1) The document proposes a post-Brexit industrial policy for the UK that focuses on rebuilding the shipbuilding and ship repair industries. It argues this could help reduce regional economic imbalances, bring jobs and prosperity back to former industrial areas, and strengthen the overall economy. 2) As an example, it suggests restoring the mothballed Pallion shipyard in Sunderland as a prototype, upgrading facilities to modern standards to allow it to compete for contracts. This could generate local employment and economic growth. 3) Rebuilding UK shipbuilding capabilities through government support and tailored regulations could enable the country to regain a share of the global shipbuilding market, export industry, and support domestic needs like border security vessels.

1. Proposal for a Post EU
UK Industrial Policy
Rupert Keyzar
AssocIIMS

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Proposal for a Post EU Industrial Policy
Introduction
Britain is looking to re-engage with the wider world once more following the landmark vote to leave the
European Union. At the forefront of any post ‘Brexit’ economic outlook, there needs to be a forward
looking industrial strategy, because at the heart of any healthy, major economy is a strong industrial policy.
Such a policy must surely incorporate the three main tenets of manufacturing - energy creation/generation,
materials manufacture and what is more commonly called ‘heavy engineering’. As the first two are
separate policies in their own right, this policy proposal deals solely with heavy engineering, with emphasis
on shipbuilding and ship repair. These are industries that could quite easily be reinstated and/or enhanced
to the benefit of the UK and many communities.
This discussion paper outlines what such a policy could look like, the key points of the current state of play
and how reinstating a mothballed shipyard in Sunderland could be used to test the viability of such a policy.
Index of Services (GDP) or ‘Where we are Now’
For the past 30 years, Britain has become increasingly reliant on a single industry in order to prosper, the
services industry. Accounting for approximately 78% of the UK’s total GDP, this has become the country’s
pre-eminent industry and is wide reaching in scope. Of the remaining 22%, 15% is manufacturing, 6% is
construction and 1% is agriculture. This has remained fairly consistent over recent years.
In the 1950s, UK manufacturing accounted for approximately 33% of GDP, in the 1970s it had declined to
around 25% and today it fluctuates around the 13-15% mark. This decline is roughly proportional to the rise
in the services industry. But is an economy built around a single, albeit multifaceted, sector safe?
At present, there is an unhealthy imbalance in the sectors that make up the country’s GDP in that the
services sector dominates to the detriment of all others and severely limits career opportunities for young
folk. However, a revitalised manufacturing industry could have various benefits such as:-
1. Reducing the so called ‘north-south divide’.
2. Bringing prosperity and employment, especially to the former industrial north of the country.
3. Greater manufacturing output = greater GDP = stronger economy.
4. Greater share of the global manufacturing market economy.
5. A much wider choice of meaningful career paths and real apprenticeship opportunities.
6. The necessity to rebuild much of the country’s infrastructure, which is currently a total basket case.
7. Greater self-sufficiency due to the ability of being able to build our own infrastructure (see point 6).
8. Restoring worldwide, the once respected ‘British Brand’.
Shipbuilding/Ship Repair
The decline of our industries is a story of legend. What is frustrating though, is that that our European
colleagues kept their industries going and invested in them. As a result, today they are in the main, highly
benefitting from them – and it is a lesson to this country.
The single largest reason why the UK is non-competitive today is NOT because of the popular
misconception that shipbuilding/ship repair is no longer economically viable in the West. It is because most
of our yards are terribly run down, with poor facilities and a 1970s outlook regards work processes. Is it any
wonder then, why contracts go to the modern and efficient European shipyards? UK shipbuilding needs to
enter the 21st
century and learn the lessons from the past of precisely what NOT to do.
Our industries needed to die in order to have the chance to be reborn and with leaving the EU, that time is
now. With a properly thought out policy, one that is directly proportional to this country’s needs by being
free of particular EU regulation, the UK has an unparalleled opportunity to compete globally again, thus
contributing to economic growth. This is one of the greatest advantages of being OUT of the EU.

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Western Europe specialises in complex vessels, whereas the Asian yards predominantly deal with simple
cargo and bulk container vessels. 99% of the world’s cruise ships are built in the West for example, along
with advanced research vessels, fishing vessels, offshore vessels and the majority of all military craft.
Therefore, it is in these areas that the UK could compete again. This year (2016), the European market
(shipbuilding, repair and conversion) is currently worth around £33 billion.
Fig. 1 - The European Shipbuilding Industry by Sector in 2016 (courtesy of SEA Europe)
Looking at the state of UK shipyards, the only shipbuilding that remains is naval based (and declining), with
the remaining yards dealing with ship repair. On top of this, some of these yards have diversified into
renewables technology. However, despite the facilities being available in some yards, the only merchant
shipbuilding that exists is the construction of the polar exploration vessel ‘Sir David Attenborough’. The
following summarises the UK’s currently existing main yards along with the sub industries they deal with:-
Yard Work Type
A&P Falmouth SR
A&P Tyne/Tees SR
Cammell Laird SB/SR/RE
Harland & Wolff SR/RE
Pallion Engineering SR
BAE Barrow in Furness SB/SR
BAE Clydebank SB/SC
Royal Dockyards Plymouth SR
Royal Dockyards Portsmouth SR
Royal Dockyards Clyde (Faslane) SR/SC
Babcock Rosyth SB/SR/SC
(SB – Shipbuilding : SR – Ship Repair : RE – Renewable Energies : SC – Scotland)
Fig. 2 – Summary of UK Shipyards and Work Type

