Peer Review of the United Kingdom Shipbuilding Industry

1. Introduction

Abstract

This chapter sets out the purpose, scope, and methodological approach of the report, and summarises the key findings and conclusions across three core areas: i) informational capabilities relating to data availability on the shipbuilding sector; ii) comparative analysis of the UK and peer shipbuilding economies; and iii) opportunities and barriers to growth and resilience.

A. Introduction

This report presents key insights from the research undertaken on comparative informational capabilities, on improving data on skills needs in the United Kingdom’s shipbuilding industry, and on identifying opportunities and challenges in the industry as well as possible industrial policy responses.

This analysis focuses on commercial shipbuilding in the UK and generally excludes shipbuilding for defence purposes. Although naval shipbuilding represents a much larger share of the UK’s total production and has performed significantly better than the commercial segment, it falls outside the scope of the OECD’s work and will only be referenced where it influences commercial activity. Because defence accounts for such a substantial portion of UK output, whether a data source includes or excludes defence production can materially affect the results. Throughout the paper, it will be clearly indicated when data points include (or exclude) defence shipbuilding. While commercial and defence shipbuilding share certain characteristics and resource requirements, such as reliance on highly skilled labour, defence activity is treated in this analysis as an external factor influencing conditions in the commercial sector.

The work on informational capabilities comprised two research projects: one on data capabilities (Report I), the other specifically on skills needs and their measurement (Report II). For the former, the research mapped definitional scope of the industry, economic indicators, and data availability both on a cross-country comparative level and nations level for the UK. For the latter, the research reviews theoretical and applied methodologies for defining occupational skills; for assessing skills supply, demand, imbalances, and mismatches, including through regional or cluster-based approaches; and for identifying future skills needs. Drawing on selected best practices, the project developed a measurement framework and applied it preliminarily to three occupations: welder, pipe fitter, and electrical control systems engineer. In both reports, engagement with stakeholders from the UK shipbuilding industry and related sectors strengthened the findings and ensured that the analysis reflected the domestic context. Key insights on comparative and the UK’s informational capabilities are also covered in greater detail in the ‘Data Collection Toolkit’ Report (DSTI/SBC(2025)9), also submitted to the Shipbuilding Committee for the April 2025 meeting.

The work on comparative opportunities and challenges was conducted across two parallel workstreams, and results were merged for a comprehensive assessment and set of recommendations (Report III). Global market analysis was conducted to position the UK along various indicators of interest. Next, in-depth comparative market, industry, and policy analysis was conducted among peer shipbuilding economies of the UK: Norway, the Netherlands, Italy, and Spain. Opportunities and challenges were identified for key sub-sectors of interest to the UK – ferries, leisure vessels, and offshore wind vessels – as well as emerging technology-driven sub-sectors – green maritime, digital transformation, and autonomy. Market and government failures were explored throughout and were organised along key themes: contextual market distortions, public needs and procurement, skilled labour, innovation and technology, and Net Zero. Engagement with stakeholders and literature helped colour in questions left by data analysis (truncated by data availability challenges).

B. Informational capabilities

Significant differences exist across countries in the classification of what is considered part of the shipbuilding sector, and in the reporting of core industry indicators. While ship construction and repair are consistently covered, the inclusion of other upstream or related industries such as military shipbuilding, or marine equipment varies widely. Similarly, shipbuilding indicators – mapped across input, output, productivity and performance – are often inconsistently reported, and partially available. These differences hamper cross-country analysis and limit the effectiveness of policy making.

The report also highlights the fragmentation and inconsistencies in the collection of shipbuilding indicators in the UK. Although well-developed data collection structures exist, their effectiveness is undermined by classification errors, discrepancies in how economic activities are reported, and limited co-ordination between public and private actors at different levels of governance.

Data quality, availability and comparability are key issues impacting knowledge, decision-making, and co-ordination, on international, national, and nations’ levels. The absence of systematic and comparable evidence significantly constrains the ability of government to anticipate structural risks, and to efficiently allocate public resources.

As the sector continues to innovate and decarbonise, skills needs are evolving rapidly, creating significant challenges for shipbuilding economies seeking to maintain competitiveness. A key obstacle is the absence of harmonised, comprehensive data on current and future skills requirements, which limits the sector’s ability to secure the right skills, in the right place, at the right time.

Effective workforce planning in shipbuilding depends on a clear understanding of how skills needs are shaped across the sector. This requires consideration of several interrelated dimensions, including the availability of skills entering the labour market, the nature of employer demand, and how these evolve over time and across regions. Key aspects include skills supply through education and training pathways, skills demand reflected in employer needs and emerging technologies, the extent of skills imbalances and mismatches, regional clustering of capabilities, and the implications of technological, market and policy developments for future skills requirements.

C. The UK shipbuilding industry in a global context: lessons from peer economies and opportunities

Global shipbuilding has shifted towards East Asia in the twenty-first century. China now represents half of global production and an even greater share of the orderbook, followed by Korea and Japan. Productivity gains in these countries reflect an increase in the size of yards and vessels being built, and the deployment of advanced digital facilities. By contrast, the UK shipbuilding industry has contracted both in terms of production volumes and market share, and build times remain significantly higher than global averages.

