‘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
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