Ferries scandal Scotland: Ferguson Marine future threatened as ‘£25m’ investment required to become competitive in doubt

A report earlier in the year found the Ferguson Marine yard needed to be three times more productive to become competitive

Ferguson Marine’s future as an internationally competitive shipyard is in significant doubt after the Scottish Government said it had turned down an initial request for around £25 million of funding to invest in the yard.

Economy secretary Neil Gray told MSPs on Tuesday the request for investment into the yard’s machinery from chief executive David Tydeman had fallen foul of state aid rules.

The refusal to provide the money to the ailing yard, which was described as having “significant risks and uncertainty” around its future solvency, throws into doubt the hope it will ever become competitive again.

One of two Caledonian Macbrayne ferries being built in the Ferguson Marine shipyard in Port Glasgow, Inverclyde

Ministers plan to sell the yard back into the private sector at some point. However, they were told in a commercial report that it needed to become three times more productive to be viable.

Mr Tydeman had previously outlined a request for a new plating line, burning tables and better computer software to help the yard improve.

However, Mr Gray said the business case outlined by the yard had failed subsidy control rules and could not be backed by the Government.

He said: “Our independence due diligence on the initial capital request concluded the initial business case would not meet the commercial market operator test, a key legal requirement if we are to demonstrate compliance with the subsidy control regime. Therefore we continue to examine options that would be compliant.”

Mr Gray said some planned work would be ditched by the yard.

However, plans for the yard to bid or be awarded directly the contract for CMAL’s small vessel replacement project remain central to its future. One source said this contract could be completed by the yard without additional capital investment.

The minister said: “Indeed a key component of the initial case for investment was contingent on a specific type of work … winning a specific pipeline of work that FMPG board and management recently concluded should not be pursued at this time.

"Both the yard and ourselves recognise that it is vital that any investments support a business plan that reflects evolving circumstances, is genuinely deliverable, and meets our legal requirements on subsidy control. We will leave no stone unturned in finding a way forward and we will consider all options for securing a future based on a promising order book.”

Graham Simpson, transport spokesperson for the Scottish Conservatives, said workers at the yard would feel a “sense of despair” at the lack of good news.

“He [Mr Gray] talks about ‘securing a future based on a promising order book’ but there will be no such order book without that investment,” he said. “The Cabinet secretary talks about needing to see a revised business plan, but he is unable to say what is lacking from the one before him.

“And it is a mystery why he thinks the yard has a future without further investment, because it does not feel that way.”

Gary Cook, senior organiser in manufacturing at the GMB union, said workers deserved clarity. He said: “No one wants these ferries to be finished more than the workers, but they also want, and deserve, to know their future will not be determined by mistakes of the past made by others.

“With a committed workforce led by ambitious managers, there is nothing to stop this yard having the brightest possible future and the Scottish Government must urgently help secure it.”

A Ferguson Marine (Port Glasgow) spokesperson said: “Our business plan is focussed on two missions: to secure further work as part of the Type 26 frigate programme for BAE, and to build a fleet of small ferries for CMAL. Our position on that has not changed since we submitted the plan in Q1 of 2023.

“Given today’s announcement by Mr Gray, we will now reassess our plans to upgrade the yard infrastructure and install specialist equipment to ensure that FMPG is equipped to compete most effectively for commercial tender work. This plan required between £20m and £25m of capital investment to put us on a firm footing to secure these long-term projects.

“We will discuss options with Scottish Government officials as soon as possible and, on behalf the workforce, we welcome Mr Gray’s commitment to ensuring that optimal solutions are identified to support the shipyard’s future.”