I fully understand the motivation and feelings of the hon. Member for Jarrow (Mr. Dixon). He has put up a pugnacious defence of his constituents' interests, of the shipbuilding industry and, in particular, of Tyne and Wear. I visited that area about two weeks ago, not for by-election purposes, but purely on Department of Industry business. I am glad that the hon. Member has raised this issue. I welcome the opportunity to make it clear to the House that the Government are keenly aware of the deep concern in the Tyne and Wear area about the prospects for the shipbuilding industry.
My right hon. Friend the Secretary of State for Industry met representatives of the Tyne and Wear county council—and of local unions—on 29 March to discuss this whole issue. They emphasised the point that the area is heavily dependent on shipbuilding and shiprepairing. Fifteen per cent. of the local working population are directly employed in these industries. Local supplier industries depend on them, too. The area has already suffered substantial job losses in shipbuilding and shiprepairing. The round of redundancies announced by British Shipbuilders in January fell heavily on the area and added to already very high levels of unemployment.
Shipbuilding, like any other industry, cannot be isolated from the effects of deep recession in its markets—and markets for most of British Shipbuilders' products are, as the chairman, Sir Robert Atkinson, has been stressing for some time, quite appalling. The shiprepair market has been grim for several years. The merchant shipbuilding market has never really recovered from the slump in orders which started in 1973. At the bottom of the last recession in 1978 new world orders were equivalent only to about a quarter of then available capacity. The market improved substantially in 1979 and 1980, but from a very low base.
The boom in bulk carriers orders in late 1980 and early 1981 brought many orders to Tyne and Wear yards. But the boom burst and with the slump in world trade the world shipbuilding market faltered in 1981 and slumped again last year. The level of new orders was equivalent to around half present world capacity. Scrapping rates have more than doubled since 1980. The amount of tonnage in lay-up has increased seven to tenfold and freight rates have gone through the floor. With the overhang of so much spare shipping capacity it is likely that the market for new ships will be very difficult for some time to come, even though world trade is expected to pick up again shortly.
Against that background, it is not surprising that Tyne and Wear should have been hit hard over the past five or six years. The area has two of British Shipbuilders' main merchant yards to which the hon. Gentleman referred—Austin and Pickersgill and Sunderland Shipbuilders—a small merchant yard, Clelands, the mixed yard, Swan Hunter, and a marine engine building works. There has not been the work available to support an industry of the size that British Shipbuilders took over in 1977. Restructuring was inevitable. If BS cannot win enough orders to maintain order books, it has to be for the corporation's commercial judgment to adjust capacity to meet demand.
Although the overall picture for shipbuilding in the area has been bleak, there have been some recent successes. Only last week Austin and Pickersgill announced that it had won an order for two cargo-carrying liners from Ethiopia. Just before Christmas Swan Hunter received orders for two frigates Worth £250 million as part of the package of Falklands replacement ships. I join the hon. Member for Jarrow in commending the excellent work that the local ship repairers and workers put in during those very difficult days at the time of and immediately after the Falklands crisis.
In Sunderland, British Shipbuilders has also won a contract to supply engines for the new Birmingham power station. In current market conditions British Shipbuilders' new merchant orders have been won against acute foreign competition and with considerable support from the Government. Opposition Members are curiously silent about the support that the Government have given to the industry. Our first actions on coming into office were to ensure the continuation of the intervention fund and of the shipbuilding redundancy payments scheme. Both those schemes were on the point of lapsing. More recently, we have significantly increased the value of the redundancy payments available.