Archie Bethel has a habit of being part of Scottish history. As a young student engineer he worked at the Ravenscraig steelworks during his holidays. A few years later he found himself having to find jobs for the 770 people who lost their jobs following its closure in his role as chief executive of Scottish Enterprise Lanarkshire
Archie Bethel has a habit of being part of Scottish history. As a young student engineer he worked at the Ravenscraig steelworks during his holidays. A few years later he found himself having to find jobs for the 770 people who lost their jobs following its closure in his role as chief executive of Scottish Enterprise Lanarkshire. Before that he was one
of the pioneering engineers working in the fledgling oil and gas industry on North Sea platforms. Today he is playing a major role in building the UK’s two biggest ever naval ships at Rosyth and fighting to make sure the historic dockyard has plenty of work to keep it going in the years ahead.
The two 65,000-ton Queen Elizabeth class aircraft carriers are the first naval ships to be built in ‘kit’ form with blocks being built in six different shipyards around the UK and assembled at Rosyth. “It is the best project I have ever worked on,” he says.
But the aircraft project is just part of Bethel’s many responsibilities as chief executive of FTSE-listed Babcock International’s marine and engineering division. That includes its Devonport and North Devon dockyards in England as well as its expanding overseas operations in Canada, Australia, South Africa and New Zealand.
Hamilton-born Bethel has come a long way since his upbringing in a working class family in the sixties. His father worked in quality assurance at Ravenscraig and after leaving school Bethel went to Strathclyde University to study mechanical engineering.
He graduated in 1974 at the beginning of the oil and gas boom in the North Sea and moved up to Aberdeen to join US equipment manufacturing company VetcoGray. Over the next eight years he worked offshore as a development engineer. “The North Sea was a pioneer in the field for drilling and production equipment,” he says. “It was probably the harshest environment we had produced oil and gas from at that stage in time so it was a really exciting time to be part of that.”
Bethel had been put on to the company’s management development programme and they moved him from engineering into sales and service. He was appointed as its North Sea regional manager based in Aberdeen looking after service and sales for a couple of years and then moved to California in the early eighties to work at the parent company’s headquarters.
In the mid-eighties he was promoted once again and came back to the UK as director of manufacturing operations. At that stage the company had manufacturing plants in East Kilbride, Montrose and Aberdeen and small plants in the Netherlands and Norway. “I was 35 and the youngest general manager in the company,” he says.
But then in 1989 he decided to leave the company after ABB acquired it. “It was the first time I started to think where did I really want to end up living. It was basically an American company so for the position I was at they automatically would want me in the States. I would be US-based and although we loved staying in the US we never really thought we wanted to move there permanently.”
He joined Scottish group Morrison Construction, which was then headed by brothers Fraser and Gordon Morrison. However he only stayed there for 18 months. “For me it was too much civils and not enough mechanicals,” he says.
During his time at Morrison, Fraser had encouraged him to get involved in the pathfinder groups for setting up new local enterprise companies and Scottish Enterprise, which was to replace the former Scottish Development Agency. “To cut a long story short I ended up getting offered the job of chief executive of the Lanarkshire local enterprise company.
“I always remember my first day at the job was the announcement of the closure of Ravenscraig. I had been in the job about two hours when I got a phone stuck under my face and a voice saying what are you going to do about it. I had a lot of learning to do but there were some great people I worked with and I ended up there five years.”
“We lost something like 14,000 or 15,000 jobs in total in Lanarkshire during the 91/92 period. There was a real negative feeling.”
Bethel says the pattern for big earlier closures of steel operations at Consett and Derby was the company just walking away and leaving the site. “We made it clear there was a big liability associated with the site and we expected British Steel to work with us to mitigate some of the worst financial aspects and contamination to the land. The Ravenscraig development company was formed and that still exists and I think it has been reasonably successful. “But the big thing I think we did in Lanarkshire was different from other areas. What they tended to do was create the enterprise zone on the former steel site.
“If you look at most of the enterprise zones, most of the development came in the last few years of their ten-year life. We thought we wanted to do it differently so with lots of support from the rest of Scottish Enterprise and the Scottish Office we actually chose the 500 acres to be sites that were ready for development immediately.”
Bethel and his team helped to create the Eurocentral, Strathclyde, Tannochside and Hamilton International business parks, which today are all key parts of the central belt economy. Within five years unemployment in Lanarkshire was back to the Scottish average. Bethel resigned from his post in 1995 and received an OBE in recognition of his work.
His next move was to join one of Scotland’s engineering legends, Motherwell Bridge. He became chief operating officer and a board director and stayed with the company for seven years. Bethel joined Babcock at the end of 2003. Its big operation in Scotland had been at Renfrew making boilers for both nuclear and conventional power stations. However, Babcock wanted to shift the balance of the business away from a dependence on heavy manufacturing to more of a service-based business and in 1996 it sold what was called the power systems division at Renfrew and a lot of other places to Mitsui.
