UK Launches Loan Guarantee Program for Shipbuilding

UK shipbuilding loan program
UK shipbuilders welcomed the government's new loan guarantee program (Camell Laird)

Published Jul 26, 2023 2:01 PM by The Maritime Executive

The UK Government announced a new loan guarantee program designed to support the country’s shipbuilding industry. It is the latest part of the National Shipbuilding Strategy refreshed by the prior government in 2022 in an effort to bolster the sagging industry.

Called the Shipbuilding Credit Guarantee Scheme, it is designed to help buyers purchase UK-built ships or to use UK shipyards for modification and maintenance of existing ships. Media reports are saying the government will devote approximately $645 million to the program which will help ship buyers access financing to buy UK-built vessels or pay for upgrade work. The program will guarantee a percent of the value of loans used to purchase, refit, retrofit, or repair vessels, sharing the risk with lenders to encourage offers of finance to UK owners and operators according to the UK Department for Business and Trade.

“Shipbuilding is an integral part of the UK’s industrial identity and through this scheme, we are backing our great maritime businesses to get ahead of the competition,” said Minister for Industry and Economic Security Nusrat Ghani. “The SCGS is expected to create hundreds of new jobs and contribute hundreds of millions of pounds to the economy.”

The UK’s shipbuilding industry, like that of many Western countries, is a shadow of its former self, having long been in decline as China and South Korea emerged as low-cost industry leaders in new construction. The UK government outlined its National Shipbuilding Strategy in 2017, initially focusing on transforming naval procurement, while also securing export and design contracts for British naval ships. Former Prime Minister Boris Johnson launched the refresh of the program in 2022 outlining the government’s further ambitions to reinvigorate the whole British shipbuilding industry. The government has committed more than $5 billion to the revitalization of UK shipbuilding.

“We applaud the Government for delivering on the pledge it made to industry in the National Shipbuilding Strategy Refresh by launching the Shipbuilding Credit Guarantee Scheme,” said Maritime UK CEO Chris Shirling-Rooke in response to today’s announcement. “The SCGS is a massive vote of confidence from government, and it will empower the UK’s shipbuilding enterprise.”

According to government figures, shipbuilding in the UK supports over 42,600 jobs nationwide. It adds nearly $3 billion to the UK economy. The hope is that the new loan program will encourage continued investment in sustainable, low-carbon marine technologies.

Famed shipbuilder Harland & Wolff, which has been working to relaunch its business after being brought out of bankruptcy by new management, issued a statement welcoming the launch of the loan guaranty program. John Wood, Harland & Wolff CEO, said, “The scheme will help UK shipbuilders to compete, win orders, and create new high-quality jobs across the country. It’s a core deliverable from the National Shipbuilding Strategy, and we are committed to working with colleagues in government and across the industry to accelerate its delivery so we can realize the objective of a competitive, innovative, and sustainable shipbuilding enterprise.”

The United States has long had a similar loan guarantee program, the Federal Ship Financing Program, commonly referred to as "Title XI." As part of the Merchant Marine Act of 1936, it provides for a full faith and credit guarantee by the United States Government to promote the growth and modernization of the U.S. merchant marine and U.S. shipyards. Through long-term debt repayment guarantees, the program encourages U.S. shipowners to obtain new vessels from U. S. shipyards and it also assists U.S. shipyards with modernizing their facilities for building and repairing vessels. Last year, the program was expanded to include the emerging new categories of vessels being built for the offshore wind energy industry.