Tugs maneuver the UK destroyer Duncan after it was launched from BAE's Govan shipyard in Glasgow, Scotland, in 2010. According to a new report, defense firms operating in Scotland might need to relocate to other parts of the UK if Scotland approves independence next year. (AFP)
LONDON — Much of Scotland’s defense industry will have to relocate to other parts of Britain if the country opts for independence in an upcoming referendum, according to a UK parliamentary report on the defense implications of a yes vote.
The loss of lucrative contracts from the UK Defence Ministry and other issues would require industry to quickly reconsider whether they should pack up and head elsewhere, the report said. The Parliamentary Defence Committee released the report.
The ruling Scottish National Party in the devolved government in Edinburgh is looking to break the country’s 307-year union with the rest of the UK with a referendum scheduled for September 2014.
Polling shows a majority in favor of retaining Scotland as part of the UK, but a large number is undecided.
The likely result of a vote in favor would see industry head for the remaining parts of the UK as MoD contracts go away, and with the proposed £2.5 billion (US $4 billion) annual Scottish defense budget insufficient to replace the lost work, the report said.
The committee said the Scottish defense industry would face a “difficult future” in the event of an independence vote.
“We believe defense companies in Scotland would be forced to rapidly reassess their business strategies with the result that relocation of operations to the remainder of the UK would be an unwelcome but necessary decision,” the committee said.
Britain’s defense budget is nearly £34 billion a year.
The impact of breaking away from the rest of the UK would be felt most immediately by companies engaged in shipbuilding, maintenance and high end technology, the UK lawmakers said.
BAE Systems, Thales, Babcock, Selex and Raytheon are among the leading defense contractors with operations in Scotland.
The sector provides more than 15,000 industry jobs with BAE’s surface shipbuilding operations on the River Clyde, employing around 3,000 people, making it among the largest employers.
BAE operates two naval shipyards in Scotland as well as a third surface warship yard and a nuclear submarine construction facility in England.
The report says construction and maintenance of a Scottish Navy would barely provide sufficient work for a single yard with the shipbuilding operation being dependent on reducing its cost base to compete for export orders.
A question mark hangs over the BAE yards anyway, with the company discussing rationalization of its surface shipbuilding capacity with the British government as work building two 65,000-ton aircraft carriers starts to run down in the next couple of years.
For the moment, a program to build a new fleet of Type 26 frigates is the only major project in prospect for the Royal Navy beyond the carrier work.
The Portsmouth surface warship yard on England’s south coast has always been touted as the most likely target for closure, according to previous media reports. The threat of Scottish independence may influence that decision, though.