BAE Systems has reached agreement in principle with the UK Government on measures to restructure its UK naval ships business, BAE Systems announced yesterday.
The agreement will result in:
- Restructuring of the contract for the Queen Elizabeth Class Aircraft Carrier programme.
- Provision of additional shipbuilding work prior to the start of the Type 26 Global Combat Ships programme
- Rationalisation of the UK naval ship business to match future capacity requirements.
The agreement comes as the construction of the biggest warships Britain has ever built, the Queen Elizabeth Class, nears conclusion where the structural assembly of the first of class vessel has reached substantial completion.
According to BAE Systems, a significant reduction in workload will follow the peak of activity on the Aircraft Carrier programme, the six Type 45 destroyers and two export contracts. The anticipated Type 26 programme will, in future years, address some of that workload reduction. In the interim period, a proposed contract for the manufacture of three Offshore Patrol Vessels, will provide additional capability for the Royal Navy and sustain key shipbuilding skills.
The agreements announced on November 6, together with an anticipated contract for the design and manufacture of the Type 26 Global Combat Ships programme, will progressively replace the Terms of Business Agreement (ToBA) BAE entered into with British Ministry of Defence in 2009. ToBA provided an overarching framework for significant naval shipbuilding efficiency improvements in exchange for commitments to fund rationalisation and sustainment of capability in the sector.
Restructuring of the Naval Shipbuilding business
BAE Systems has agreed with the UK Ministry of Defence that Glasgow would be the most effective location for the manufacture of the future Type 26 ships. Consequently, the Company proposed consolidation of its shipbuilding operations in Glasgow, positioning it to deliver an affordable Type 26 programme for the Royal Navy.
Under these proposals, shipbuilding operations at Portsmouth will cease in the second half of 2014. Subject to consultation, Lower Block 05 and Upper Blocks 07 and 14 of the second Queen Elizabeth Class Aircraft Carrier will be allocated to Glasgow.
“The Company remains committed to continued investment in the Portsmouth area as the centre of its Maritime Services and high-end naval equipment and combat systems business.
“Consultation will commence on a total employee reduction of 1,775 that is expected to result from these restructuring proposals, including 940 in Portsmouth in 2014 and 835 across Filton, Glasgow and Rosyth, progressively through to 2016, ” BAE Systems said in a release.
The cost of the restructuring will be borne by the Ministry of Defence.
Queen Elizabeth Class Aircraft Carrier
BAE Systems, with the other participants in the Aircraft Carrier Alliance, has agreed changes to the Queen Elizabeth Class Aircraft Carrier contract, under which the industrial participants’ fee will move to a 50:50 risk share arrangement providing greater cost performance incentives. The maximum risk to the industrial participants will continue to be limited to the loss of their profit opportunity.
Press Release, November 7, 2013; Image: BAE Systems