Takeover deal could seal Arnish’s “golden era”​

​Arnish has boomed and bust a few times in the course of a half century and optimism will inevitably be accompanied by reservations. However, the man who now runs the yard believes the long and twisting road which led the Spanish state-owned shipbuilder to a location they had never previously heard of, on the edge of Europe, offers an extraordinary opportunity for Arnish’s long-term security.

Last Friday morning, Albert Allan and shop stewards at the yard met Torcuil Crichton to discuss what lies ahead. Albert said of the MP’s role: “He was on the end of the phone for us for the last six months. Every time I spoke to Torcuil, he was in there pushing, talking to his colleagues on our behalf. There were some really big road blocks and he helped us overcome every one of them”.

There was plenty to be positive about. The previous day, a statement in the House of Commons confirmed that the yard has an immediate future and, in Albert Allan’s view, a lot more than that. He predicts “a golden era for Arnish”, specialising as Navantia’s subsea centre for the oil and gas industry; a class of work the yard is already engaged in, with high satisfaction levels from an international client.

“Navantia”, says Albert, “want us to grow our subsea profile. They also want us to grow the nuclear-related work we do. Basically, they don’t want us to change anything. It is all labour intensive work which will require additional workforce and the upskilling of our current team”. Albert foresees the workforce on the site as it now stands rising towards 300.

There are currently 171 employees, including 29 apprentices, at Arnish.

Union and management agree that there are huge opportunities for local employment. At present, there are ten Portuguese welders at the yard, delivering excellent work and fitting in well in their new surroundings. But from every perspective, it makes sense to maximise local employment through training and re-training, a lot of which is already going on. Some of the former Bakkafrost workforce are now at Arnish in various roles.

Renewables is an obvious market for the yard to target but Albert Allan is very clear that he does not intend it to be the short-term focus. “There is going to be a massive spike in renewables work towards the end of the decade, and we have to be ready”, he says. But in the meantime, there are plenty opportunities to be going on with, particularly to develop a “subsea centre of excellence”.

“Being ready” by the end of the decade will, for him, involve re-visiting plans announced earlier this year to create a second deep water port at Arnish, along with Stornoway Port Authority, “to enable the development of the Stornoway Offshore Wind Hub”, capable of fulfilling much bigger renewables contracts than at present. It would fill in the area between the new cruise ship terminal and the existing fabrication yard.

When a prospectus for the project was distributed in April, there was a strongly supportive response from ten major companies, including the developers of offshore and onshore windfarms. However, the plans went into storage once the chronic financial problems facing Harland & Wolff started to manifest themselves, casting doubt over the future of Arnish and the other yards.

If the plans for a second deep water port are to become a reality, public investment will be needed to support a project which carries a price tag close to £100 million. Torcuil Crichton is confident that this is the kind of port infrastructure opportunity which will attract investment from UK Government renewables funding while Albert Allan is clear that they will also be knocking at the doors of HIE and the Scottish Government.

While Harland & Wolff in its recent manifestation is now part of history, the fact remains that the risky decision to support John Wood in his takeover of the Arnish yard three years ago was more than justified. Without that bold step, backed by HIE and a local “Action For Arnish” campaign, the next sequence of wholly unpredictable events would never have been available to fall into place.

The 21st century version of Harland & Wolff was a speculative venture which, for that reason, found difficulty in securing funding on terms which would have given it a secure base. On one level, it was an act of entrepreneurial genius by John Wood, an ebullient engineer with strong Tory connections, who in 2019 bought the shuttered Harland & Wolff yard in Belfast, with all its historic connotations.

To this day, there is no story written, even about the latest challenges of Harland & Wolff, which does not refer to it as “the yard that built the Titanic”. Over the next two years, John Wood picked up other distressed assets for very little – the Appledore yard in Devon and the two former BiFab yards at Methil and Arnish, all of them branding as “Harland & Wolff”.

It was a bold strategy which might have succeeded. The yards, including Arnish, won contracts and the ability to transfer work between yards was an asset. However, there was always a suspicion in the industry that Harland & Wolff were bidding low to secure cash flow, while reliant on borrowing from an American hedge fund at very high rates of interest. One former manager described it as “a giant Ponzi scheme” which was bound to come to grief.