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Facilities and efficiency are everything in the shipbuilding world and one only has to look at the successful
yards in Germany to see what is possible. British design and engineering is highly regarded the world over –
for example, the UK contains many of the premier F1 design houses. This country also plays a large role in
the design of ships but what we lack are the facilities to turn design into reality, as the ships are all built
elsewhere. Just very recently, Rolls Royce landed a £25m contract to design two new vessels for a
Norwegian company – yet they are to be built in Norway. This shows that the facilities are, for the UK, the
missing piece in the puzzle.
The Proposal
This proposal is centred around government assistance in the form of finance and the legislation of new
industrial regulation, so as to allow the rebuilding of UK shipyards to a standard that is equal to the
competition. Doing so will break the perpetual cycle of not being able to win contracts due to poor
facilities. The basics of this proposal are as follows-
1. Financing the rebuild and reorganisation of some or all of the country’s shipyards to a state equal
to that of the competition.
2. Instigating the necessary regulatory regimes that are directly proportional to the UK’s needs in
order to give the industry the greatest advantage over the competition – and thus success.
With the cycle broken, private yards will at last be able to be in a position to tender for contracts with the
knowledge that they are now on a level playing field with the competition.
It must be understood that this is not a proposal for nationalisation; on the contrary, it is a request that
government equips the country’s existing private yards with the tools to forge new paths for the first time
in 50 years plus. It is in the country’s national interest to reinstate a global manufacturing strategy, as
exporting products is equally as important as services; even more so should the exchange rate remain low.
The Requirements
1. The need to restore and modernise to current global standards what already exists.
2. Infrastructure wise, this will be achieved by the government investing in some or all of the
country’s private yards. However, a clause must exist whereby owners have to keep sites to a
minimum standard and if there is any mismanagement/decline in the site, then all monies invested
are to be owed back to government where they will be redistributed to other yards.
3. New UK regulations to be introduced that are purpose designed to assist in industry growth and the
winning of contracts.
4. Installation of modern management systems with the very clear aim to create high
productivity/efficiency to allow direct competition against all European and certain Asian yards.
5. Employ and train workforce from local and national areas first then from outside.
6. Create genuine apprenticeships with job guarantee on site, upon completion (working with new
and existing local technical colleges).
Education and Employment
There is another side to this proposal and one which is aimed squarely at dealing with two overarching
issues of modern times, that of education and subsequently employment. A strong
industrial/manufacturing base can only exist with the ongoing supply of skilled people. And skilled people in
turn are the result of a strong education policy.
The outlook for so many of our young people from outside of London and the larger cities ranges from
retail, call centres and coffee shops to crime, poverty and a life on benefits. This perpetual cycle has not
changed in decades and one which no government or any think tank has managed to solve. But a modern,
strong and competitive manufacturing base can most certainly help as it gives people a whole new range of
possibilities and careers that presently do not exist. The reliance on the services industry will only add to
the decline of society outside the main cities, resulting in the ongoing resentment of government as well as
fuelling the divide between major cities and the rest of the country as a whole.

