Providing a government guarantee on £200 million of borrowing for Harland & Wolff posed too great a risk to taxpayer money, the UK Business Secretary has said.
Jonathan Reynolds told Parliament on Monday 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.
Harland & Wolff confirmed the failure of its EDG bid on Friday and said it was engaging with its current lender to seek an emergency debt facility.
The shipyard owner already has a $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 Defence.
But production for the seven-year programme 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.”
The shipyard owner responded on Friday by announcing its chief executive John Wood had stepped aside, with Russell Downs set to become its new executive chairman.
The appointment of the restructuring expert alongside the confirmation it was engaging with Rothschild & Co has increased speculation that the company could be broken up and sold.
Alongside its Belfast site, Harland & Wolff also owns two yards in Scotland and one in Devon.
While Harland & Wolff said Mr Wood was “taking a leave of absence”, a filing with Companies House on Friday confirmed he was no longer a director.
The Unite union has called for political focus to secure the shipyard’s long-term future.
“Harland & Wolff’s workforce and the shipyards they work in are of critical strategic importance,” said the union’s general secretary Sharon Graham.
“Five years after Unite members secured Harland and Wolff’s survival in Belfast, the political focus must now be on attracting stakeholders who are committed to building a long-term future, rather than those looking to turn a quick profit.
“I have been very clear with ministers that our union will leave no stone unturned to defend these vital assets and Unite has been engaging positively with senior government officials in order to ensure that this happens.”
