The Ferguson Marine shipyard has signed a contract to build three sections of a Royal Navy warship which is currently under construction on the River Clyde.
The shipyard is owned by the Scottish government, and last week a committee of MSPs warned it needed urgent investment to allow it to survive.
The value of the new contract is unclear – as is the time it will take to complete.
The Port Glasgow yard only had one contract remaining on its books – to finish off the long-delayed CalMac ferry, MV Glen Rosa.
With that vessel due to sail next summer, concerns were growing about what work the yard and its 300-strong workforce would do next.
Now it has confirmed the signing of a new contract with the defence giant BAE Systems.
Ferguson will fabricate three sections of HMS Birmingham – one of the Royal Navy’s Type 26 frigates – at Port Glasgow.
These sections will then be taken to BAE’s Govan yard in Glasgow, where the warship is being assembled.
The Port Glasgow yard recently missed out on a government-funded order for seven small CalMac ferries, seen as well-suited to its capabilities, which went to a Polish shipyard instead.
Last week, members of Holyrood’s public audit committee said leadership and governance failings along with the delays and cost overruns building two CalMac ferries had caused “reputational damage”, despite the yard’s long and proud history.
The MSPs said there was no shortage of potential work, and recovery was possible but it would require investment to make the yard more competitive and better oversight.
Last summer the Scottish government promised to invest up to £14.2m in the yard over two years although it remains unclear how much of this investment has yet been delivered.
The government takeover came after contracts for the two dual-fuel ships, Glen Sannox and Glen Rosa, ran into difficulties and ferries procurement body CMAL rejected claims for extra costs.
The stand-off saw work on the ships almost grind to a halt with both the former owner of the yard and CMAL blaming each other for the problems.
Delays and design challenges continued under public ownership with the cost of the two ships now about £460m if written-off government loans and money paid out prior to nationalisation are included. The original contract price was £97m.
Glen Sannox was finally delivered to CMAL last November, nearly seven years late. The second ship is due by the end of June 2026.
How significant is the new order?
The latest subcontracting work for BAE follows on from a previous pilot, negotiated by former Ferguson’s boss David Tydeman, which saw the yard build two units for another frigate, HMS Belfast.
While no value has been given for the new contract, the previous BAE subcontracting work was said to be worth about £6-7m.
Providing three of the 60 units for HMS Birmingham will provide much-needed work for the core steel workforce at Ferguson’s, as much of the remaining work on MV Glen Rosa involves specialist contractors.
However the yard will still be actively seeking new ship orders, having missed out on the small vessels replacement programme contract which was previously a key part of its future business strategy.
That contract, worth £160m, went to a Polish firm after the Scottish government rejected calls to award it directly to Ferguson’s – citing the risk of legal challenge.
Ferguson’s is likely to bid for two new contracts for CalMac ships which are expected to go out to tender in the next 12 months or so.
The procurement for phase two of the small vessels replacement programme for three new ferries is expected later this year.
Ministers have also promised funding to replace a larger CalMac ship, MV Lord of the Isles.
Inverclyde MP Martin McCluskey said the contract for work on HMS Birmingham was a “lifeline” for the yard and a “vote of confidence” in Ferguson Marine.
He told the Good Morning Scotland programme: “We want the yard to be building boats, not just fabrication as it’s doing for BAE – but what this is today is the first new contract the yard has had in quite some time.
“It’s providing them with work to keep going, hopefully bridge a gap between now and whenever the next contract comes which I hope is a direct award for Lord of the Isles from the Scottish government.”