VT goes with the flow in revamp call

VT GROUP today swung its weight behind calls to restructure the UK shipbuilding industry, as a contract for two £1.5bn aircraft carriers from the Ministry of Defence is in the offing.

But chief executive Paul Lester said it was 'way too early' to draw up concrete plans for mergers of shipyards and denied it had held consolidation talks with rivals.

Lester was talking after it emerged BAE Systems wanted to merge its three yards with those owned by VT and others.

The operators want to smooth out the peaks and troughs of their businesses. Due to the vast but sporadic nature of government shipbuilding contracts, yards must scramble to recruit workers when they win a big contract, only to lay them off as projects end.

Lester said: 'It's crazy to drive the industry up to a peak then come screaming down at the end of the cycle.'

He advocated collaboration between operators but cautioned that formal mergers could be riven with arguments over valuation. Yards could co-operate on the carriers but compete on frigates or offshore patrol craft, he said.

VT shares slipped 2p to 260p after it confirmed the Government had decided to take a £2bn airfield servicing project in-house. VT, Serco and Babcock were pitching for it under the Private Finance Initiative.