This article appears as part of the Scotland's Ferries newsletter.

Ministers have been warned the state-owned firm at the centre of the nation's ferry fiasco has been placed "on the verge of extinction" as it stands to lose out on a multi-million pound contract to produce a new wave of electric lifeline ferries.

The Scottish Government has said it could not simply award the work directly to the shipyard as it would have meant "substantial risks and uncertainties" due to UK subsidy laws, with the contract instead due to be put out to competitive tender.

Those laws are, however, not so far standing in the way of the Scottish Government's preferred option to directly award the right to provide lifeline island ferry services to the state-owned ferry operator CalMac.

CalMac's current £975m eight-year Clyde and Hebrides Ferry Services contract expires in September 2024. It had previously won the contract for six years in 2007 – after ministers were forced to tender for routes to satisfy European competition rules.

Now there are concerns that Ferguson Marine is being placed at new risk by the Scottish Government refusing to provide a direct award,  jeopardising hundreds of jobs despite indicating that it would inject a further £14.2m into the shipyard over two years. The money is subject to legal, financial and commercial scrutiny, which the government said should be complete by the autumn.

It is nearly £11m less than was originally requested by Ferguson Marine to support future work.

That lack of £25m support led the board to admit that lack of investment to upgrade shipyard facilities as part of a five-year business plan cast "significant doubt" over the continuing operations of what is the last remaining shipbuilder on the lower Clyde.

It put at risk its hopes of extra work from BAE Systems which is delivering City Class Type 26 frigates on the Clyde.

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It also placed uncertainty over its hopes to get the contract from the Scottish Government's Transport Scotland agency for the £175m replacement of the seven 50m ageing 'loch class' ferries vessels serving the Clyde & Hebrides Ferry Services (CHFS). Three more are to follow in phase two.

The Scottish Government say it was wrong to suggest the shipyard received less than it sought, saying that it put in a revised business plan for £14.2m "which was considered necessary... to help productivity".

The initial bid for £25m came after the Scottish Government commissioned a productivity study from consultants First Marine International (FMI) to advise on how to "improve the competitiveness" of the nationalised firm - which is at the centre of the continuing row over the delivery of MV Glen Sannox and MV Glen Rosa which were both due online in the first half of 2018 when the Inverclydes shipyard firm was a different company entity - Ferguson Marine Engineering Limited (FMEL) under the control of tycoon Jim McColl.


With both now due to serve Arran, they are getting on for six years late. The last estimates suggest the costs of delivery could have more than quadrupled from the original £97m cost.

Ferguson Marine was nationalised at the end of 2019 and reborn as Ferguson Marine (Port Glasgow) as Mr McColl's firm fell into administration in the wake of the delays and the soaring costs with previous shipyard firm management and Scottish Government-owned ferry owners and procurers Caledonian Maritime Assets Ltd blaming each other.

According to a briefing on the state of the yard sent to then wellbeing economy secretary Neil Gray, and copied to the First Minister, the request for the £25m which is central to the shipyard's five-year business plan was based on a combination of the FMI report and Ferguson's own analysis.

FMPG hoped for a heavy involvement in the Small Vessel Replacement Programme which hopes to achieve a substantial renewal of the smaller ferry fleet by 2031.

They are due to be electric motor-powered modern versions of the three 42m hybrid vessels Ferguson Marine built successfully, on-time and on-budget before nationalisation, between 2012 and 2015 - but that was before nationalisation.

Industry insiders say that the specification for bidding for the new ferries contract is stacked against Ferguson Marine even if it bids for the work - because it has no history of delivery and questions surround its ability to provide financial guarantees.

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According to the proposed contract specification seen by The Herald, candidates have to provide up to three examples of projects which involved the delivery of vessels "of corresponding size and complexity vessels being procured".

It says: "The examples must demonstrate that the candidates [have] relevant capability and experience to deliver the services/supplies as described in the contract notice..."

It goes on: "Candidates should include the scope of delivery and description of the vessel which the applicant has built in the last five years."

It also says that candidates must hold or commit to obtain prior to the start of any awarded contract a refund guarantee and it "must be from an international bank".

One insider told The Herald that it would be known that Ferguson would struggle to meet the requirements.

A similar story came when Ferguson's lost out to Turkey in getting the £105m contract to build two ferries set for Islay described as an "embarrassment" for the SNP by the Scottish Conservatives.

Ferguson Marine had failed to get past the first Pre Qualification Questionnaire hurdle in the Islay ferries contract with insiders saying that the conditions contained criteria it could not meet.


Scottish Government-controlled Caledonian Maritime Assets Limited (CMAL), which owns the nation's ageing ferry fleet, had invited four overseas companies to bid for the contract to build the two vessels - and excluded the Inverclyde shipbuilder.

The Alba Party's general secretary Chris McEleny who has long fought for the direct ward said the direct award refusal has "put shipbuilding on the lower Clyde on the verge of extinction" believing that it will result in it closing by next Christmas.

The former Inverclyde Council SNP group leader said: "The decision not to directly award the orders to Ferguson’s is nothing short of a betrayal of the people of Inverclyde and the workforce in Port Glasgow. I have been campaigning for the Scottish Government to directly award this work to Ferguson’s, warning them that if they did not then there would be no steel left to cut at the yard, no work left and no orders in the pipeline.

"For years I’ve received weak responses from ministers telling me they were still considering the legal implications, at first they blamed UK procurement law and now they blame the threat of legal action. The Scottish Government have been happy to go to court when they’ve been acting unlawfully over gender politics and daft green bottle return schemes but not to defend shipbuilding on the Clyde? It is outrageous.

"If the SNP do not reverse this decision then they will face a rout at the ballot box in Inverclyde in two years time.”

Scottish Conservatives' shadow transport minister Graham Simpson added: "The odds have been stacked against Ferguson's winning this contract for some time after ministers first refused to invest in modernising the yard and then dithered over a decision following a second request from yard bosses.

"Ultimately, following the debacle over the entirely political decision to build the Glen Sannox and Glen Rosa there it is right that the small vessels contract goes to a yard with a track record of building such boats and which can do the job on time and on budget.

"Unfortunately that probably rules out Ferguson's this time but with the extra investment now announced it should be able to at least be in the running for next award of three ferries."

The yard's interim chief executive officer John Petticrew admitted it would have to bid for the contract against "unfair" foreign competition.

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The Scottish Government said that each case for a direct award is "taken on its merits" with procurement and subsidy control requirements "carefully considered".

A Scottish Government spokesman said: “The Scottish Government remains committed to pursuing a sustainable future for Ferguson Marine Port Glasgow (FMPG).

“Any direct award of a public contract must comply with the Subsidy Control Act and be capable of withstanding legal challenge. Ministers concluded a direct award of the Small Vessels Replacement Programme Phase 1 contract would likely lead to the worst of both worlds – delaying the new ferries if this resulted in a legal challenge, and the yard ultimately not securing any work.

“It is inappropriate to compare this with the decision to make a direct award of lifeline ferry services."

A Ferguson Marine spokesman said: “We plan to submit a bid. Meanwhile we will continue our determined efforts to secure further commercial work for the yard.

“Now that the additional investment has been confirmed, over the coming weeks the Ferguson Marine board and senior team will be refining and finalising a comprehensive project plan for how and when this funding will be allocated.  This plan will also be discussed and agreed with Scottish Government.  We will update on our progress in due course.”