‘We will rely on im­ported work­ers for years to come’

Bab­cock’s boss tells Alan Tovey of his worry over a lack of home­grown en­gi­neer­ing tal­ent and why his com­pany is no out­sourcer

The Sunday Telegraph - Money & Business - - Business - The Sun­day In­ter­view

When Archie Bethel isn’t pac­ing round Bab­cock’s Lon­don Wig­more Street of­fice, there’s a good chance the en­gi­neer­ing gi­ant’s boss can be found pe­rus­ing the gui­tar em­po­ri­ums of Den­mark Street. “I’m a pretty keen gui­tarist,” says the 65-year-old Scot. “My favourite bands? Oh, Bruce Spring­steen, the Killers, the Stones.”

His La­nark­shire roots are ev­i­dent as he talks in the board­room of the com­pany’s head­quar­ters, in be­tween sips of a huge mug of tea. Some­how it’s sur­pris­ing that Bethel – a bear of a man, it has to be said – likes to riff away on a gui­tar, but then the £4bn com­pany is not your av­er­age busi­ness.

Bab­cock is so in­ter­twined with Bri­tain’s de­fence that the UK can’t go to war with­out it. It builds and main­tains sub­marines and ships for the Navy, looks af­ter the Army’s equip­ment and trains the Forces.

It’s also pretty much got its own air force. The avi­a­tion di­vi­sion not only trains mil­i­tary pi­lots both at home and abroad, but also of­fers ser­vices such as aerial fire­fight­ing, search and res­cue, air am­bu­lances, and oil­field trans­port.

“We’ve got 400 air­craft op­er­at­ing in Europe alone,” Bethel says. “It’s the fastest-grow­ing part of the busi­ness – 17pc last year.”

Bab­cock ex­panded its avi­a­tion op­er­a­tions in 2014 in what many at the time saw as a bad deal. In­vestors were tapped for £1.1bn to buy Avin­cis from its pri­vate equity own­ers, pay­ing £920m and tak­ing on £700m of debt.

Bethel, then one of the se­nior man­age­ment team un­der Peter Rogers, who he re­placed two years ago, ad­mits the com­pany paid top dol­lar.

“We bought at the top, which was fine, be­cause oil was at $113 a bar­rel,” he re­calls. The part of Avin­cis that Bab­cock wanted was its he­li­copter emer­gency med­i­cal ser­vices di­vi­sion, and not its Bond oil­field trans­port unit.

“If we could have bought it with­out Bond we would have, but there were some pretty racy fore­casts for the oil price. We took a deep breath and said, ‘let’s make it work’. Three months later the oil price crashed,” Bethel says with a chuckle. “Was it a bad de­ci­sion? Not at the time. We’ve more than sur­vived. It’s high qual­ity.”

He runs through tales of vis­its to Bab­cock’s avi­a­tion fa­cil­i­ties in Europe, where fire­fight­ing air­craft, res­cue he­li­copters, even drones, are con­trolled from, as well as re­pair bases where Bab­cock en­gi­neers “strip back air­craft to the bone” for over­hauls.

Avi­a­tion makes up nearly a fifth of over­all rev­enue and it has se­cured some big wins re­cently, in­clud­ing teach­ing mil­i­tary pi­lots for the fa­mously pro­tec­tion­ist French.

“That opened up other peo­ple’s eyes to what you can sell abroad,” says Bethel. “There’s not a mil­i­tary in the world whose bud­get isn’t un­der pres­sure. We can make them sav­ings they can spend on the front line.”

By a whisker, the big­gest part of Bab­cock is its land unit, gen­er­at­ing more than a third of sales, split on a 2:1 ra­tio be­tween civil and de­fence. This di­vi­sion might be the one the public is most aware of, with en­gi­neers in Bab­cock-branded hi-vis kit re­pair­ing rail­ways and power lines. But the com­pany also main­tains tens of thou­sands of ve­hi­cles for the mil­i­tary and emer­gency ser­vices, and also pro­vides civil and mil­i­tary train­ing.

Its ma­rine busi­ness, sim­i­lar in scale, is the core from which Bab­cock was built up. Thanks to its mem­ber­ship of the Air­craft Car­rier Al­liance build­ing the Queen El­iz­a­beth-class car­ri­ers, Bab­cock has been in the lime­light, with bit parts in TV show Bri­tain’s

Big­gest War­ship, which fol­lows a ship’s con­struc­tion at the com­pany’s Rosyth dock­yard. Bethel, who ran Bab­cock’s ma­rine busi­ness from 2007 to 2016, is proud of the com­pany’s work on these ves­sels – he of­fers to show a photo on his phone of the car­rier squeez­ing through the dock­yard gate – even though he ad­mits it hasn’t been the best con­tract.

