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UK policy, funds for aerospace projects but no support for Harland & Wolff

Secretary Reynolds told Parliament that a government guarantee on £200 million of borrowing for Harland & Wolff shipyard posed too great a risk to taxpayer money

The new Labor government gave a clear indication of its policies and course of action this week when it announced at the Farnborough International Air Show a £103 million funding for aerospace projects, supporting greener travel and thousands of jobs across the UK. This contrasts with the rejection of a guarantee loan for the Harland & Wolff shipyard in Belfast.

Business and Trade Secretary, John Reynolds said funds will be delivered through the Aerospace Technology Institute Program (ATIP) for five aerospace R&D projects by GKN Aerospace, Queens University, Rolls-Royce, Short Brothers and ZeroAvia. The projects will help pioneer innovations like zero-emission hydrogen flight and sustainable propulsion systems and turbines.

The announcement comes on the back end of the 2023 figures, showing that the aerospace industry “added almost £40 billion to the [UK] economy last year,” said Reynolds. “By backing it to pioneer cutting-edge new technologies, we’re delivering economic growth and supporting high-skilled jobs in every part of the UK.”

However on Monday Secretary Reynolds told Parliament that providing a government guarantee on £200 million of borrowing for the Harland & Wolff shipyard posed too great a risk to taxpayer money.

Reynolds said that the decision to reject the Belfast shipyard owner’s application for a UK Export Finance Export Development Guarantee (EDG) was based on “a comprehensive assessment of the company’s financial profile and the criteria set out in our risk policies”. He said the government had also decided not to provide any form of emergency liquidity funding.

The shipyard owner already has a US$115m (£89m) facility with the New York-based Riverstone, which cost it around £1.5m per month in interest payments last year. Harland & Wolff had sought the UK Government’s backing in an effort to borrow £200m from commercial lenders to refinance its debts, which stood at around £92m at the end of 2023. The EDG scheme typically offers lenders a government-backed guarantee on up to 80% on the risk of a loan.

The London-listed company, which recorded a pre-tax loss of £113m in the two years to December 31 2023, stands to earn £750m from a lucrative subcontract to build vessels for the Ministry of Defense. But production for the seven-year program is not due to start until 2025.

Harland & Wolff was forced to temporarily suspend trading in its shares in the lead up to the UK Government announcement, after accounting issues meant it was unable to file audited accounts on time.

In his statement, Jonathan Reynolds said: “While such a decision is not easy, it is my assessment, following extensive engagement by my officials with market players, that HM Government funding would not necessarily secure our objectives and there is a very substantial risk that taxpayer money would be lost. The Government believes, in this instance, that the market is best placed to resolve the commercial matters faced by Harland & Wolff.”