Shipbuilding (Steel Allocation)

Part of the debate – in the House of Commons at 12:00 am on 14th October 1952.

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Photo of Mr Frederick Willey Mr Frederick Willey , Sunderland North 12:00 am, 14th October 1952

I want to take the opportunity tonight of raising some points for discussion about one of our major industries, the shipbuilding industry, which vitally affects my own constituency, because for the last 100 years Sunderland has rightly claimed to be the largest shipbuilding town in the world.

When shipbuilding has prospered Sunderland has prospered; when shipbuilding has slumped, Sunderland has been paralysed by the misery of mass unemployment. I am sure that the Civil Lord would agree at any rate with this, that whatever the depressions which this great industry has faced in the past and whatever difficulties it may face in the future, the hard work, enterprise and initiative of the shipbuilding industry is equal to any in this country.

The tragedy in the past has been that time after time the industry has faced a position in which its workers have been neglected and wasted. In Sunderland at times we have had nine out of ten of the shipbuilding workers unemployed. Consequently, against this background, and in spite of the present prosperity and the present all-time-record order book which the industry has, the shipbuilding industry must always remain fearful of the threat of depression.

It is not surprising therefore that when the Lloyd's returns for the second quarter this year showed that only 206,000 gross tons had been commenced in that quarter—the lowest figure for any quarter since the war—and, moreover, when the Lloyd's returns revealed that that represented only 19 per cent. of the world tonnage, against the 40 per cent. of the world tonnage which was being constructed in 1951, the industry felt some apprehension and concern.

The shipbuilders themselves have attributed this to the steel allocation scheme and the working of that scheme. May I say at once that the shipbuilders have not been misled by the Conservative Party? They accepted the re-imposition of controls as being absolutely necessary. In fact, Mr. Ramsay Gebbie, for whom I have the greatest respect, and who was at the time President of the Shipbuilding Conference, said that When a basic raw material is in seriously short supply, there is an obvious need in the national interest to determine the best use of what is available. That is a proposition which I accept and which I hope, in the light of experience, the Conservative Party will begin to accept.

But what the Shipbuilding Conference complained about was that, although they accepted the necessity for an allocation scheme, the shipbuilding industry was not near enough to the front of the queue; and they claim that they are receiving about 50 per cent. short in the steel they require to make full use of the yards.

Although the Members for the shipbuilding constituencies in the North-East were a little upset that we were not notified of his visit, I am sure we were all very pleased when the Civil Lord came to the North-East to visit the yards on the Wear and the Tyne, and when the Civil Lord met reporters we were happy to learn through them that the allocation for the fourth quarter is to be 8 per cent. higher than that for the previous quarter.

But, perhaps like Oliver Twist, I say that is not enough, and the industry says that is not enough. It seems to me that it does no more than reflect the improved steel supply position and is no effort to meet the fundamental objection of the industry to the present level of allocations. I admit at once that at Newcastle the Civil Lord claimed that we could now build at a higher rate than at any time since the war, but I think he was rather optimistic. I think the industry will still be faced with the problem of keeping heavy capital equipment under-employed with the consequent rise in costs and short fall in production at a time—and this is the significant thing—when our percentage of the total world shipbuilding is falling.

I therefore put these questions to the Civil Lord. In dealing with the allocation, is he satisfied that the industry is holding at least eight to nine weeks steel stocks in hand? I mention that figure because I remember that when I met Sir Stafford Cripps in 1948 he regarded this as a minimum. We were inclined to agree that this could be accepted as an absolute minimum. I ask the Civil Lord, what is the stock position in the industry at present?

Moreover, it has been a constant complaint of the shipbuilders this year that the steelmakers have been unable to honour to the full extent the authorisations. This is an entirely new situation. I remember again that when we met Sir Stafford Cripps in 1948 he revealed to us that in the previous year the shipbuilders had received 23 per cent. over and above their allocation, and it is a fact that on previous allocation systems the shipbuilders have always somehow or another contrived to get well above their allocation.

Another real complaint made by the shipbuilders is this question of out-of-sequence deliveries. This is a vitally important matter to an assembling and prefabricating industry—to an industry which is prefabricating on the scale the shipbuilding industry is. The Civil Lord, I know, recognises this is a problem, because at Newcastle he said he would take the problem of irregular deliveries back with him to the Admiralty and see what he could do about it on his return to the Admiralty.

I notice that in its Supplement yesterday "The Times" still deals with this question of deliveries being made out of sequence, and I should like to ask the Civil Lord whether any progress has been made in overcoming what appears to be a very real complaint of shipbuilders, not only about getting enough steel, but that the steel supplies are coming in the wrong sequence, which contributes to increasing costs and prejudices them in the world market.

So much for the steel allocation. I want to raise a few more points on the immediate prospects of the shipbuilding industry. I would say at once that it is very dangerous to generalise from a single quarter's returns in shipbuilding, but I think that the Civil Lord will have to agree, at any rate as far as the second quarter of this year goes, that that quarter shows an appreciable fall in the production rate and that although, as far as I am concerned, the figures for the third quarter are not yet available, such figures as are available show that there has been a further and continued retardation of the production rate. If that continues it is bound to prejudice the industry in its present real enough difficulties.

One of our leading shipbuilders said fairly recently that the delays resulting from steel shortage may be the reason why some shipowners are having new tonnage built on the Continent. I should like to know whether this is happening. If it is happening it is certainly a most disturbing factor, because it is happening at a time when, quite clearly, the shipping laid down for export is less than last year, the shipping under construction for export is appreciably less than last year, and when shipping completed is also substantially less than last year's.

