In a dispute that has cast doubt on the future of Harland & Wolff, the Belfast shipbuilder responsible for the Titanic, the UK government is divided over a financial assistance package.
Whitehall officials say that the Treasury is hesitant to approve a loan guarantee facility of £200mn backed by taxpayers, whereas three rival Ministries — Defence, Trade and Business, and Northern Ireland Office — all want to move forward.
Three people familiar with the discussions said that Chancellor Jeremy Hunt hasn’t made up his mind yet and is still getting advice. Some involved in the negotiations claim he is dragging out the decision. Insiders say a decision will be made in the next few days. H&W is looking to borrow up £200mn at a reduced interest rate from a group banks, with the government as a guarantee.
The loss-making business would need to find alternative sources of funding to meet its working capital needs and complete key contracts, including building three ships under a £1.6bn Royal Navy Contract.
Last year, the company’s auditors warned that it faced “material uncertainties” if it did not secure new financing and gain additional work.
One person familiar with the company said that the group was also in the middle of wage negotiations with its staff, and “needs” the money to pay payroll.
The report of the split in the government comes just days after Grant Shapps, the UK defence secretary, claimed that the UK had entered a “golden era” of shipbuilding after he had approved new warships to increase the UK’s military spending.
Two officials stated that the government is inclined to assist the Aim-listed Aim, which operates in Scotland and England and has the Titanic shipyard located at the Belfast skyline.
One official insisted that Treasury was concerned with the specific financing mechanisms proposed but was not against the principle of providing support to the 163 year-old company. Officials are considering alternative options for support in the event that the chancellor rejects the guarantee scheme.
The MPs, however, have questioned if it’s right to use taxpayer money to support a struggling business.
Kevan Jones (Labour MP for North Durham) called on the National Audit Office on Wednesday to investigate.
There are serious questions about the use of taxpayers’ money to guarantee a loan worth millions to Harland & Wolff given its current financial situation.”
Jones, who raised concerns about an unprecedented 100% guaranteed loan in Parliament, wrote Gareth Davies (head of the NAO) earlier this week to ask the agency to investigate what guarantees are in place to protect taxpayers.
Jones also said that there are questions about “due diligence” done to ensure H&W could deliver the £1.6bn contracts before it was awarded.
Jones said that the National Audit Office (NAO) should answer these questions in taxpayers’ name.
H&W’s management said in a Wednesday statement that it was “comfortable” with the progress of what is a large and complex transaction for all involved parties.
H&W’s shares dropped more than 28% on Tuesday, before recovering 50% of their losses and closing at £10.10 valuing the company at less than £18mn.
The latest accounts of the company, up to 2022, show revenues of £27mn, but losses of 370mn. H&W had a net debt of £82.5mn due to the high interest rates on a $100mn Riverstone Credit Partners loan.
H&W stated in December that it had “sufficient funding” to cover its working capital needs “until completion of the new loan facility”.
Francis Tusa is an analyst and editor at the Defence Analysis Newsletter. He said that awarding a PS1.6bn to a company whose market value was substantially lower than this level “was not good practice”. H&W is a company that hasn’t built a complex ship in more than 20 years.
In December, the Ministers agreed to move the loan guarantee forward to the next phase so that H&W can work with its bank consortium to secure financing.
Officials said that the MoD and DBT want to quickly agree on a financial package in order to provide certainty about the future of shipbuilding.
This package is essential if H&W wants to fulfill a £1.6bn contract for three support vessels to be built by the Royal Navy. was awarded this contract in 2022 , as part of an Spanish-led consortium. Previously, unions expressed concern that the work might be moved to Spain.
According to a Whitehall insider, the NIO is in favor of extending financing to Harland & Wolff because of its importance as a Belfast-founded iconic business. In January , the government committed to supporting the shipbuilding and defense industries in Northern Ireland.
Alan Perry, senior organizer for the GMB in Belfast, stated that he “definitely” did not hear the company in danger, or anything at the moment “that would concern us”.
A spokesperson for the government said: “We are continuing to work with Harland and Wolff on the export development guarantee.” It would be inappropriate to make any further comments until the final outcome of the process has been confirmed, due to the commercial sensitivities.
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