November 25, 2004
The British Ministry of Defense is pushing the country's shipbuilding industry to consolidate operations as the ministry develops a strategy for the Royal Navy's future ship building programs. Defense officials said the ministry shares the blame for the chronic cycle of boom and bust that have plagued the industry over the past thirty years, but they want to see shipbuilders restructure and consolidate for the future since they won't be enough work to keep everyone busy. There are currently five major firms that are involved in building Royal Navy warships.
Shipbuilders have called for greater stability in the Royal Navy's future shipbuilding programs so they can make long-term plans for retaining skilled labor and investing in new facilities. Some have suggested that sole-source contracting rather than the current system of competitive bidding is the way to go. Mergers are viewed by both industry and defense officials as unlikely in the short term, but companies are favoring a joint venture structure that might ultimately lead to corporate mergers in the future. There is also little that the ministry can do to move around funds in the short term, leaving companies such as BAE Systems laying off around 25 percent of naval design workers by the end of the year. This will leave a gap in skilled personnel in two years once the UK starts ramping up work on future aircraft carrier and new resupply ship programs. Shipbuilders are also skeptical about the ministry's ability to deliver a long-term stable plan for ship construction. Doug Mohney