In fact, if we turn to the Trade and Navigation Returns they reveal, whether we pay attention to quantity or to value, that there has been a very serious fall in the value of the exports of shipping made by this country. In fact, those accounts show that in the first eight months this year compared with the corresponding eight months of last year we have earned £10 million less in foreign currency—over the past eight months.

I should like to draw the Civil Lord's attention particularly to the fact that our most important customer since 1945 has been Norway. In fact, at times Norway has been importing shipping from us at six times the rate of any other country in the world. But, within the first eight months of this year our exports to Norway have fallen by no less than £4,500,000. I would ask the Civil Lord, what does this mean? Does it mean that we can no longer depend to the same extent on the Norwegian market for our exports in shipbuilding? Because if it does mean that, it means that we shall have to face aggravating difficulties in the export field. Whatever the position regarding the export of shipping to Norway, I think the Civil Lord would be bound to agree that the signs are ominous today, when both the volume and the value of our export of ships is falling and at the same time the percentage of British shipbuilding in the total world tonnage is also showing a tendency to fall.

In July I asked the Minister of Labour what effect the heavy reduction on freight rates was likely to have on employment in the shipbuilding industry. The reply then was that the fall in rates had not reduced the demand for new tonnage. In April, 1951, our freight rates were twice the rates in 1948, but by June of this year those rates had been halved. In other words, they were back to the 1948 level, when a good deal of concern was being expressed in the shipbuilding industry.

Since June, the freight rates have fallen to about one-third of what they were in April, 1951; in other words, the freight rates now are only about three-quarters what they were in 1948. This is very disturbing, not only for the shipping industry but also for the shipbuilding industry, and I should like to know from the Civil Lord what effect he estimates this drastic fall in freight rates will have on the shipbuilding industry, and how real it makes the present enormous order books. Personally, I express this point of view. I think he is being far too optimistic in anticipating that next year, 1953, we shall be able to obtain a production of 1,400,00 gross tons a year.

Another point I should like to raise—and I do so with some diffidence, because I appreciate that it is a very difficult thing to be dogmatic about—is this. What has been the impact of the re-armament programme on our shipbuilding industry? How far is the impact of the re-armament programme the explanation of our present figures? On 9th July the First Lord, in reply to a Question, said: The total amount of steel allocated for merchant shipbuilding in the Sunderland area for the third quarter of this year is about 12 per cent. less than the corresponding allocation in the second quarter, and represents approximately 60 per cent. to 65 per cent. of the total demand for steel for merchant ships made by the shipbuilders in the area.If, however, account is taken of the separate allocation made in the first quarter for certain re-armament contracts on which work is about to begin, the allocation is approximately the same as for the second quarter and only slightly less than that for the first quarter."—[OFFICIAL REPORT, 9th July, 1952; Vol. 503, c. 92.] I raise this question with some diffidence, because I recognise at once that one of the complaints we have always made in Sunderland is that we have not had a sufficient volume of work from the Admiralty, and that has in the past contributed to our depressions.

We welcome, of course, the placing of the minesweeper orders in Sunderland. At the same time, I wonder whether the Civil Lord is paying sufficient attention to the future of the Wear yards. The Sunderland yards more than any other yards in the country have always depended almost entirely on merchant shipbuilding. I agree it is that reliance which has made us particularly vulnerable in times of depression, but today we have this enormous pressure on the yards because of their order books, with at the same time the drastic collapse in the freight charges, which, I believe, we must all concede has dramatically changed the immediate prospects regarding world shipping; and at this time the First Lord admits that, as far as our yards are concerned, they are only being utilised to the extent of 60 per cent. or 65 per cent.

This is happening at a time when our proportion of the total world shipbuilding tonnage is falling. Although I raise this point with some diffidence, I should have thought that this was an occasion on which we should pay very real heed to something which the Prime Minister said some time ago. I think that in this particular context we should, at any rate, re-look at the question of the priority of exports.

I would concede at once the proper and legitimate bias of the Admiralty towards defence work. I would concede that defence work is, in the present circumstances, a top national priority. At the same time, there is also the vital problem today of retaining our position in the export market with regard to shipbuilding, especially as I think that most people would fear that in the present circumstances this position may attain for only a few months. In a few months, if the slump in shipping continues we may find the shipbuilding industry facing a very different position regarding export orders. I appeal therefore to the Civil Lord to consider the possibility of regarding in the present circumstances shipping for export as a top, even an absolute, priority.

A point which I believe only applies to the export of shipping is that not only does the export of shipping directly contribute to our present balance of payments crisis, but, in the case of shipping, the export is almost entirely to what I might call the democratic powers and, in fact, although we are exporting shipping, we are building a mercantile marine which if we were landed in war would, as in 1939, be again at our service. I think that exceptional position relating to the export of shipbuilding should be borne in mind when we are balancing one consideration against another. We should then be prepared perhaps to go further in this case than we might feel we should go in other cases.

In conclusion, I want to say a few words about the long-term prospects of the shipbuilding industry. I know that today there is this very understandable emphasis on tankers. I do not want to make a point about the unbalance of the skilled trades in the industry. I think that we have to meet this tanker demand. The position today, however, is that over one-half of the work in the British yards is on tankers. We are contributing 44 per cent. of the total tanker tonnage under construction.

We talk about an oil hungry world, but how near are we getting towards meeting tanker capacity in the world? Once we do that the only question we are concerned with then is the replacement of the tanker fleet. This is peculiarly a British question because we are so heavily involved in the construction of tankers. I should like to know whether enough thought has been given to the impact that the attaining of capacity in tankers will have upon the British shipbuilding industry, and what steps we are taking in advance to prepare the yards against it. How far, for instance, are we losing, because of our concentration on tanker work, other work competitively in the world position which I have just described? This is no more than a part of what, after all, is a much wider question, that of the future of the shipbuilding industry.