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The Labor government is under pressure to sign off a rescue deal for beleaguered Belfast shipbuilder Harland & Wolff within weeks, in an early test of the party’s willingness to support strategic companies when they get into trouble.
“Crisis talks” are underway in government over whether to back loss-making Titanic shipbuilder’s request for a £200m loan guarantee the company needs to refinance its debt.
The decision by ministers on whether to intervene is one of several facing Sir Keir Starmer’s new government as thousands of jobs are threatened by the industrial crisis in all corners of the UK.
The Labor government has pledged to grow the economy and increase inward investment. But its immediate short-term challenge is facing potential large-scale job losses: Tata Steel in Wales plans to cut 2,800 jobs; the Scottish oil refinery at Grangemouth is scheduled to cease operations; Thames Water struggles to avoid financial collapse; thousands of aviation roles are uncertain in Northern Ireland as Spirit AeroSystems is split by Boeing and Airbus; and Dyson consults on cutting 1,000 rolls in southern England.
Liam Byrne, the former Labor chairman of the trade select committee, said the government’s industrial strategy should not be defined by which companies it decided to “go to the rescue”.
“There is a risk that industrial strategy will be defined in part as government picking losers or losers picking government, rather than as a strategic approach to the economy,” he said. “A good industrial strategy is all about building on our competitive advantages.”
With some of these crises inherited from before the election, the new ministers will find themselves under pressure from Labour’s union allies to intervene in a more muscular way to save jobs.
Harland & Wolff has been in talks with ministers for months trying to stem the losses.
The company has a $115 million credit facility from New York-based Riverstone Credit Partners that pays 14 percent interest and matures at the end of December. H&W is in talks with new lenders to secure a £200m loan at a lower interest rate.
Last December, the Conservative government tentatively signed a new £200m loan guarantee from UK Export Finance.
But in May the Financial Times reported that – amid potential state aid concerns – the Treasury was blocking the move against the wishes of three other departments: Defence, Northern Ireland and Trade and Enterprise.
On July 1 – days before the election that swept Labor to power – the company suspended trading of its shares on London’s AIM market after accounting problems delayed the submission of audited annual results.
It warned: “Should there be any substantial delay in securing the facility after the general election, the company’s ability to execute new and large contracts would be adversely affected.”
One industry insider said the statement “almost feels like a veiled threat. . . but there is nothing to say that the Treasury’s concerns have disappeared and nothing to suggest [chancellor] Rachel Reeves will be forced to act quickly.”
She was handed over as part of a £1.6bn Royal Navy contract for three new support ships as part of a Spanish-led consortium.
Its unaudited results showed an operating loss of £24.7m for 2023 and H&W said it intended to publish audited results later this month.
A person close to the company said this week that the business “continues to have very positive discussions with the government and is confident that we will have a solution soon”.
The government declined to comment, citing “commercial sensitivities.”
Elsewhere, ministers are dealing with a series of industry crises, including Grangemouth, where Scotland’s only remaining oil refinery is due to close this year.
The owner of the site, Petroineos, announced in November that it would end refining operations on the Forth and convert the site into an oil import terminal. At the weekend, Starmer said he had an “obligation” to help 400 workers who could start losing their jobs as soon as next year.
In Wales, Tata Steel is poised to cut up to 2,800 jobs as a result of a deal with the previous Conservative government to switch to green steel production with a £500m government subsidy and to close its two Port Talbot blast furnaces.
Jonathan Reynolds, the business secretary, insisted there was a “better deal available” if the Indian company negotiated with the new government, which has committed £2.5 billion to green steel, if the company guaranteed jobs and a supply chain.
But Tata already closed one of the ovens last week. Starmer spoke to Tata management on Saturday, while the company held further talks on Monday with Reynolds and Welsh Secretary Jo Stevens. “Dad is perceptive,” said one of the assistants.
Meanwhile, ministers hope to avoid nationalizing Thames Water, Britain’s biggest water company.
On Tuesday, Thames urged regulator Ofwat to sign off on a business plan to make the company “investable” as it seeks to raise the fresh capital it needs to stave off collapse.
Whether it can use the strained treasury to stave off some of these job losses, the harder task for Labor will be to demonstrate that it has a coherent strategy beyond the usual routine of averting every crisis as it arises.
Lord Richard Harrington, a former Tory trade secretary, said he believed the new Labor government was still committed to creating a viable industrial strategy: “There will always be short-term crises, one-off problems, but as a government the focus should be on a strategic approach to areas with competitive advantage, such as aviation, to invest more in these areas.’