Before the nationalisation bill could be presented to Parliament, the outlook for the industry deteriorated. The oil crisis at the end of 1973 brought the long post-war boom to an end, and the downturn was aggravated by the over-ordering which had taken place in the five preceding years. World launchings of merchant ships, which reached a peak of 36m tons in 1975, fell to a low point of 17m tons in 1981. The British government was immediately plunged into a series of fire-fighting operations. Court Line, owners of Doxford & Sunderland, had over-extended itself through its ventures in aviation and hotels, and in June 1974 the company was on the brink of collapse. The government decided to take over its shipbuilding and shiprepairing interests. This move was justified on the grounds that it would safeguard £133m of shipbuilding orders and 9,000 jobs. Further short-term intervention was necessary at the three companies which were already wholly or partly owned by the government – Cammell Laird, Harland & Wolff, and Govan Shipbuilders. In February 1977 the government set up a shipbuilding intervention fund, with an initial allocation of £65m, to subsidise orders on a selective basis.
The progress of the nationalisation bill through Parliament was delayed by legal and procedural objections, and it did not become law until June 1977. The new state corporation, British Shipbuilders, began life on 1 July. An unfortunate consequence of the delay was that the chief executive-designate, Graham Day, withdrew from the post. Day was a Canadian, formerly a lawyer with Canadian Pacific, who had impressed the government while serving as managing director of Cammell Laird from 1971 to 1974. His place was taken by Michael Casey, a senior civil servant in the Department of Industry.
The immediate task for Casey and his colleagues was to secure new orders, but the few large contracts which were won required substantial support from the government’s intervention fund. The first accounts covering the period up to March 1979 showed a loss of over £100m, partly because of provisions for losses on contracts taken before nationalisation; the losses would have been much higher had it not been for the profits earned by the warship builders. There were disturbing similarities between British Shipbuilders and Upper Clyde Shipbuilders a decade earlier – the lumping together of disparate yards, some of which were virtually bankrupt, and a desperate search for business to keep the workforce employed.37
The Labour government hoped to use nationalisation as a means of promoting the fuller involvement of the trade unions in solving the industry’s problems. This meant a larger role for the Confederation of Shipbuilding and Engineering Unions. In 1978 a new procedure was agreed for settling wages at the national level, replacing 168 separate bargaining arrangements in individual yards, and in the following year provision was made for local productivity agreements within guidelines set at the centre. A few months later the Confederation accepted that jobs could be reduced as long as there were no compulsory redundancies. The effect of nationalisation was to give the Confederation more influence over the industry’s affairs, but the centralisation of collective bargaining caused resentment among shop stewards in the yards. The national unions were in the awkward position of collaborating with management in policies which would inevitably lead to fewer jobs.
In the first two years after nationalisation the scale of redundancies was small enough to be manageable, but in 1978, with the order intake showing no sign of improvement, British Shipbuilders was forced to consider more drastic measures. In presenting the corporate plan to the government at the end of that year the company forecast that merchant shipbuilding capacity would be reduced from 631,000 tons to 430,000 tons by 1980–81, with a reduction in employment from 33,300 to 21,000. Although the corporate plan was not published and the government decided not to respond to it until after the general election, rumours of impending redundancies provoked anxiety among the unions.
The Government Opts Out
The Thatcher government, elected in May 1979, believed that loss-making state-owned enterprises were a burden on the economy which should be removed as soon as possible. In the case of British Shipbuilders privatisation was not feasible until the profitability of the company had improved, and there were no immediate steps to withdraw financial support. The corporate plan which had been prepared before the election was approved, and the government agreed to establish an intervention fund of £120m to cover the next two years. The management of British Shipbuilders was strengthened by the appointment as chairman of Robert Atkinson, an experienced businessman who had considerable knowledge of the engineering and shipbuilding industries. One of his first moves was to tighten financial control at the centre while putting stronger pressure on yard managers to increase productivity; he also brought a tougher line to the conduct of industrial relations. By the end of 1980 the order book was looking healthier, and the losses were reduced. Atkinson believed that break-even would be possible by 1983/4.
Employment continued to fall rapidly. The willingness of shipyard workers to accept voluntary redundancy angered some union leaders, but the combination of generous severance payments and the bleak outlook for the industry made it difficult to mobilise resistance. By the start of 1983 some 26,000 jobs had been lost since nationalisation, and in April of that year Atkinson announced plans for a further 9,000 redundancies. This prompted a strong reaction from union leaders, who threatened a campaign of yard occupations along the lines of the UCS sit-in. Implementation of the redundancy plan was deferred until after the election of June 1983, but the convincing Tory victory made it clear that there would be no softening in Mrs Thatcher’s hard line. Unlike the miners, who began their ill-fated battle with Mrs Thatcher in 1984, few shipyard workers relished the prospect of an all-out fight with the government.38
Relations between Atkinson and the government were uneasy, mainly because of disagreements over the privatisation of the warship yards. Atkinson believed that the politicians were determined to get British Shipbuilders off their hands as quickly as possible, even at the cost of decimating an industry which, in his view, was capable of being rehabilitated, albeit on a smaller scale. Atkinson was succeeded after the 1983 election by Graham Day, the government’s original choice to head British Shipbuilders, and privatisation was set in train. By the middle of 1986 Vickers in Barrow, Yarrow on the Clyde and Vosper Thornycroft in Southampton had been sold. Swan Hunter, which since the early 1980s had concentrated mainly on naval vessels, was sold in a management buy-out. National union leaders opposed these sales, but they had little support at the local level. Most workers in the warship yards felt that nationalisation had been a disadvantage for them, since it held wages in the industry below what the naval yards on their own could have justified.
The future of the merchant yards depended on reducing costs and improving productivity. As Day put it, ‘The craft basis on which British Shipbuilders has operated – rigid demarcation lines, fierce protection of skills and the like – has to be altered. We’ve got to get from a craft to a system basis’.39 With the unions weakened by rising unemployment and a general sense that the continued decline of the industry was inevitable, managerial control over the pace and allocation of work was tightened. At the end of 1983 the Confederation signed an agreement which showed how far the principle of craft control had been eroded. The terms of the agreement provided that ‘all employees must be prepared to acquire new skills and to remove customary practices where they are no longer appropriate’, and that ‘all levels of staff will be interchangeable as required according to their individual skills and experience’.
The reaction of most union members to these changes was resigned acceptance. They recognised that their job security now depended not on their union, but on the commercial viability of the yard where they worked. The two features of the labour relations system that had persisted since the nineteenth century – sectionalism and craft control – were finally crumbling. But the reforms could do little to protect the industry in a market dominated by huge excess capacity. In 1986, when world merchant shipbuilding capacity was estimated at 18m tons, new orders totalled only 9m tons, of which the British share was 2 per cent. There was no prospect of improvement until 1990 at the earliest.
For the Thatcher government, these figures underlined the pointlessness of ploughing money into an industry which seemed likely to make heavy losses for the indefinite future. The remaining merchant yards, the government decided, had to be sold or closed. The Govan yard was bought by the Norwegian Kvaerner group, and Harland & Wolff was