Swan shipyard future in doubt: MoD awards pounds 170m Navy contract to VSEL and Kvaerner Govan

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THE FUTURE of the Swan Hunter shipyard on Tyneside was in doubt last night after a crucial pounds 170m Royal Navy contract was awarded to two rival shipbuilders.

The Ministry of Defence's decision to hand the order for a new helicopter carrier to VSEL and Kvaerner Govan will leave Swan Hunter and its 2,200- strong workforce with an empty order book from the latter part of next year.

Throughout the fiercely contested battle for the order all three yards had warned that thousands of jobs rested on a successful tender. But Swan Hunter had never disguised the fact that its survival depended on winning the contract.

Last night there was dejection on Tyneside. Roger Vaughan, joint chief executive of Swan Hunter, warned that the loss of the order would have 'serious consequences'.

Unemployment in Newcastle upon Tyne is running at 12.4 per cent but in some pockets of Wallsend, where the Swan Hunter yard is based, male unemployment is as high as 50 per cent.

There was relief, however, in Barrow, home of VSEL, and on Clydeside, site of the Kvaerner Govan yard. Noel Davies, chief excecutive of VSEL, said the contract would have important implications for employment in Barrow and on Clydeside.

David Smith, commercial director of Kvaerner Govan, said the contract would enable the yard to continue working until the end of 1995 and provide a much-needed fillip to the area, where adult unemployment is running at 25 per cent.

The MoD defended its decision to deny Swan Hunter the order by saying the rival tender had been pounds 50m cheaper. But it was also being pointed out that the award of the contract to the joint bid would provide work in two regions where unemployment is also high.

It is expected to be several days before a full statement is issued on the future of Swan Hunter, bought out by its management from state-owned British Shipbuilders in 1986. But it may have to begin shedding jobs almost immediately. The yard's only current contract is for three Type 23 frigates - the Westminster, Northumberland and Richmond. The first ship begins sea trials this week, the second will be delivered later this year and the third towards the end of next year.

Stephen Byers, Labour MP for Wallsend, said: 'This is a devastating body blow to Tyneside, where Swan Hunter is an integral part of the manufacturing base. There must now be real doubts about the future of the yard and of shipbuilding on Tyneside.'