Babcock struggling after £1.6bn loss and more safety issues at Devonport

Babcock International, whose marine division runs Devonport Royal Dockyard Ltd. (DRDL), have been forced to sell a profitable arm of their business after a £1.6bn loss last year. The contractor was also issued with an improvement notice in July by the Office for Nuclear Regulation (ONR) for failing to consistently manage the risks of employees working at height. This follows an improvement notice in September 2020 for failing to maintain and check an effluent system.

Shares in Babcock fell 16% after the £1.6bn loss was reported in the company’s delayed results for 2020/21 financial year. The company also said it would need to write off £2bn from its value, higher than the £1.7bn estimated in April. In order to reassure investors, the company promised to sell assets and raise £400m to reduce its debts. In August the company announced that it had sold its subsidiary Frazer-Nash Consultancy to the American firm KBR for £293m.

Frazer-Nash was acquired by Babcock when it purchased Devonport Management Ltd. in 2007. It has offices in the UK and Australia and employs around 900 people. Its revenues in the last financial year were £100.5m, according to Babcock, which also said Frazer-Nash already operated ‘largely independently’ from its parent company. Recent job listings for a Submarine Systems Engineer and a Strategic Weapons Systems Consultant suggest that Frazer Nash will remain closely linked to Babcock’s submarine maintenance work at Devonport.

When issuing the improvement notice in July ONR said that DRDL had “failed to demonstrate consistent and effective arrangements” to manage the risks of working at height. Working at height can refer to work carried out on ladders, scaffolding, ropes or mobile platforms. ONR had previously expressed concern about DRDL’s record in this area, but felt that overall progress was insufficient, despite some good practice. DRDL has until 31st of March 2022 to comply with the notice.

At the beginning of October ONR announced that Babcock was judged to have complied with an earlier improvement notice from September 2020. That related to DRDL’s failure to carry out checks on an effluent system used in maintenance and repair work. Again, ONR had previously raised concerns but DRDL had not made sufficient progress. DRDL was given until 31st of August 2021 to comply, but in September ONR said that they would be given a four week extension.

Work on HMS Vanguard at Devonport is still ongoing, with indications that it may not be completed by the end of the year. Vanguard, the oldest submarine of its class, is undergoing a major refit and an unplanned refuelling. When this work began in December 2015 it was expected to complete in 2019. NIS understands that a lot of non-nuclear components have needed replacing as part of the process.

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