A dramatic revival in shipbuilding in Glasgow is under way

The future cashflow prospects for defence businesses are rosy

BAE Systems

As NATO leaders met in The Hague on Wednesday to make their historic re-armament pledge, about a hundred shipyard workers and managers at BAE Systems were gathering on Glasgow’s Upper Clyde for the official opening of a vast new shipbuilding facility in Govan.

The Janet Harvey Hall, named after the first woman to work in the yard in the second world war, is one of the largest industrial buildings in Scotland. It has to be big to accommodate the side-by-side construction – sheltered from Glasgow’s notorious weather - of two Type 26 frigates that the UK’s biggest defence contractor is building for the Royal Navy. In all, eight were ordered under a £7.9 billion contract with the Ministry of Defence.

To a piped soundtrack of 1940s music including wartime crooner Vera Lynn, staff heard how the new facility was built on land once owned by Fairfields, the former Govan business that blazed a global trail for Scottish shipbuilding in the 19 th century. But as GMB union convener Kenny Smith told them: “It also stands as a monument to the future.”

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That future can be seen in why the Type 26 is being built in Glasgow. It was in front of the same hall that Keir Starmer last month unveiled the government’s Strategic Defence Review, warning the threats Britain now faces are “more serious and less predictable than at any time since the end of the Cold War”.

One of those is a marked increase in Russian submarine activity in the North Atlantic, particularly under the icy waters of the Norwegian Sea. This is where the Type 26 comes in. Described by BAE Systems as a “frontline warfighting frigate” with “high survivability characteristics”, the vessel has been built for stealth, including an alternative electric motor to reduce noise.

BAE Systems has invested £300 million in modernising its facilities in Glasgow to build the Type 26, including docks across the Clyde at Scotstoun where hulls are fully fitted out, including with a computerised “combat management system”. A “mission bay” towards the stern allows the deployment of drones and anti-hypersonic missiles. “This is designed to beat the Russian sub at the cat-and-mouse game,” explains Simon Lister, a former Royal Navy vice-admiral and military attaché in Moscow who is now managing director of BAE Systems’ naval ships business.

The building of the Type 26 signifies nothing less than a dramatic revival in shipbuilding in Glasgow after decades of post-war decline. Just as sites like Govan and Belfast were vital to wartime efforts in the past, it’s a revival driven by geopolitics. And it places Scotland at “the beating heart of military shipbuilding”, as Scottish Secretary Ian Murray put it last month when the first Type 26 was officially named “HMS Glasgow” by the Princess of Wales.

It’s a revival that looks sustainable, too, which will matter for jobs. Annual defence spending of £2.1 billion in Scotland currently supports over 11,000 defence industry jobs, of which almost 5,000 are at BAE Systems in Glasgow.

In the Netherlands, NATO committed to meet US president Donald Trump’s demand to raise defence spending to five per cent of GDP by 2035. The UK has pledged as part of this to raise core defence spending to 3.5 per cent, with an additional 1.5 per cent on security- related infrastructure such as cyber security and border protection.

The future cashflow prospects for defence businesses are rosy. Investors have taken notice, powering explosive growth in the share prices of European publicly listed defence companies such as Rheinmetall of Germany, Italy’s Leonardo – which has an avionics and radar business in Edinburgh – and Babcock, the UK’s second largest defence contractor that’s building Type 31 frigates at Rosyth.

This week, Babcock’s chief executive David Lockwood declared a “new era for defence” as his company raised its profits target. BAE Systems, whose shares are up 62 per cent so far this year, hopes it will win a contract from Norway this year to deliver five Type 26s.

Developing a robust supply chain will be key. Two things announced in this week’s UK Industrial Growth Strategy stand out. One is a new £400 million innovation fund to support new defence technology, while another is the creation of “defence growth deals” for Scotland, Wales, and Northern Ireland to create “regional industrial clusters”. In March, the government said it would launch a new “support hub” to small and medium enterprises better access to the defence supply chain.

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“The government has made a very clear link between increased defence spending and the effect on the economy, so this will have an effect not only in Scotland but the supply chain, a lot of which is in Britain,” says Emma Salisbury, a research fellow at the Council on Geostrategy.

Notably, about half of the supply chain for the Type 26 is sourced in Britain. One unknown is whether this increase in naval activity will have any spillover effect into civilian shipbuilding. A hearing at the Scottish Parliament this week heard from Brussels-based consultancy ADS Insight that while competition from Asia had hollowed out European shipbuilding over decades, calls have started to come for a European maritime industrial strategy.

A declaration was signed last month by 20 EU member states calling for “support [for] cross-fertilisation between commercial and naval shipyards and maritime equipment manufacturers”. As Timo Schubert, a partner at the firm, put it: “Europe has finally come around to understanding that shipbuilding is a strategic asset.”