Mersey Gateway could take a toll on links with British steel

The new bridge looks set to be the latest in a series of major UK projects to benefit foreign, rather than local, workforces. Mark Leftly reports
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The Independent Online

Every weekday, more than 80,000 vehicles cross the River Mersey using the Silver Jubilee Bridge, overshadowed by its 87-metre high, 330-metre wide arch. Opened in 1961, the now Grade II-listed structure was designed to cope with only one-tenth of that number of cars, and the resulting traffic jams has reduced the journey between Runcorn and Widnes to a snail's pace.

After years of delay, most notably caused by the coalition's spending review shortly after it took power in 2010, three consortia are closing in on winning a £2bn contract to build and run a second bridge 1.5km downriver. This bridge, the Mersey Gateway, is one of the major pieces of infrastructure that the country is looking to as part of its plans to revive the economy, to the extent that Chancellor George Osborne has noted as "incredibly important".

Big Four accountant KPMG has gone further and named the Mersey Gateway as one of the world's 100 most significant urban infrastructure projects. This puts the six-lane toll bridge, suspended by cables attached to towers that rise to 135m in height, in an industrial corner of the North-west in the same league as plans to revive downtrodden Detroit and the construction of an "energy city" powered by solar panels in Qatar.

As a result, last Monday's announcement that the final bids for the 30-year contract must be submitted by April should feel like good news; a project designed to regenerate the wider Liverpool area will finally have an engineering team selected and ready to get building by the summer.

Instead, the Mersey Gateway bridge is on the verge of turning into the most criticised major capital spending project since Germany's Siemens was handed the £1.4bn trains contract for Thameslink nearly two years ago, which rival Bombardier argued cost 1,400 jobs at its plant in Derby.

The situation is even more comparable to the new Forth crossing, where all the steel used will be from China, Poland and Spain – the metal in the existing 123-year-old bridge was almost entirely sourced from Scotland (see box).

At a time when the Government is promoting a National Infrastructure Plan as a strategy to create jobs and economic growth, two of the most important schemes in British industry have already seen jobs lost to workforces overseas. The Mersey Gateway could end up with steel parts prefabricated as far away as South Korea, which would pay the wages of 500 people almost 5,500 miles away from Runcorn.

Steelwork is a significant part of the British economy, worth around £2.5bn and employing 10,000 people. The British Contractual Steelwork Association (BCSA) represents 95 companies in the sector, including Severfield-Rowen, the listed group which built the widely praised London 2012 Olympic velodrome but was still forced to launch a £47.9m emergency rights issue last week in an attempt to pay off its heavy burden of debt.

The trade body has met with Mersey Gateway Project directors twice, the last time only a few weeks ago, and it has warned that the way the bidding process has been set up could result in work that would be best done in the UK actually going to other parts of the world.

The three remaining consortia are: Merseylink, which, despite the domestic-sounding name, includes financing from Australia's Macquarie, engineering expertise from South Korea's Samsung C&T Corporation and various European partners; MGL, in which Germany's Hochtief is a lead member; and finally a largely French grouping that also includes British construction giant Balfour Beatty.

Most of the concerns have centred on Samsung's involvement in what appears to be a heavyweight bid – and it only joined late in the process. However, the real issue is that the ultimate client, Halton Borough Council, has not insisted on the final winner possessing Britain's gold-plated Register of Qualified Steelwork Contractors Scheme for Bridgeworks.

Any steelwork company with a facility within the EU, that fabricates anything from footbridges to crossings with more than a 100m span can apply for this certificate. Had the council insisted on this being part of the selection process, it is far more likely that any steelwork would be completed in the UK as most firms with this qualification would naturally be British.

Last year's Forth crossing process also didn't have such a caveat. That led to Michael Leahy, the general secretary of the Community trade union, arguing that there was no industrial policy that helped "level the playing field for Scottish industry to compete globally". He argued that a third of the steel could have been produced from Tata's site in Motherwell, with the balance from places such as Teesside and Scunthorpe, but instead it was travelling 12,000 miles from China.

"We're very concerned that the same thing that happened with the Forth Bridge doesn't happen with the Mersey Crossing," says BCSA's director general Sarah McCann-Bartlett, who it's difficult to accuse of being jingoistic given that she is Antipodean. "We need to see a UK supply chain," she adds.

McCann-Bartlett's deputy, Gillian Mitchell, is even more outspoken. She points out that where materials are supplied from will be left to the winner to sort out once appointed, while it is not even clear if a massive bridge that has been discussed for years will be made from steel or concrete – though if it is the latter, this should mean that work is carried out on-site and is therefore more likely to be from a domestic supplier.

"The client is leaving these type of decisions to the consortia," fumes Mitchell. "Personally, I think that is too late. It's far better to mandate these things as early as you can. Local jobs should be for local people and by that I mean the UK."

While the BCSA insists that the Mersey Gateway should have insisted on the UK qualification in its tender documents, senior project directors warn that this could potentially contradict the EU's strict procurement rules. These insist that there are no biases given to domestic bidders for any contract, though certain basic standards and the cost impact of foreign worker involvement often mean that local companies remain the favourites to win most substantial public-sector contracts.

Steve Nicholson, the project director at Mersey Gateway, argues: "You've got to recognise that there is an open market obligation. You can't try to load a project with that kind of liability [that a winner could be challenged in court]. That's very difficult given the current legal framework and there are very strong economic arguments to use a local supply chain – the best costs usually come from harnessing a local supply chain."

He adds that the bid process, so far, has been "extremely competitive", so that whichever consortium wins in the end, the public will get the best value for money – though that does not necessarily mean the same as the cheapest.

However, the economic benefits of 500 people in the UK manufacturing big chunks of the bridge means that their jobs are either created or protected. Typically, every pound invested in construction results in £2.84 of economic benefit in the UK – which, should Samsung win, means that the South Korean economy will be raking in the cash.

Infrastructure and jobs …

Thameslink trains

Unions were furious when Siemens won the contract to build 1,200 rail carriages for Thameslink two summers ago. Even though the rival bid came from Canada, Bombardier was relying on the contract to keep on skilled staff in Derby. Siemens thought the argument against its appointment was unfair given that the German giant has a substantial workforce in the UK, though there were subsequently funding problems.

Forth Bridge

The latest Forth crossing is due to open in 2016, with costs partly kept down by making many of the steel parts in China. However, this has caused a huge political row, with Scottish Labour Party leader Johann Lamont (inset below) accusing First Minister Alex Salmond of giving the Chinese an £800m steel contract while taxpayers ended up getting "two pandas" in exchange. Work to put in seabed foundations started last year.