Step Change For UK Shipbuilding?

Originally proposed as the Home Shipbuilding Credit Guarantee Scheme, the SCGS is seen as elemental to the effectiveness of the revised National Shipbuilding Strategy, launched by the UK Government in March 2022 to revitalise the country’s shipbuilding industry.

The UK maritime industry has been calling for the reintroduction of state guarantee-based arrangements for many years. Appreciation in Westminster of the maritime sector’s overall contribution to the economy finally led the Government last October to reaffirm its intention to put the scheme in place. An official statement at the time contended that the move would “level the playing field with competitors’ export credit guarantees and ensure UK shipbuilders have a fairer chance of securing valuable contracts.”

The SCGS will guarantee a percentage of the value of loans used to purchase, refit, retrofit or repair vessels, sharing the risk with lenders to encourage offers of finance to the UK shipping community. It will be delivered by UK Export Finance(UKEF).

The facility provides for Government guarantees of up to 80% of loans over a maximum repayment period of 12 years. Shipyards will receive payment via the credit facility as amounts fall due under the commercial contract. The transaction must satisfy the Department of Business and Trade’s eligibility criteria relating to shipyard, bank and contractual structure involved in each case.

The National Shipbuilding Strategy in its revised format, as a refresh of the plan first proposed in 2017, delineated a £4bn($5bn) Government procurement programme over the ensuing 30 years, described as a “pipeline of work”, covering naval ships and other state-owned vessels.

Although companies will not automatically qualify for contracts or receive any subsidies to attract those orders, so as to safeguard competition, the rationale is that yards should be better able to plan for the future in the knowledge that there will be continuity of demand. The “pipeline” identifies a requirement for more than 150 publicly-owned(naval and civil) vessels.

The architects of the strategy calculate that the shipbuilding and allied industries contribute £2.4bn($3bn) each year to the economy and support 42,600 jobs nationwide.

In reference to the SCGS, Minister for Industry and Economic Security Nusrat Ghani said “With cutting-edge vessels designed and built here in the UK, this will be a boost to high-skilled careers and to every company involved in the supply chain for shipbuilding, helping us to grow the economy.” She formally implemented the scheme in London on July 26 at an event aboard an innovative river passenger catamaran constructed by Wight Shipyard for Thames Clippers.

John Wood, CEO of the resurgent Harland & Wolff Group endorsed the SCGS as a core deliverable from the National Shipbuilding Strategy, saying it would help UK shipbuilders to compete, win orders and create new, high-quality jobs across the country, adding that “We look forward to using the scheme as both a customer and builder.”