Navantia to rescue shipbuilder Harland & Wolff

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Navantia is set to announce on Thursday it will rescue ailing UK shipbuilder Harland & Wolff after the British government offered the Spanish defence group more generous terms on a contract to build three Royal Navy vessels.

The agreement will protect the 1,200 jobs at H&W’s four shipyards in Northern Ireland, Scotland and Devon.

Navantia has agreed to buy the four yards, preserve all jobs, and also pay outstanding back pay to workers, said people familiar with the situation.

In return, the UK has offered more generous terms on a £1.6bn contract to build a trio of Royal Navy vessels used to transport supplies to aircraft carriers. It was not immediately clear how much more the UK has offered.

Navantia had no immediate comment. Russell Downs, the restructuring expert brought in as H&W interim executive chair, did not immediately reply to a request for comment.

The crisis at H&W, which built the Titanic ocean liner a century ago, has been an early test of the new Labour government’s approach to industrial strategy.

H&W’s parent company had its Aim-listed shares suspended in July, just three days before the UK general election.

Jonathan Reynolds, Labour’s business secretary, subsequently rejected a request for a £200mn loan guarantee from the parent company, which then fell into administration in September.

Yet Reynolds has led cross-Whitehall efforts involving the Treasury and Ministry of Defence to preserve H&W and keep the four yards going without any job losses, according to government officials.

Navantia and H&W have been working together on the £1.6bn contract to build three fleet solid support (FSS) tankers for the Royal Fleet Auxiliary, the civilian branch of the Navy.

The Spanish group has also been providing regular financing to the Belfast-based company since the autumn.

But Navantia had made clear it would not do the deal unless the British government revisited the original terms of the agreement, at one point requesting an extra £300mn, the Financial Times reported.

The vessels are due to be built in blocks at H&W’s yards in Belfast and Appledore in Devon, as well as at Navantia’s main site in Puerto Real in Cádiz — with final assembly in Belfast.

That would result in the first ship being finished at H&W Belfast’s yard in more than two decades, in a major fillip to Northern Ireland’s manufacturing sector.

H&W more than tripled its revenues in 2023 and halved its operating losses to £24.7mn.

Yet the company ran into difficulties as interest payments surged on its expensive debt from US hedge fund Riverstone Credit Management.

Matt Roberts, GMB national officer, said the news of H&W’s rescue was very welcome. “This is good news for UK sovereign capability and capacity in renewables and shipbuilding, but challenges remain,” he said. “Without proper investment into local skills and facilities at all four yards, and the onshoring of orders, the doom loop will be in danger of coming back. The GMB will hold both Navantia and government’s feet to the fire to ensure promises are kept.”