The UK business secretary has revealed the government will not provide any emergency liquidity funding to struggling Belfast shipbuilder Harland & Wolff (H & W), leaving it racing to find a private sector financial rescue.
The written ministerial statement from Jonathan Reynolds on Monday came just days after H & W admitted that its separate, long-standing request for a £200 million (€237 million) loan guarantee had been turned down by the British government.
The company employs about 1,500 workers at four sites – one in Devon, two in Scotland and its main base in Belfast where the Titanic was built.
Mr Reynolds said the decision to turn down both financial lifelines to H & W was “not easy” but that he believed he had done the right thing given the “very substantial risk” the money would be lost.
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“HM government funding would not necessarily secure our objectives and there is a very substantial risk that taxpayer money would be lost,” he said. “The government believes, in this instance, that the market is best placed to resolve the commercial matters faced by Harland and Wolff.”
John Wood resigned as the company’s chief executive on Friday as it appointed a restructuring expert, former PwC partner Russell Downs, as interim executive chair.
[ Harland & Wolff boss quits amid emergency funding talksOpens in new window ]
Mr Wood’s departure had been expected as a condition of a new loan being discussed with H & W’s existing Wall Street lender, Riverstone, with which it has a $115 million (€105 million) credit facility charging a 14 per cent interest rate.
Mr Reynolds said he had been encouraged by government engagements with Riverstone and its apparent desire to “find pragmatic solutions” to the crisis.
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“Harland and Wolff indicates that these discussions on new financing should conclude in the next few days,” he said. “This will involve the ... onboarding of new management with a focus on recapitalisation and ensuring sustainable finances.”
In a weekend letter to staff seen by the Financial Times, Downs said that despite the UK rejection of funding, H & W had “secured further financing to support our operations whilst we identify our immediate priorities and what our focus is”, but he gave no details.
Mr Downs appealed for business as usual while he visited the Belfast yard and the site at Appledore in Devon this week, then the Scottish yards next week.
He said he was focused on “finding a way forward” but declined to comment on the future of the 163-year-old company amid fears among staff it could be broken up.
Michael Flacks, a distressed asset investor, told the Sunday Times he was keen on buying just the Belfast yard. He could not immediately be reached for comment.
Responding to Mr Reynolds’ statement, Sharon Graham, general secretary of the Unite union, which represents most of the workers at H & W, said the “political focus must now be on attracting stakeholders who are committed to building a long-term future, rather than those looking to turn a quick profit”.
Matt Roberts, national officer for the GMB union, said the situation was “worrying” for workers and their families.
He added that H & W’s yards had “been at the heart of UK manufacturing for centuries” and were “critical to our future security in building the Fleet Solid Support ships for our navy”.
Mr Wood led a £6 million rescue of the shipbuilder from administration in 2019, since when it won part of a £1.6 billion contract to build new Royal Navy ships alongside Navantia of Spain.
But this month it failed to produce audited accounts and its Aim-listed shares have since been suspended.
Speaking at the Farnborough Airshow on Monday, Mr Reynolds said he was confident that Royal Navy warships would still be built in Belfast.
The Belfast yard had been expecting to cut steel for the project in July next year and to deliver the first ship in June 2029. The site is at present building barges and port infrastructure, as well as carrying out ship repairs.
“What we are committed to is UK shipbuilding. We are very confident there is a market solution out there that will enable that to happen,” Reynolds told reporters. – Copyright The Financial Times Limited 2024
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