How will Portsmouth cope with the loss of jobs?

Workers leave HMS Nelson in Portsmouth after hearing BAE Systems is ending shipbuilding at one of the country's most historic yards. Photo: Andrew Matthews/PA Wire

The Defence Secretary, Philip Hammond, described the loss of almost 1,000 jobs at Portsmouth shipyard as "regrettable but inevitable" this afternoon.

Inevitable, because Portsmouth is falling victim to a drop in defence orders as the Government cuts spending across the board and the fact that Britain is an expensive place to build ships nowadays. Customers for commercial vessels prefer to go to China (with 45 per cent of the market, according to brokers Barry Rogliano Salles) or South Korea (29 per cent). Fewer than one per cent of all ships launched last year were built in Europe - Britain doesn't even get a mention. Once Royal Navy orders disappear there is no real chance of attracting orders from the commercial world.

A total of 940 jobs are being axed by the defence giant at HMS Nelson. Credit: Andrew Matthews/PA Wire

As the news of the closure sinks in, it raises questions of how Portsmouth will cope with the loss of jobs. Mr Hammond was at pains this afternoon to point out that the port will remain the base for at least one of the two new aircraft carriers, protecting 11,000 repair and maintenance jobs. Yet Portsmouth and the wider Solent area have become unusually dependent on big employers in recent years and vulnerable to big shocks like this. In a thorough examination of the region's economy, the think tank Centre for Cities explains why**.

Over the past decade, the Solent region has seen relatively strong economic growth but this wasn't matched by a corresponding rise in private sector jobs, making it more vulnerable than the rest of the South East of England when big employers and the public sector cut back.

Defence Secretary Philip Hammond raised prospects of new work in the city and region by hinting at a lucrative City Deal. Credit: PA Wire

Every 100 jobs at the Naval base in Portsmouth create another 66 jobs elsewhere in the region. Adding together the direct and indirect jobs created by the maritime sector (suppliers, logistics, financial services and catering, for example) the total number is 48,300.

Could the jobs being lost today - and the skills each of those workers has - be saved? Why not mothball the facilities and reopen them if fortunes changed? It's been tried before in other industries. In 2010, when Corus closed its steel plant at Redcar, the furnace was simply switched off and made safe. Two years later new owners were able to relight the furnace and rehire many of the old staff. But steelmaking is a very cyclical industry which sees global demand rise and fall with the economy. There is no prospect of a surge in defence orders in the UK. The Government even had to create an order for three small patrol ships to keep the Scottish yards ticking over while they wait to start work on a new frigate in a couple of years.

This afternoon, as he addressed the Commons, Mr Hammond hinted at help in the form of a City Deal the Government is negotiating with the county and city authorities. This could amount to many millions of pounds to make the site more accessible for new businesses to move in, financial incentives to attract them and the jobs that they would bring.

Portsmouth's authorities have been aware of the potential loss of jobs at BAE Systems for some time. Credit: Andrew Matthews/PA Wire

This has been tried before with mixed success. Sandwich, in Kent, was left reeling when Pfizer, the pharmaceutical company, closed its research and development labs there, with the loss of 2,000 jobs. Since then the site has been granted enterprise zone status and a new developer has attracted 50 companies with 1,300 jobs - a total it hopes eventually to more-than double.

Other attempts to woo investment have not worked as well because the incentives are relatively small or developments have simply run out of steam. The road to redevelopment is littered with discarded schemes.

Portsmouth's authorities have been aware of the potential loss of jobs at BAE Systems for some time and the negotiations for a City Deal are at a late stage. A lot hangs on the outcome.

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