The UK Government will not guarantee a loan for troubled shipyard Harland & Wolff because there is a “very substantial risk that taxpayer money would be lost.”
Labour's Business Secretary Jonathan Reynolds said the market was "best placed to resolve the commercial matters" faced by the firm.
Unions said the workers at the yard needed "every possible support from ministers on both sides of the border."
READ MORE: Harland & Wolff: Fears for Scottish jobs as company seeks new finance
As well as yards in Belfast and Devon, the Northern Irish company - best known for building the Titanic - has sites in Anish on Lewis and in Methil, taken on by the shipbuilder following the collapse of Burntisland Fabrications (BiFab).
It is thought around 400 people are employed by the firm in Scotland.
Harland and Wolff were seeking a new loan from a consortium of UK banks to refinance a £90m high-interest loan and invest in its operations.
UK Export Finance, the government credit agency, agreed to the guarantee in December, but the final sign-off was subject to a commercial rate review and consent from the Treasury.
The company is part of a consortium that landed a £1.6bn contract to build new Fleet Solid Support ships for the Royal Navy.
In a written statement to Parliament, Mr Reynolds said the Government would also not offer direct funding to help maintain the company’s liquidity.
“This decision was based on a comprehensive assessment of the company’s financial profile and the criteria set out in our risk policies. We have also decided not to provide any form of emergency liquidity funding.
“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 and Wolff.”
In a statement on Friday, the firm said it would seek alternative new debt facilities from current lender Riverstone Credit Management.
The company said it was also engaging an investment bank – Rothschild & Co – to assess “strategic options”.
Chief executive John Wood has also taken a leave of absence with immediate effect, with Russell Downs, an industry expert in refinancing and recapitalisation, taking on the role of interim executive chairman.
READ MORE: Historic Scottish yard sees first shipbuilding activity since 1856
Commenting on the company’s move to seek further financing from Riverstone, Mr Reynolds said: “This should allow the business to continue pursuing its short and longer-term objectives, in which the Government continues to take an interest.
“In all our engagements with them, Riverstone Credit Management LLC has recognised the importance of the assets at Harland and Wolff as well as the people who work there, showing a desire to find pragmatic solutions that support HM Government objectives.
“Harland and Wolff indicates that these discussions on new financing should conclude in the next few days. This will involve the current CEO taking an immediate leave of absence and the onboarding of new management with a focus on recapitalisation and ensuring sustainable finances.”
The Business Secretary said he knew reports over the company’s future will have caused concern among employees, as well as those working in the connected supply chains.
He said he was working with colleagues across government and the devolved administrations to secure a “positive outcome” across all four sites.
“My ministerial team have also reached out to the trade unions represented across the four sites to reassure them that the steps set out by the company appear to me to hold by far the best prospects of ensuring business continuity, job security and the delivery of important existing contracts,” he added.
“My officials will continue to work closely with those in the Ministry of Defence and the National Shipbuilding Office on the Fleet Solid Support contract, for which Harland and Wolff remains a key subcontractor.
“Officials in the Ministry of Defence are also well engaged with the prime contractor, Navantia, UK to monitor delivery of this important contract.
“I welcome potential new financing for Harland and Wolff and the appointment of new management and wish them all the best in their continued efforts to build up this business.
“Shipbuilding supports 42,600 jobs nationwide, adds £2.4 billion to the economy every single year, and is an important pillar of our civil and defence industrial base.
“We are committed to supporting vibrant and successful shipbuilding and fabrication industries, and our skilled workforces who deliver them, in all parts of the UK, in which Harland and Wolff has its role to play.”
READ MORE: Scotland to be hit by bin strikes as unions reject offer
Louise Gilmour, GMB Scotland secretary, said she had written to Scottish Secretary Ian Murray and Deputy First Minister Kate Forbes in a bid to try and secure the future of the site.
Gilmour added: “The recent history of the Scots yards has been one of squandered opportunities. The workers are skilled, committed and blameless for the ongoing uncertainty around their yards.
“They deserve every possible support from ministers on both sides of the border who must work urgently with management and unions to find a secure way forward.
“There are many options to protect these yards, including in the manufacture of wind turbines and other renewable energy infrastructure.
“If talk of a just transition is ever to be more than empty words, these workers and their yards must have a secure future as part of a new industrial strategy for Scotland.”
Ms Gilmour added: “It is not enough just for the yards to survive, they must be supported to thrive.
“The Scottish Government has committed £500m to anchoring renewable supply chains in Scotland while the UK Government has announced plans to create GB energy to direct public investment to grow renewable infrastructure.
“While this will take time to establish, all parties can agree a joint approach now to seize the opportunities of the energy transition.”
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