Harland & Wolff crisis is first test of Labour’s industrial policy

Harland & Wolff crisis is first test of Labour’s industrial policy

Unlock the Editor’s Digest for free

The Labour government is under pressure to sign off a rescue deal for the beleaguered Belfast shipbuilder Harland & Wolff within weeks, in an early test of the party’s willingness to prop up strategic companies when they run into trouble. 

There are “crisis talks” within government over whether to back a request from the lossmaking Titanic shipbuilder to issue a £200mn loan guarantee the company needs to refinance its debt.

Ministers’ decision whether to intervene is one of several facing Sir Keir Starmer’s new government, as industrial crises in every corner of the UK threaten many thousands of jobs.

The Labour government has pledged to grow the economy and supercharge inward investment. But its immediate short-term challenge is grappling with potential widespread job losses: Tata Steel in Wales plans to axe 2,800 jobs; the Scottish oil refinery at Grangemouth is scheduled to cease operations; Thames Water is seeking to avoid financial collapse; thousands of aerospace roles are uncertain in Northern Ireland as Spirit AeroSystems is carved up by Boeing and Airbus; and Dyson is consulting on cutting 1,000 roles in the south of England.

Liam Byrne, a former Labour chair of the business select committee, said a government’s industrial strategy should not be defined by which companies it decided to “ride to the rescue” of.

“There is a risk of the industrial strategy being partly defined as government picking losers or losers picking government, rather than a strategic approach to the economy,” he said. “What good industrial strategy is all about is leaning into our competitive advantages.”

With some of these crises inherited from before the election, new ministers are set to come under pressure from Labour’s trade union allies to intervene in a more muscular way to save jobs.

Harland & Wolff has been in talks with ministers for months as it tries to stem losses.

The business has a $115mn credit facility with New York-based Riverstone Credit Partners that pays 14 per cent interest and matures at the end of December. H&W has been in talks with new lenders to secure a £200mn loan at a lower interest rate.

Last December the Tory government gave preliminary sign-off to a new loan guarantee from UK Export Finance on the £200mn.

But in May the Financial Times reported that — amid potential state aid concerns — the Treasury was blocking the move against the will of three other ministries: defence, Northern Ireland, and trade and business.

On July 1 — days before the election that swept Labour to power — the business suspended trading in its shares on London’s AIM market after accounting issues delayed the filing of its audited annual results. 

It warned: “Should there be any material delays to securing the facility post the general election, the company’s ability to execute new and large contracts would be adversely affected.”

One industry figure said the statement “almost feels like a veiled threat . . . but there’s nothing to say those Treasury concerns have gone away and nothing to suggest [chancellor] Rachel Reeves will be bullied into acting quickly”. 

It had been handed 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 £24.7mn for 2023, and H&W said it is aiming to publish the audited results later this month.

One person close to the company said this week the business is “continuing very positive talks with the government and are confident we will have a resolution soon”.

The government declined to comment, citing “commercial sensitivities”.

Grangemouth petrochemical plant
Grangemouth petrochemical plant is scheduled to cease operations © Jeff J Mitchell/Getty Images

Elsewhere ministers are dealing with an array of industrial crises, including Grangemouth, where Scotland’s only remaining oil refinery is set to cease operations this year. 

Site owner Petroineos announced in November that it would cease refining operations on the Forth and convert the site into an oil import terminal. At the weekend Starmer said he had a “duty” to help the 400 workers who could start losing their jobs as soon as next year. 

In Wales, Tata Steel is poised to lay off up to 2,800 workers as a result of a deal with the previous Tory government to shift to green steel production with £500mn of government subsidy and close down its two blast furnaces at Port Talbot.

Jonathan Reynolds, business secretary, has insisted there was a “better deal available” if the Indian company would negotiate with the new government, which has set aside £2.5bn for green steel if the company would guarantee jobs and the supply chain.

But Tata has already closed one of the furnaces last week. Starmer spoke to Tata management on Saturday, while the company held further talks on Monday with Reynolds and Welsh secretary Jo Stevens. “Tata is receptive,” said one aide.

Meanwhile, ministers are hoping to avoid having to nationalise Thames Water, Britain’s largest water company. 

On Tuesday Thames urged regulator Ofwat to sign off on a business plan to make the company “investable”, as the utility tries to raise the new equity it needs to stave off collapse.

Whether it can use the stretched Treasury coffers to avert some of these job losses, the harder task for Labour will be to demonstrate it has a coherent strategy outside of the whack-a-mole routine of averting each crisis as it arises.

Lord Richard Harrington, a Tory former business minister, said he believed that the new Labour government was nevertheless committed to forging a viable industrial strategy: “There will always be short-term crises, one-off problems, but as a government they should focus on taking a strategic approach to areas with a competitive advantage, for example aerospace, to get more investment in those areas.”