“The Min­istry of De­fence re­ally duffed us up,” he sighs, re­call­ing the saga of build­ing the ships. The fi­nal price of £6.2bn was nearly dou­ble the orig­i­nal es­ti­mate, thanks to po­lit­i­cal flip-flop­ping over whether it should be equipped with F-35 jets ca­pa­ble of hover land­ings, or fit­ted with cat­a­pults and ar­rester gear. Changes to the de­sign and con­struc­tion sched­ule to fit the de­fence bud­get didn’t help. “They talk about in­dus­try al­ways pulling one over on the MOD, but it didn’t that day, I can tell you.”

The car­ri­ers will form the heart of the Navy for the next 50 years, and Bethel says Bab­cock will even­tu­ally make money up­grad­ing them and Bethel is con­fi­dent there will be plenty of work in the fu­ture: “We need at least four more nu­clear power sta­tions just to give the UK se­cu­rity of sup­ply,” he says. “And there’s 100 years of work de­com­mis­sion­ing them.”

Bethel – the son of a steel­worker – has come a long way since try­ing to leave Hamil­ton Academy af­ter what would now be his GCSES.

“I’d got an ap­pren­tice­ship with Rolls-royce,” he says. “I was due to start on the Mon­day but on Fri­day I de­cided I’d go back to school af­ter the week­end and then go to univer­sity.”

His old head­mas­ter took him back, and Bethel won an en­gi­neer­ing place at the Univer­sity of Strath­clyde. This led to his first job, work­ing in the oil in­dus­try for Vetco Gray as the North Sea was be­gin­ning to boom.

“It taught me a lot,” he says. Bethel re­calls “work­ing round the clock for three days in the mid­dle of the sea” so a dig­ni­tary in Lon­don could press a but­ton to start pro­duc­tion. “That was at 10am and I got fin­ished at 4am,” he says. “Hun­dreds of guys stood around watch­ing me on the rig. That teaches you to be re­source­ful.”

He later joined fam­ily-owned Scot­tish engi­neer Mother­well Bridge with a re­mit to float it, but ten­sions be­tween the 105 share­hold­ers over how to pro­ceed re­sulted in it break­ing up. “It taught me that in any com­pany, you have to have a strat­egy that ev­ery­one is be­hind,” says Bethel. “It might be a crap strat­egy, but oth­er­wise all you get is in­fight­ing.”

The move to Bab­cock came in 2004, when Rogers recog­nised he was try­ing to do at Bab­cock what Bethel had at Mother­well Bridge. “He said he needed a Scot to run Rosyth [the Scot­tish dock­yard], some­one who un­der­stood how they speak,” Bethel jokes. Ini­tially he thought he would be tasked to turn Rosyth into a com­mer­cial yard as the Navy pulled back, but Bab­cock found a knack for win­ning mil­i­tary ma­rine jobs.

With a steady stream of work – the com­pany has a £31bn bid pipe­line and over­seas growth in mind – Bab­cock seems well placed.

Record re­sults last month helped to quell spec­u­la­tion that it could be the next out­sourcer to run into trou­ble.

Bethel de­scribes his com­pany as “to­tally dif­fer­ent” to these trou­bled busi­nesses, “with big as­sets like dock­yards and assem­bly yards – out­sourcers are the kind of com­pa­nies that take over work­forces, we’re more like a man­u­fac­turer with a big cap­i­tal base”. He’s un­wor­ried by the com­par­i­son, blam­ing un­so­phis­ti­cated an­a­lysts for lump­ing it in with com­pa­nies like Car­il­lion and Mi­tie.

So what does worry him? “Skills,” he sighs. “I’ve spent 30 years try­ing to pro­mote en­gi­neer­ing from the re­ally bad im­age it got in the Eight­ies when Bri­tain de­cided en­gi­neer­ing was a bad thing.” He says the UK “prob­a­bly, no def­i­nitely, won’t” gen­er­ate enough home-grown tal­ent and will rely on im­port­ing skilled work­ers for many years. How­ever, Brexit – what­ever shape it takes – won’t stop them com­ing to Bri­tain.

“I don’t think there is any chance this coun­try will turn its back on tal­ented peo­ple: it’s what’s made this coun­try for hun­dreds of years.”

‘I’ve spent 30 years try­ing to pro­mote en­gi­neer­ing from the re­ally bad im­age it got in the Eight­ies’

Reach­ing for the sky: Bab­cock boss Archie Bethel re­cently de­liv­ered record re­sults. Be­low, Bab­cock helps to main­tain sub­marines such as HMS Vic­to­ri­ous in Faslane

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