Peer European shipbuilding economies demonstrate that resilience is possible through specialisation in high-value segments, export-oriented production and strong reputation. Facing similar challenges in competing against East Asian economies, some European shipbuilding countries have managed to secure certain segments of the global market.

Competitive specialisation opportunities exist for the UK, especially in three key segments – ferries, leisure and offshore wind vessels – as well as in emerging technology-driven subsectors, green and autonomous vessels. These areas build on demonstrated domestic strengths in design and innovation and align with growing global demand for low-emission and smart vessels, and with the expansion of international demand for offshore wind energy.

While specialisation has supported resilience in some peer economies, it has not always delivered long term growth. As rapid technological changes widen the gap between shipbuilding economies, specialisation in niche submarkets might not be enough to maintain the production capabilities and market shares. Investment in the modernisation of production infrastructures, and in emerging technologies will be essential for ensuring long term growth and resilience in the sector.

D. Realising opportunities

Realising these opportunities will require addressing market failures and distortions that constrain the UK’s competitiveness, productivity and investment. The existence of these barriers –arising from unfair competition, spillovers from related domestic industries, the satisfaction of ‘public needs’ through public procurement, information and co-ordination in training and employment, digital transformation challenges, innovation and emerging technologies, and the transition to Net Zero – provide clear rationales for government interventions.

Policy interventions need to be mindful of contextual market distortions impacting the UK shipbuilding sector and the markets it operates in. Globally, varying level of subsidisation by governments and heightened concerns over supply chain security – especially in key inputs such as steel, carbon and glass fibre composites, and batteries – challenge the level playing field. Domestically, the interrelatedness of the shipbuilding sector with other advanced manufacturing industries creates both positive and negative spillovers that must be incorporated in the design of government interventions. While the shipbuilding industry in the UK benefits from a cluster effect with related industries that can pool skilled labour and generate knowledge spillovers, it suffers from indirect competition over shared inputs increasing their prices and undermining the sector’s competitiveness, especially from the aerospace and the naval shipbuilding industry. These areas of competition for shared resources also represent ones where horizontal policies can positively impact multiple sectors.

Skilled labour shortages are one of the most acute challenges facing the shipbuilding industry. Market failures in the training and skill system create skill shortages and imbalances undermining firms’ production capabilities and the sector’s international competitiveness. At the company level, shipbuilders face difficulties attracting skilled workers, as they compete with related industries that often offer higher wages and benefit from a stronger reputation. High living costs in maritime clusters can further discourage prospective workers. Shipbuilders also incur additional costs when replacing experienced workers with younger recruits, as this can lead to short‑term inefficiencies and requires substantial investment in training, particularly as new technologies continue to reshape production processes. These challenges are further exacerbated at the industry level by limited, fragmented information on current and future skills needs. This lack of visibility hampers efforts to modernise education and training systems and ultimately restricts the pool of skilled labour available to shipbuilders. Targeted policy interventions may be especially effective in addressing shortages for skill profiles shared across related industries, helping to ease competition for talent and strengthen the resilience of the broader maritime industrial workforce.

Digital transformation and innovation represent essential drivers of productivity growth, resilience and competitiveness, yet current evidence suggests uneven adoption across the UK shipbuilding sectors, and government failure in the design of policy support to innovation compounded by the little information on the “real” impact of these programmes. Several supply-side innovation programmes support R&D in the shipbuilding sector, but the innovation-to-commercialisation step remains a persistent bottleneck. Firms face fragmented information on available support, insufficient guidance beyond financial instruments, short funding cycles that constrain long‑term planning, regulatory uncertainty, and limited co-ordination among investors. Strengthening policy design through closer co-ordination between government and industry, improving regulatory clarity and ensuring the availability of data on key indicators of the sector would help bridge the gap between innovation and commercial deployment.

Net zero policies are reshaping shipbuilding demand. Domestic and international commitments are creating new markets for low- and zero-emission vessels, alternative fuel technologies and reshaping the types of vessels being demanded. However, co-ordination failures between maritime actors, imperfect information on the regulatory pathway and unpriced environmental externalities slow down the pace of transition, creating clear rationales for targeted government interventions. New vessel types and markets are emerging, but co-ordination and information failures, as well as negative externalities create rationales for government interventions.

Public procurement is a valuable tool to support innovation, and the net zero transition, with potential risks of adverse market effects. Used strategically, public procurement can serve as a key demand-pull instrument to support public goals and create early markets for emerging technologies, while addressing public needs. However, it can also come at the expense of productivity improvements, stimulate excess capacity and impose significant costs for companies participating in complex bidding procedures.

Strategies supporting shipbuilding embedded in broader regional and cross-sectoral development objectives may foster both growth and resilience through enhancing spillover effects and market dynamism. By acknowledging the embeddedness of shipbuilding companies within regional clusters, as well as their broader interrelatedness with other advanced manufacturing industries, policy makers can design interventions that may promote positive spillovers effects.