BAE Systems is to cut almost 1,800 jobs from its UK-based Maritime-Naval Ships business and will cease shipbuilding operations at its Portsmouth facility next year, the company announced on 6 November.
At the same time, the company has reached agreement with the Ministry of Defence (MoD) on a series of measures to restructure its naval ships business in the UK. This includes the restructuring of the Queen Elizabeth-class (QEC) aircraft carrier programme, provision of additional shipbuilding work prior to the start of the Type 26 Global Combat Ship programme, and industrial rationalisation to match future capacity requirements.
In addition, BAE Systems has confirmed plans to consolidate its future shipbuilding operations – underpinned by the projected Type 26 Global Combat Ship programme – at its Govan and Scotstoun sites in Glasgow. Ahead of this, the MoD has announced plans to build three offshore patrol vessels (OPVs) for the Royal Navy (RN) to maintain key industrial capabilities on the Clyde between the end of QEC build and the ramp up to Type 26.
An announcement on the future of BAE Systems Maritime-Naval Ships’ facilities has been long expected. The company faces a significant reduction in workload following the completion of the six-ship Type 45 destroyer programme, the peak of activity on the QEC programme, and conclusion of two export contracts. The Type 26 programme will only partly fill that workload gap.
BAE Systems said that its shipbuilding operations at Portsmouth will cease in the second half of 2014. Subject to consultation, Lower Block 05 and Upper Blocks 07 and 14 of the future HMS Prince of Wales – the second QEC carrier – will be re-allocated to Glasgow.
A total of 940 employees at Portsmouth are expected to lose their jobs by the end of next year. A further 835 jobs will be lost at Filton, Glasgow and Rosyth through to 2016. The cost of the restructuring will be borne by the MoD.
BAE Systems said it “remains committed to continued investment in the Portsmouth area as the centre of its Maritime Services and high-end naval equipment and combat systems business”. Defence secretary Philip Hammond subsequently announced that more than GBP100 million (USD160.1 million) was to be invested in HM Naval Base Portsmouth, which will be home to the carriers HMS Queen Elizabeth and HMS Prince of Wales .
The MoD and BAE Systems also announced that, with the other participants in the Aircraft Carrier Alliance, they had agreed changes to the QEC contract, now estimated to have risen to GBP6.2 billion. Under the revised terms, the contract will be amended to accommodate programme changes and activities previously excluded from the contract.
Under the new Target Cost contract, the industrial participants’ fee will move to a 50:50 risk share arrangement providing greater cost performance incentives. The maximum risk to the industrial participants will continue to be limited to the loss of their profit opportunity.
A Terms of Business Agreement, entered into by BAE Systems and the MoD in 2009, was designed to provide an overarching framework for significant naval shipbuilding efficiency improvements in exchange for commitments to fund rationalisation and sustainment of capability in the sector. However, under this arrangement, the MoD would have remained liable to pay for any periods when no shipbuilding was taking place at UK yards.
Hammond said that the build of the three new modified River-class OPVs would funded from money that would have been used to pay for idle capacity, finance redundancies and meet the cost of industrial restructuring. “This is an investment not only in three ships, but in this country’s warship building industry. It prevents workers standing idle and sustains the vital skills needed to build the planned Type 26 frigate in the future,” he said.
Work on the helicopter-capable OPVs is planned to begin in 2014, with the first ship being delivered to the RN in 2017. It is currently assumed that the new ships will replace the current River-class vessels, in RN service since 2003.
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