Babcock floats move for Titanic shipyard as owner teeters on brink
Babcock International, the London-listed defence contractor, is weighing a possible bid for some of the assets of Harland and Wolff, the shipbuilder which is close to collapse.
Sky News has learnt that Babcock, which has a market value of £2.4bn, has expressed an interest in Harland and Wolff’s Belfast shipyard which is famous for having built The Titanic.
News of its interest comes amid reports that Harland and Wolff could fall into administration as soon as next week.
The company has been struggling under the weight of a substantial debt-pile, and was dealt a hammer blow soon after the general election when the government decided against guaranteeing a £200m loan to it.
It was unclear this weekend how serious or advanced Babcock’s interest was in Harland and Wolff’s Belfast shipyard or its other assets.
Several other trade and financial bidders are understood to have signalled their interest in bidding, according to defence industry sources.
Bankers at Rothschild, who are running a sale process to gauge interest in the company and its assets, have set a deadline for proposals of later this month.
Navantia, the Spanish shipbuilder which has a joint contract with Harland and Wolff, is likely to be among the rival bidders.
Teneo is reported to have been put on standby to act as administrators.
Pic: PA
Founded 163 years ago, Harland and Wolff operates from three sites other than Belfast: one at Appledore in south-west England, which used to be owned by Babcock; and two in Scotland.
In recent weeks it has been engulfed by management turmoil, with the departure of its chief executive and, this week, its finance chief.
On Friday, Russell Downs, the company’s interim executive chairman, said he had ordered a probe into what he described as an apparent “misapplication” of more than £25m of corporate funds.
Its shares, which are listed on London’s junior AIM stock market, have been suspended for months, and will be delisted if the holding company collapses into insolvency proceedings.
The parent company’s administration will not mean that its operating facilities are insolvent, as they are held in separate corporate entities.
However, there are concerns that such a move would prompt the Ministry of Defence to re-tender a contract that Harland and Wolff has a share in to build three Fleet Solid Support ships for the Royal Navy.
A worker at Harland and Wolff MIG welds an anode onto the rudder. Pic: PA
John Wood, the former chief executive who was forced to step down recently, told The Sunday Times that he was preparing a rescue bid for Harland and Wolff.
He indicated to the newspaper that he could seek an injunction to prevent its holding company being placed into administration.
Babcock has been deeply embedded in Royal Navy shipbuilding contracts for decades, and would be a logical acquirer of Harland and Wolff assets.
Workers at the Harland and Wolff shipyard. Pic: PA
The FTSE-250 group has largely recovered from its own travails of several years ago, announcing last November that it would pay its first dividend for four years.
Shares in Babcock have risen by over 20% during the last year.
Babcock said that it did not comment on speculation.
Business
UK interest rates an outlier after decision to hold but Bank of England forecasts inflation rise to 2.5%
There has been no change to the UK interest rate despite the US and European central banks all moving to cut in the last week.
The Bank of England has kept the interest rate at 5% as official figures this week showed some measures of price rises grew.
It follows the first cut in more than four years.
The rate set by the Bank impacts how much lenders charge to borrow money, so it affects how expensive mortgages or credit card bills are.
But there was no consensus on the decision. One of the nine rate decision-makers voted for a cut.
There were signals of the Bank’s direction of travel from governor Andrew Bailey.
Where to next?
If the economy continues to progress in line with its expectations “we should be able to reduce rates gradually over time”, he said.
But, he said, “we need to be careful not to cut too fast or by too much”.
Money blog: UK’s cheapest and most expensive cities to rent
Market expectations are currently for a cut at the next meeting in November followed by a further one in December.
The latest forecasts from the Bank are for inflation to rise again, reaching 2.5% by the end of the year.
How did we get here?
Interest rates were brought to a high last seen during the 2008 global financial crash in an effort to bring down spiralling inflation.
More expensive borrowing can choke economic demand and slow price rises.
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Bank of England holds interest rates
The Bank is tasked with bringing inflation down to 2%. It currently stands at 2.2%.
The US central bank, the Federal Reserve, brought interest rates down by 0.5 percentage points to 4.75% to 5% on Wednesday and the European Central Bank (ECB) reduced borrowing costs last week to 3.5%.
Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.
Reaction
Sterling strengthened, following the news and against a weakened dollar a pound bought $1.33, the highest amount in more than two years.
Business
Why Bank of England is in no rush to lower interest rates – even though some think decision to wait is dangerous
Slowly does it.
That’s the overarching message to take away from the Bank of England‘s latest monetary policy decision. Unlike the Federal Reserve, the US central bank, which decided yesterday to cut interest rates by half a percentage point – more than many had expected – the Bank wanted to signal today that it’s in no rush.
Money blog: UK’s cheapest and most expensive cities to rent
Alongside the decision to leave borrowing costs on hold at 5%, the Bank’s governor also signalled that he and the rest of the Monetary Policy Committee were in no rush to cut them again. Provided there aren’t any inflation surprises, he said, “we should be able to reduce rates gradually over time”. He added: “But it’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much.”
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The Bank of England has held the base interest rate at 5%
Even so, the Bank is expected to carry on cutting rates in the coming months. Indeed, economists think the Bank will cut rates in November by at least a quarter percentage point, followed by more cuts next year, taking borrowing costs down towards 3% by next summer.
Keep up with all the latest news from the UK and around the world by following Sky News
That’s largely because inflation is now considerably lower than in recent years, and because there is evidence that high interest rates are starting to weigh down economic activity. The longer those rates stay high, the bigger the depressive impact they have on the UK.
But that raises another issue. For some economists, the Bank of England’s gradualist approach is dangerous. They worry that higher rates, which deter companies and individuals from spending and investing, are causing unnecessary damage.
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That helps explain why one of the MPC members, Swati Dhingra, voted to reduce rates at this meeting.
But the rest of the committee was of one mind – no point in rushing.
Whether they are right is something we’ll find out in the coming months.
There has been no change to the UK interest rate despite the US and European central banks all moving to cut in the last week.
The Bank of England has kept the interest rate at 5% as official figures this week showed some measures of price rises grew.
It follows the first cut in more than four years.
The rate set by the Bank impacts how much lenders charge to borrow money, so it affects how expensive mortgages or credit card bills are.
But there was no consensus on the decision. One of the nine rate decision-makers voted for a cut.
Where to next?
There were signals of the Bank’s direction of travel from governor Andrew Bailey.
If the economy continues to progress in line with its expectations “we should be able to reduce rates gradually over time”, he said.
But, he said, “we need to be careful not to cut too fast or by too much”.
Market expectations are currently for a cut at the next meeting in November followed by a further one in December.
How did we get here?
Interest rates were brought to a high last seen during the 2008 global financial crash in an effort to bring down spiralling inflation.
More expensive borrowing can choke economic demand and slow price rises.
The Banks is tasked with bringing inflation down to 2%. It currently stands at 2.2%.
The US central bank, the Federal Reserve, brought interest rates down by 0.5 percentage points to 4.75% to 5% on Wednesday and the European Central Bank (ECB) reduced borrowing costs last week to 3.5%.
Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.
Reaction
Sterling strengthened, following the news and against a weakened dollar a pound bought $1.33, the highest amount in more than two years.
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