The Cost Gap: Why UK Shipyards are Losing Ground
For years, the UK maritime sector has faced a daunting challenge: competing with overseas shipyards that can consistently undercut domestic bids. According to the Society of Maritime Industries, this price gap typically ranges between 10% and 20%.
This disparity isn’t accidental. It is driven by a combination of aggressive state support, favorable tax breaks, and significantly lower labor costs in foreign markets, making it difficult for UK yards to remain competitive on price alone.
Social Value vs. Procurement Law: The Great Debate
To level the playing field, the National Shipbuilding Strategy has advocated for the inclusion of “social value” in public procurement. This means scoring bids based on benefits such as local training and supply chain improvements, rather than just the lowest price.
However, implementing this is not straightforward. Caledonian Maritime Asset Logistics (CMAL) has rejected the employ of social value scores, arguing that such a move could conflict with Scottish procurement laws. These laws mandate principles of “equal treatment” and “non-discrimination,” which can craft favoring local yards legally risky.
This tension has led to significant friction, with unions expressing anger over the absence of social value scoring in new shipbuilding contracts, fearing the long-term erosion of domestic skills.
The Trend of Overseas Outsourcing
The impact of these procurement hurdles is already visible in the movement of contracts. Although the 2022 refresh of the National Shipbuilding Strategy identified a 30-year pipeline of 150 potential vessels, a growing number of these orders are heading abroad.
Recent examples highlight a worrying trend for the UK maritime industry:
- Royal Navy Support: A Ministry of Defence contract for 24 support vessels, including tugs, was subcontracted to Serco, which subsequently awarded the shipbuilding order to the Dutch firm Damen.
- Specialized Vessels: The order for the Northern Lighthouse Board vessel, Pole Star, was awarded to a shipyard in Spain.
- Ferry Fleet: Since 2022, CMAL has placed ferry orders totaling approximately £570 million with companies in China, Poland, and Turkey.
The Future of Local Shipyards: A Need for Change
The survival of domestic facilities, such as the Ferguson shipyard, now appears to hinge on a fundamental “policy step change.” Without a shift in how contracts are awarded or how local yards are supported, the risk of further decline remains high.
Current rules are seen by some, including industry figures like Sweeney, as a deterrent that actively pushes local shipyards out of the bidding process for Scottish ferries.
Frequently Asked Questions
What is “social value” in shipbuilding?
Social value refers to the broader benefits a contract brings to society beyond the product itself, such as apprenticeships, job creation, and the strengthening of local supply chains.
Why are UK ships often more expensive than overseas options?
The Society of Maritime Industries cites higher labor costs and a lack of the state support and tax breaks that overseas competitors typically enjoy.
Why can’t CMAL simply prioritize UK yards?
CMAL must adhere to Scottish procurement laws that require “equal treatment” and “non-discrimination” among bidders.
What do you think? Should the government prioritize “social value” and local jobs over the lowest bidder, or is strict adherence to procurement law the only fair way to operate? Share your thoughts in the comments below or subscribe to our newsletter for more industry analysis.