Fortuitously, as it turned out, this did not happen before the Ministry of Defence awarded a massive contract for Fleet Solid Support Vessels to a consortium led by Harland & Wolff out of Belfast with Navantia as its main partner. The Royal Navy badly needs these ships by 2028. So when Harland & Wolff hit the rocks last summer, there was enormous pressure on the incoming government to find a solution.

Entirely coincidentally, Jonathan Reynolds, who had been shadow business secretary when Labour was in opposition, decided that he wanted to reach out, quite literally, to the four corners of the UK during the election campaign. Torcuil Crichton, who did not really know him, was delighted to accept his offer and, of course, took him to Arnish where the storm clouds were beginning to gather.

This personal contact with the yard became crucial when, a few weeks later, Mr Reynolds found himself transferred from shadow to substance as Secretary of State for Business and Trade in the incoming government with the problems faced by Harland & Wolff as one of the first briefings on his desk.

John Wood had been counting on the incoming Labour government being a soft touch for an industrial bail-out based on underwriting a £200 million loan from their American bankers.

That would have been crazy or, as Mr Reynolds put it in the Commons last week “deeply irresponsible” because of the “unsustainable debt” which Harland & Wolff had accumulated. As Torcuil Crichton said: “Any injection of public money would have been seized by an American hedge fund without touching the walls of Arnish or any other yard”.

Mr Reynolds told MPs: “We had to explain in confidence to all colleagues affected why the initial decision on the guarantee alone was not the right way forward, but that we were committed to the kind of solution we have announced today”.

There was some political flak for not accepting Mr Wood’s demands. In the Western Isles, Alasdair Allan MSP claimed that Arnish was being “thrown into jeopardy as a result of … political games at a UK level over the issue of this loan”. As it soon transpired, nothing could have been further from the truth.

Apart from the desire of the incoming government to do the right thing by industrial jobs, the imperative which set Harland & Wolff apart was the Ministry of Defence’s urgent need to get the job completed. This pointed firmly in the direction of Navantia as a potential buyer but it could have been accomplished by saving the Belfast and possibly Appledore yards, where the naval work was to be concentrated.

The trick which Mr Reynolds and his colleagues, including Scottish Secretary Ian Murray, performed was to persuade Navantia over the course of the next few months that any deal must cover all four yards, including the former BiFab casualties at Arnish and Methil.

In the Commons last week, Mr Reynolds said: “It was really important to us that we keep all four yards together. There had been an assessment that, for understandable reasons, the Belfast yard was more commercially valuable, so there was a real chance that any unstructured rescue package could have lost the two Scottish yards.

“There were question marks about those yards in particular, so keeping the business together and protecting the future of those workers was hugely important to us, and I am delighted that we have been able to achieve that.

“The job guarantees for the non-Belfast yards will last for two years. The guarantee is for 90 per cent of the overall job numbers, simply to provide the usual degree of flexibility in running that business… The deal also comes with investment in the Scottish yards, so whatever the future holds, those yards will be even more competitive and more able to bid for the kinds of contracts that will secure the long-term prosperity we are all seeking”.

Torcuil Crichton says: “The commitment to maintaining all four yards has existed from day one and has never wavered. It has been a complicated route but I think we have ended up with the best possible outcome.

"That visit by Jonathan Reynolds during the election campaign was a huge stroke of good fortune. It meant he knew exactly what was at stake and the importance of making sure that all four yards were included. Then when Navantia saw for themselves, the deal was sealed.”

There is general agreement that the Navantia management visit to Arnish was very valuable in firming up their enthusiasm. Seeing really was believing brought the Spanish company fully on board.

As for Albert Allan and the Arnish team, over the last six months they have continued to focus on what they could control and impact, the yard has been resilient and performing extremely well under the challenging situation, and this has not gone unnoticed by the client base.

There are significant opportunities in the pipeline and the resilience the team have shown will serve them well as they enter into that potential new “golden era”.