16 July 2024 , 20:15
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About 1,500 jobs at risk as shipbuilder waits on reported £200m state deal in early test for Labour industrial policy
Harland & Wolff, the owner of the Belfast shipyard that built the Titanic, has insisted that it is still awaiting a government decision on a £200m intervention despite signs that Labour is due to reject the financial lifeline.
The company is presenting an early test of the Labour government’s industrial policy, with 1,500 workers fearful the company is running out of time to secure funding needed to make it ready to build three warships for the Royal Navy.
Harland & Wolff (H&W) was forced to suspend its London-listed shares a fortnight ago, and it has missed two deadlines to file audited accounts, raising questions over its finances and its ability to fulfil a £1.6bn contract to build the three fleet solid support ships that will carry supplies such as ammunition and food to the navy’s aircraft carriers.
The government, under the Conservative party, had provisionally agreed a deal to 100% underwrite a £200m loan by a consortium of lenders to Harland & Wolff to allow it to refinance its debts. The company on Tuesday said it had reduced its request for the guarantee from 100% to 80%, and that it had presented legal opinions showing that a guarantee would not violate state aid rules.
However, the Financial Times reported that Labour had decided that giving the guarantee would be an inappropriate use of government funds, citing an unnamed Whitehall source saying: “Giving the loan guarantee would be deeply irresponsible.”
The company has been investing heavily to recruit a workforce of 1,500 across the Belfast site, plus yards at Appledore in Devon, and Methil and Arnish in Scotland. It plans to split work on the fleet solid support vessels across the yards, while working in a consortium with Spain’s state-owned Navantia.
H&W said that the former chancellor Jeremy Hunt approved the loan guarantee in principle in December. The spokesperson said the company was informed in March that officials were concerned about the fact that the government was underwriting the full value of the loan. A 100% guarantee would be an unusual step that would leave the taxpayer liable for the full amount if the company failed.
“Harland & Wolff is aware that the new ministers are in the process of being briefed by civil servants on our case,” the spokesperson said. “We have proposed a reworked deal at the standard 80% guaranteed level, that has been awarded to hundreds of other companies, and look forward to hearing the government’s response.
“With the new government having been in office for just over a week, it will take time to work through the process. As yet, we have not been informed of any decision, and we stand ready to meet with the new government at their convenience.”
Failure to obtain the guarantee would be a major blow to H&W, which agreed the deal over a year ago with UK Export Finance, a ministerial department.
If a government guarantee for the loan is not forthcoming, the company would be forced to ask private lenders for money at standard market rates to refinance its £191m in liabilities.
The company’s main priority is refinancing £91m in loans from Riverstone Credit Management, a US private investor that is charging an interest rate of more than 14%. Payment is due at the end of this year.
RMS Titanic was fitted out at the Harland & Wolff shipyard, Belfast, 1911-1912. Photograph: Pictures from History/Universal Images Group/Getty Images
H&W held a board meeting on Tuesday to discuss its finances, according to two sources. However, it has not given workers any updates on the talks, and management of the main shipyard in Belfast has not been briefed, leaving workers unclear over the future of their jobs.
“The longer this goes on, the more concern there is,” said a person involved in talks.
Labour has taken power with the future of several other UK industrial sites in the balance, including Belfast’s Short Brothers factory, which is being sold by Spirit Aerosystems to Airbus, and the Port Talbot steelworks in south Wales, where talks between the new government and the owner Tata Steel over decarbonisation and jobs are ongoing.