Japan was a new shipbuilding nation, and there was an enthusiasm for expansion and for new technology, just as there had been in Britain a century earlier. In 1956 Japan overtook Britain in shipbuilding output, and in the same year shipbuilding displaced textiles as Japan’s largest export industry. The diffusion of modern production methods was assisted by the presence in Japan of an American company, National Bulk Carriers, which had been active in the Liberty ship programme during the war. This company leased the former naval yard at Kure, and the fifty-two ships which it built during the 1950s were based on production methods blending American know-how in welding and prefabrication with a novel Japanese approach to flow-line assembly. The Japanese chief engineer at Kure installed a production planning system which stemmed from his experience in the aircraft industry during the war.23 Other shipbuilders studied Kure’s methods and applied them in their own yards. Productivity rose rapidly, and the Japanese industry was well placed to profit from the boom in orders which followed the closure of the Suez Canal in 1956.
Within Western Europe the most successful shipbuilding nations during the 1950s were Sweden and West Germany. Oil tankers were a Swedish speciality, and leading yards like Kockums in Malmo and Gotaverken in Gothenburg had a close relationship with Norwegian owners. Substantial investments were made in welding and prefabrication; in 1950 nearly 40 per cent of Swedish launchings were of all-welded vessels compared with only 4 per cent in Britain. The American approach to mass production was much admired in Sweden, and in 1959 Gotaverken decided to apply assembly-line principles to shipbuilding on a greenfield site at Arendal. Although the Arendal project later ran into difficulties, it was regarded at the time as the most advanced shipyard in the world.
As long as British yards had plenty of orders and were making good profits, the loss of market share was not a matter of pressing concern. But as Britain’s lag became more evident, especially in the construction of larger ships, several companies committed themselves to ambitious re-equipment schemes. Capital investment rose sharply after 1956, and, as if to confirm the warnings of the Cassandras, these schemes came on stream just as the world shipping market entered its first serious post-war downturn. The reopening of the Suez Canal in 1957, together with the US recession in that year, led to a sharp fall in freight rates. In Britain new orders fell from 5.4m tons in 1956 to just over 2m tons in 1962.
The response to this setback showed how deeply pre-war experience had influenced the thinking of the industry. The view of senior managers was defensive, as it had been in the 1930s. Capacity should be reduced in line with the lower level of demand, and, in assessing how much capacity would be needed, the primary consideration was the likely size of the British merchant fleet.24 If an industry-wide capacity reduction scheme was to be instituted, the approval of the government was necessary. The reaction of ministers was unenthusiastic. They believed that the industry’s problems were mainly of its own making: the shipbuilders had failed to modernise as effectively as the Japanese and the Swedes had done. This diagnosis was confirmed by a critical report published in 1960 by a government agency, the Department of Scientific and Industrial Research (DSIR).25 Its analysis drew attention to managerial weaknesses in British shipbuilding, including a primitive approach to production control and an old-fashioned approach to labour relations. An ominous sign of declining competitiveness was the increase in the number of orders placed by British shipowners with overseas yards.
Belatedly the industry began to put its house in order. In 1959 a joint delegation of employer and union representatives visited Swedish shipyards. They concluded that Sweden’s superior productivity was due to the careful planning of the production process and the flexibility with which labour could be deployed. The absence of demarcation between trades made it easier for Swedish yards to maintain a stable labour force.26 This visit was followed in 1961 by a more extensive study of production methods by a committee of industry experts, and this report also highlighted deficiencies in planning and supervision as major causes of low productivity.27
The Conservative government which held office until 1964 was concerned about the industry’s performance, but reluctant to intervene directly. In the discussions over the capacity reduction scheme (which was eventually abandoned) the Minister of Transport, Ernest Marples, suggested that the industry might create a small number of multi-yard groups. This would facilitate the closure of uneconomic capacity and allow yards to specialise in work for which their equipment and skills were best suited. But a collective solution of this kind did not find favour with the shipbuilders. They claimed that they were losing orders from domestic owners because foreign yards offered more generous credit terms. The government commissioned a report from Peat Marwick, the chartered accountants, which showed that credit was much less important than price and delivery. But the government’s non-interventionist line was hard to sustain as the continuing recession led to yard closures and unemployment. Between 1958 and 1963 employment in merchant shipbuilding fell from 78,000 to 48,000.
In 1963, with an election looming, the government announced a £30m scheme to help finance new orders from British shipowners for British shipyards. This was presented as a temporary measure to help the industry through its difficulties, but it marked the start of a more interventionist policy which was to be taken much further by the Labour government after 1964.
State-directed Modernisation
The new government was strongly committed to industrial modernisation, and shipbuilding was high on the list of industries which needed attention. Shortly after the election a committee was appointed under Reay Geddes, chairman of Dunlop Rubber Company, to examine what changes were necessary. While the committee was still taking evidence, the government was faced with a crisis at Fairfield, one of the largest yards on the Upper Clyde. This company had modernised its facilities and built up a substantial order book, but its debts were high and it had incurred serious cost over-runs on a luxury car/passenger ferry being built for an Israeli line. After making heavy losses in 1963 and 1964, the company declared itself bankrupt in October 1965. The attempted rescue, which became known as the Fairfield experiment, has been seen by some observers as one of the greatest missed opportunities in the history of British shipbuilding.28
The prime mover was Iain Stewart, a Scottish industrialist who had been arguing for some years that insecurity of employment lay at the heart of the industry’s poor labour relations. He believed that Fairfield could be used as a laboratory for a new approach based on a constructive partnership between employers and trade unions. If Fairfield could be saved by these means, it would set an example to other shipbuilders. For the plan to be put into effect, an immediate injection of funds was necessary, and it could come from only the government. Stewart’s request for help came at an opportune time, since ministers were anxious to avoid a major yard closure before the Geddes committee had reported. A £1m loan was made available in November 1965, and the government took a 50 per cent stake in the new company which was formed to take over the Fairfield assets.29
The Fairfield experiment lasted for just under two years. During this period progress was made in relaxing demarcation barriers between trades and in introducing a job evaluation scheme as the basis for a more rational wage structure. A consultative