years, including, of course, commissioning the aircraft carriers on the Clyde.
Labour’s 2009 industrial strategy laid out our priorities for growing our industrial base and rebalancing our economy. Unfortunately, these efforts have stalled under this Government because of a lack of a clear policy to support British manufacturing.
During these tough economic times, the defence industry means jobs and growth right now. But more than that, by bringing the work here today, we are encouraging investment in the skills of tomorrow.
Apart from the economic argument, the concept of ‘Sovereign Capability’ is important. It is crucial that the UK retains operational independence for our key capabilities. This means that the construction and maintenance of the capabilities, which are deemed vital to the defence of the country, should take place within the UK.
I am not advocating a closed shop, and the UK does benefit from having the most open market for defence equipment in the world, but we need an industrial strategy that identifies how our defence contracts can be best used to further our national interest.
An active industrial policy is vital to sustain the shipyards, and the knowledge and skills, that we need.
While we talk about the future of British shipbuilding of course, the very future of the British Isles in their current form will be the subject of a referendum in the next year or two.
Some of you may have read at the weekend the report by Malcolm Chalmers, one of the world’s most respected defence experts, into the implications of Scottish separation on defence policy. It shines a light on the plethora of questions that haven’t even begun to be answered yet.
The SNP’s argument for separation, which has so far been based on emotion and patriotic rhetoric alone, simply does not stand up to scrutiny.
First, a fundamental flaw with the SNP’s approach is that they have failed to articulate their vision for defence policy. Apart from references to what they have termed a ‘defence force’ there is little indication as to what they would envisage a separate Scotland requiring. We can assume from what they have said that they expect a separate Scotland’s armed forces to be non-expeditionary, and yet Alex Salmond appears to hold up Denmark and Norway – two forces who have capabilities far beyond a mere defence force – as blueprints. This lack of clarity on such a key issue as national defence, should be a concern for us all.
Second, the SNP cannot hide from the financial reality. As Malcolm Chalmers states, it would not be realistic for Scotland’s Defence Forces to expect an annual budget of more than around £2 billion, given the size of a separate Scotland’s economy. That is a significantly smaller defence budget than those of neighbours such as Denmark and Norway.
Not only that, but this defence budget would have to bear the set up costs of a new military and all that entails in terms of equipment, staffing, bases and supporting structures. A separate Scotland would rightly lay claim to a proportion of current UK personnel and hardware, but splitting up and relocating these assets will come with a heavy price tag.
The SNP’s notion that we can snap off parts of the UK’s military into a functioning independent force is simplistic, and downright naive. The UK’s forces are designed to work as an integrated entity, regardless of the geographical location of moveable assets, and pulling apart the different aspects would mean untangling longstanding and complex agreements.
Third, there would be serious questions about Scotland’s place in the world if, as the SNP have said, a separate Scotland would not join NATO. In an age of increasing reliance on interdependency, the SNP want a separate Scotland to go it alone. Not only would we be out of the room when the key decisions were being made, but to shun the alliance that has protected our security for the last sixty years would breed resentment among our friends, exactly when, as a new country, Scotland would be trying to build relationships with allies. The SNP’s defence policy would see the Scottish people go from having the influence on the world stage as part of the UK, to being a small player that relies on the goodwill of other nations to defend ourselves.
Fourth – and most pertinent to our discussions today – Scottish separation would have a devastating impact on Scottish shipbuilding. The Clyde has built ships for over 300 years. Over 5,000 jobs directly, and 15,000 indirectly, depend on the yards.
If Scotland leaves the UK, the Clyde and Rosyth will be in a foreign country to the Royal Navy. The SNP say it is scaremongering to say that separation will affect the orders Scotland’s yards receive. But to me, and most other people in the industry, these concerns seem obvious. Nothing escapes the fact that the Navy has never built a warship in a foreign yard and there is nothing to say that a newly independent Scotland would be treated differently to any other foreign country in this regard. As far as the new UK would be concerned, all the demands about supporting British industry and maintaining sovereign capability that I mentioned earlier would remain, only now Scottish yards would not enter the equation.
I am not overstating my concern when I say that I consider the prospect of separation to be the greatest threat ever posed to Clyde shipbuilding.
The defence budget of an independent Scotland would be in a different league to the UK at present, and could not sustain the shipbuilding we have on the Clyde. A small independent country of six million people would not be seeking to build two aircraft carriers three times longer than a football pitch. Malcolm Chalmers clearly spelt out the inevitable consequence in his report – much of Scotland’s defence industry will head south.
The SNP say that such talk is doing Scotland down – but to deny the reality of what a small nation could afford is trying to deceive Scots, and I know they won’t be taken in by it. I don’t doubt that a separate Scotland could operate a defence force, but the costs to get to that stage will be huge and it will be a very different sort of armed forces to what we are used to.
This must act as a warning to the SNP – in their quest to advance Scotland’s cause, they risk bringing Scotland’s proud shipbuilding legacy to an end. Scotland, and Scottish jobs, are better off when the UK is placing orders on the Clyde, not sending those contracts elsewhere.
Thank you again for your time today. Going forward, I hope to discuss with you how we can promote a more active industrial strategy, and how we can work together to make sure British shipbuilding – on the Clyde and across the country – is supported for decades to come.