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The Pallion Shipyard in Sunderland – A Working Prototype
Any major policy proposal requires testing to see if it is viable before deciding whether to roll it out on a
larger scale. This policy requires taking an existing shipyard and using it as a testbed for all the key points.
The ‘mothballed’ Pallion shipyard in Sunderland is the perfect site in which to assess this new proposal.
When this site was opened in 1975, it was universally acclaimed as one of the most advanced yards of its
kind anywhere. Conceived and designed by James Venus, this yard became the template for the giant
shipyards we see today, especially in Asia and the Middle East. Hailed as one of the most productive and
efficient layouts of its kind, it earned the nickname ‘ship factory’ where steel would enter one end and
come out as a fully completed ship from the other end. It was genuinely revolutionary and changed the
science of shipbuilding worldwide. Yet in 1989, it was closed as the final part of British Shipbuilders.
Privatised and bought out by an Anglo-Greek conglomerate roughly two years later, the site became Pallion
Engineering. However, it has struggled quite badly and today the site’s condition (in line with all other ship
repair sites around the country) reflects this. Yet, the important things is, is that it still DOES exist and as a
result could become the ideal testbed for a new industrial policy platform for less than the cost of building
a new shipyard from the outset.
The Requirements
1. To restore and fully modernise the yard to its designed capability so as to bring it in line with
existing successful European yards, along with 21st
century operational and staff facilities.
2. The yard to be re-equipped according to the relevant markets it is to compete in.
3. Restore/create links to the country’s main transport infrastructure (road/rail etc).
4. Dredge the deep water channel of the river Wear to the North Sea.
5. Exemption from business rates for a defined period.
6. The required management and workforce to be employed from the existing and redundant
workforce of ship repair/heavy engineering companies from around the local area and from
countrywide. There are also many skilled managers/workmen stationed abroad that would be
available. If required, experienced workers from abroad would be welcomed.
7. The creation of new industry regulation purpose designed to give the UK a direct advantage over
EU countries.
8. An in-house sales department to promote the yard and actively seek tenders worldwide for new
builds and repairs.
9. An in-house liaison department to deal with those in government responsible for building the next
generation vessels for the Border Force and the smaller Royal Navy vessels etc.
The Benefits
1. With a 21st
century shipyard, one has the ability to compete for tenders in the £250 billion small to
medium size shipbuilding and £7 billion ship repair world markets.
2. The ability to investigate emerging and growing markets within the maritime industry such as the
£20 billion superyacht new build/refit sector of which 54% of this market is based in Europe. The
industry was worth £492m in 2013-14, an increase of 7.1 per cent compared with the previous year
and an industry which presently employs around 3,700 people and growing.
3. The ability to build next generation fishing vessels, Border Force and Royal Naval vessels for an
expected rise in requirement upon the desired return of UK territorial waters.
4. Growth of existing/new supply chain companies potentially creating chain reaction growth.
5. Reduced unemployment. Sunderland has an unemployment rate of 8.5% (average) which is nearly
double the country average of 4.9% (Aug 2016).
6. The slow rebuilding of northern communities and a reduction in associated poverty.
7. Restored and new infrastructure as a requirement to connecting the shipyard to the UK transport
network.
8. Stronger local economy due to the increased business.

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The Issue of Unions
As many will no doubt remember, the various industrial unions of the 1970s and 1980s brought our
manufacturing industries to its knees. Whilst not wholly responsible for the end of our shipbuilding
industry, the seeds of its decline was born out of unionism going back to the 19th
century and taking root as
the 20th
century played out. Today, unions still hold the country back in certain areas and are of great
embarrassment to the UK on the world stage.
Therefore, any new proposal for an industrial policy absolutely must either circumvent union involvement
(though refusing employment to union members is illegal), limit its influence or even bring it in house
within government in order to help set competitive pay and strong working conditions. Union affiliation is
of course, entirely understandable. But to avoid the obvious stranglehold they can exert, being always one
step ahead is a priority. It is certainly worth studying from successful shipbuilding nations, how they deal
with their unions and how they are integrated into the successful running of their industries.
But what is certain, is that it’s imperative to learn the lessons of this country’s past union based debacles if
any industrial policy is to succeed.
In Conclusion
The decline of this country’s heavy industries during the 1970s and 1980s was, sadly, inevitable given their
state due to various factors. But it was devastating for numerous communities up and down the land, of
which many are still suffering the effects. Yet, free from the chains of EU regulation, if we chose to do so,
this country could once again have an industrial might - but one which is modern and highly competitive
unlike the days of old. Prosperity should not be a London or Manchester only privilege, but one that
reaches every town, city and coastline throughout the UK.
A strong manufacturing base helps with employment, gives meaning to apprenticeships and offers new
career avenues, gives reasons to study at University and technical college, builds strong communities and
could potentially rebalance the north-south divide.
But above all that, it could help in the growth of the country’s GDP through domestic and export new build
and repair contracts - and therefore, the growth of the economy. The UK must embrace industry again, in
exactly the same way as many of our European colleagues do. No longer to be considered a ‘sunset or
smokestack industry’, a revitalised and modern shipbuilding and repair industry can become an intrinsic
part of the economy of a newly independent UK. And with the lower pound, manufacturing becomes
competitive again.
If through leaving the EU, the intention is to rediscover our sense of being a maritime and global trading
nation as stated by government and the new Prime Minister Theresa May, then rebuilding our shipping,
shipbuilding and in fact all manufacturing industries goes hand in hand. The services industry needs to be
balanced by a strong manufacturing industry in order to generate true prosperity for the whole country,
not for just a small part of it.
If services remain the dominant industry, then the anger and resentment of many of those 52% who
voted to leave the EU because the country has left them behind, will just continue to grow unabated.
Rupert Keyzar
AssocIIMS
Southampton
September 2016.