German competition threatens shipyard jobs

A political crisis is threatened in Scotland as Clydeside shipyards face mass redundancies because of German competition for British defence contracts.

Govan shipyard in Glasgow was saved from closure last year when BAe Systems bought it from Kvaerner. But that was in the belief that a BAe Systems-led consortium would secure a £300m contract to build roll-on roll-off ferries for the Ministry of Defence.

It now appears a rival German submission has undercut the bid by 15 per cent, threatening up to 10,000 jobs, at Govan,Yarrow in Scotstoun and at engineering suppliers inthe area. In the long-run, taking into account the refitting of the ferries, the contract over 20 years could be worth £1bn.

Ministers are expected to meet local MPs and yard representatives this week. The MoD has said an announcement will be made by the end of the spring.

Mohammed Sarwar, the Labour MP for Govan, said yesterday: "It would be a grave mistake for the Government not to consider allowing this contract to go to the Govan shipyard. The cheapest tender is not necessarily the best. Everyone understands how much all this matters to jobs on the river Clyde." Mr Sarwar claims to have been told by a ministerial source that the order will probably go to Germany, a decision that would be a blow to the political reputation of John Reid, the Secretary of State for Scotland, who claimed much credit for saving the yard last year.

Labour is sensitive over the future of the shipyard - it sits in a marginal constituency the Scottish National Party is keen to win to show Labour's heartlands are vulnerable. If the ferries were classified as war ships, the Government could simply award the contract to a British yard.

However, because they are technically for commercial shipping, EU rules that favour the lowest bidder apply.

Jamie Webster, yard convener for the GMB union at Govan, said: "The Government must intervene and listen to what people are saying. The manufacturing base is being destroyed around them."