UK’s business secretary, Jonathan Reynolds, announced recently that Belfast shipbuilding company Harland & Wolff (H & W) will not receive any immediate financial aid from the government. The announcement followed H & W’s disclosure that their application for a £200 million loan guarantee had been rejected by the UK government.
H & W currently operates four worksites across the UK encompassing Devon, Scotland and its major site in Belfast, which is known for being the birthplace of The Titanic. The company employs roughly 1,500 workers.
According to Reynolds, dismissing both financial safety nets for H & W wasn’t an easy decision, however, he stands by his judgement considering the ‘substantial risk’ of financial loss. He voiced his opinion that market forces were better suited to tackle H & W’s commercial issues, rather than risking the taxpayer’s finances.
In recent events, John Wood, H & W’s CEO resigned and was replaced by Russell Downs, a former PwC partner and restructuring specialist. Wood’s exit was speculated to be a condition for discussing a new loan with Riverstone, their existing Wall Street creditor. The company currently holds a $115 million credit agreement with Riverstone, carrying a 14% interest rate.
Reynolds mentioned that talks with Riverstone regarding new funding were promising. Anticipating these discussions to wrap up in the coming days, he noted the introduction of new management seeking recapitalisation and financial stability.
Despite the UK government’s rejection of financial aid, a letter from Downs to the staff disclosed that H & W still managed to secure more funding to support operations. The letter didn’t reveal the specifics, but reassured that the focus will now be identifying main concerns and establishing a solid financial stability.
Mr Downs requested for normal operations to continue in his visit to the Belfast yard as well as the Appledore site in Devon this week, with plans to visit the Scottish yards afterwards. Although remained focused on exploring the next steps, he refrained from giving his views on the prospects of the company, which has a 163-year-old history, amid employees’ concerns about its potential disintegration.
Sunday Times reported Michael Flacks, a specialist in distressed assets, expressing interest in solely acquiring the Belfast yard, however, he was unavailable for further comments.
Reacting to Mr Reynolds’ declaration, Sharon Graham, the general secretary of Unite union that represents majority of H & W’s workforce, emphasised the necessity of political efforts in drawing stakeholders committed to building a lasting future, rather than those aiming for short-term gains.
GMB union’s national officer, Matt Roberts, flagged the situation as cause for worry for employees and their dependents, underscoring that H & W’s yards have long acted as the manufacturing nucleus for the UK, bearing significant potential for future security by constructing Fleet Solid Support vessels for the navy.
In 2019, Mr Wood led a £6 million bailout of the beleaguered shipbuilder, enabling it to win part of a £1.6 billion contract for creating new Royal Navy ships in partnership with Spain’s Navantia. However, its inability to produce audited accounts this month resulted in the suspension of its Aim-listed shares.
At the Farnborough Airshow on Monday, Mr Reynolds expressed confidence that Belfast would continue to be a production site for Royal Navy warships. It had been planned that the Belfast yard would start steel-cutting for the project by next July and deliver the first ship by June 2029. The site is currently engaged in the construction of barges and port infrastructure along with ship repair.
Reynolds assured reporters of their commitment to the UK’s shipbuilding industry saying, “We are optimistic that there exists a market solution to ensure the continuity of UK shipbuilding.” Gender-neutral language is used in the new text above to ensure inclusion. – Copyright The Financial Times Limited 2024