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Harland & Wolf suppliers owed millions of pounds fear they will not be paid as the bankrupt shipbuilder is taken over by Spain’s Navantia, warning of a hit to UK supply chains if they are replaced by European contractors.
The 164-year-old company best known for building the Titanic fell into administration last September, hobbled by large losses and steep interest payments on its debt.
A deal was struck in December with state-owned Navantia which the UK government vowed would protect 1,000 jobs at H & W’s four yards in Northern Ireland, England and Scotland.
But suppliers say jobs are already being lost in the supply chain and they have little prospect of getting their invoices paid.
Russell Downs, the bankruptcy and restructuring expert brought in as interim executive chair in July, told the Financial Times in December the sale to Navantia “regrettably” would mean losses for creditors and suppliers.
On January 14, the four yards that had been continuing to operate followed the parent company into administration.
“It’s very stressful,” said the chief executive of one British-based supplier who, like others, asked not to be named. “They owe us £10mn plus, a reasonably big chunk of our business . . . We’re an SME. That kind of money does have an effect.”
He added: “Until just before Christmas, the assumption was that H & W would be sold as a going concern and Navantia were going to stand behind its debt . . . Looking ahead, I would imagine Navantia are going to use their own suppliers now — they’re not going to want to take liabilities.”
Tan Dhesi, chair of the defence select committee at Westminster, asked John Healey, UK defence secretary, in a letter last week for “comprehensive answers” by February 3 on how government is helping H & W’s supply chain.
“The immediate effects on the UK supply chain and employment landscape are huge,” said the head of one company supplying H & W’s Appledore yard in England and Belfast.
“There’s a lot of angry local people and not much support from anybody,” said a supplier of services in Belfast, who said his company and clients were owed £22mn.
“It’s a horrible situation . . . It’s a bit like David and Goliath,” he said. “It’s been cloak and dagger the whole way through . . . Basically, the rug has been pulled. The headlines are saying they’re saving jobs. I know [supply chain] companies have already started laying people off.”
Navantia understands suppliers’ concerns and is committed to developing H & W’s capabilities and “supporting the local industry,” said one person familiar with the company’s plans. It aims to “redevelop a healthy industrial ecosystem in order to support their [suppliers’] viability,” the person said.
The sale to Navantia is expected to close on Monday. Staff were told in an email last week seen by the FT that “the next chapter in the shipyard’s history is about to begin”, with Navantia bringing “the experience, stability and investment that is desperately needed”.
The Belfast and Appledore supplier said the so-called prepack sale was “being used as a means to write off debt at the expense of the trade creditors” which are mainly SMEs.
The UK government and Navantia have refused to disclose financial details, including the size of what Jonathan Reynolds, business and trade secretary, said was a “relatively minor” increase to the £1.6bn contract to build three Royal Navy support vessels in which Navantia and H & W are partners. Navantia had pushed for a boost to clinch the deal.
A government spokesperson said it “has not given any direct financial support to Navantia” and the deal contained “the minimum changes to the contract necessary — on commercial terms — to ensure its continued delivery”.
Hilary Benn, the UK’s Northern Ireland secretary, on January 15 blamed unpaid invoices to suppliers on “the failure of the old H & W”.
“It now falls to Navantia to decide which of the invoices it wishes to pay, but it will want to secure a relationship with suppliers contributing to the fleet solid support ship programme,” he said.