At the same time it bought the former Royal Navy dockyard at Rosyth where it had been operating a govermment owned/contractor operated (goco) contract. The main business at Rosyth was refits of submarines and warships. When the navy sold it to Babcock in 1997 it had a dowry of something like eight or nine years worth of refits. In 2002 former Courtaulds executive Peter Rogers was appointed as CEO of Babcock and he recruited Bethel to run Rosyth and look at its future. “He said what do we do with this?” recalls Bethel. “Do we wait until the end of the allocated programme – which finished in 2006 – and then flatten it and sell it for real estate? Or is it an ongoing business?”
The year Bethel came in total group turnover was only £320m with probably £200m of that coming from Rosyth. This year it is £3.3bn and Bethel’s division is about £1.3bn of that. “I came in and thought this is an absolutely fantastic facility here. It has got the biggest docks, the biggest basin. So it was a case of how do you make all this work?”
In the same year Bethel joined Babcock it also won a ten-year contract to run the Royal Navy’s submarine base at Faslane. The company also decided to diversify so it wouldn’t be dependent on defence and bought Peterhouse Plc, which owned Scottish rail maintenance company First Engineering and power transmission company Eve. The reason for choosing Peterhouse was that Babcock was recognising its key skills were the ability to work in complex, high-level, regulated environments. In March 2006 BAE Systems and VT group combined together and made a takeover bid for Babcock which was eventually rejected.
“What it did really highlight to us was that we were in that kind of vulnerable size stage. Also at the same time in 2007 the government’s strategy was trying to push the whole defence industry into further consolidation. We had a decision to make after that. If there is going to be consolidation you have either got to be a consolidator or be consolidated.”
Babcock decided to make a move for Devonport Management, which ran Devonport dockyard in Plymouth and was owned jointly by Balfour Beattie, The Weir Group, and Brown and Root. Devonport naval base and dockyard had been privatised in the same year as Rosyth and bought by the three companies but Babcock was convinced it wasn’t a core operation for its owners and – after a long and complicated process – succeeded in buying it. At that point Babcock formed the new marine and technology division and Bethel became its chief executive with responsibility for all naval support activities. “We had all the complications of bringing two big competitors together,” says Bethel. “Rosyth and Devonport had competed with each other for a long, long time so it was interesting getting them under the one ownership. That put us in a pretty strong position in terms of support for the Royal Navy,” he says.
Over the next couple of years it made two more linked acquisitions. One was Bristol-based Strachan & Henshaw, which specialised in torpedo launch systems for submarines, and the other was a specialist in pumps for submarines. However, the company is firmly fixed on the after construction support business, rather than on building submarines and ships, for good economic reasons. “The capital cost of a frigate is probably about £300m or £400m. But its 30-year through life support is probably going to be £3bn or £4bn.The market of the through life support is much bigger than the capital business.”
In 2010 Babcock signed a 15- year terms of business agreement with the Ministry of Defence to transform how they operate their infrastructure and navy assets. As a result of the deal Babcock gets a long-term horizon in which to plan its operations to look after 12 submarines and about 35 naval ships. The aircraft carrier assembly project was something that Babcock would normally not be interested in. But Rosyth was a natural choice to build it because it had the only dry dock big enough for such huge ships. “It started as a competition and BAE wanted to do everything but it became quite clear that what the government didn’t want to do was to go to one part of the country, build up a 10,000-man workforce to build two ships and then when they were finished you are back into paying people off. So they came up with idea of building around the country.”
Bethel admits a number of traditional shipbuilding managers did not think the project would work. But managers from an oil and gas industry background like Bethel were well used to the idea of building rigs in modules. Some 34 different blocks have been, or are being, built in six shipyards including BAE Systems on the Clyde and Portsmouth; Cammell Laird at Birkenhead; A&P on the Tyne; and at Babcock’s North Devon shipyard. “All these blocks get barged down here and we stick it altogether. This is the first time it has ever been done and it is working really well.”
Around 1500 Babcock employees are working on the ships at Rosyth along with some 500 workers from the partner companies in the project. The official launch date for the first carrier, Queen Elizabeth, is 2016 and Prince Charles is expected to launch in 2019.
Bethel says the carrier assembly programme is going well. “These are the two biggest warships the navy has ever had and the two most complicated. There have been huge engineering challenges and logistics challenges.”
One of them was bringing in the biggest crane in Europe. Named Goliath, the crane was just a few metres below the Forth Road Bridge when it was towed into Rosyth two years ago. “The crane is a fantastic project in its own right,” he says. “It lifts 1000 tonnes. It was built in China because it was half the price of anywhere else.”
The entrance to the dock also had to be widened by eight metres, which was another big engineering challenge. “We were down 35 metres into the Forth uncovering foundations that nobody had seen since 1894,” says Bethel. “At the time it was the biggest civil engineering contract in Scotland.”
He says one of the benefits of owning both Rosyth and Devonport is that the company could use the latter for refit work which it could not have done at the former because of the carrier project. One of Bethel’s big success stories is overseas expansion for Babcock.
In 2009 it won a 15-year engineering support contract in Canada to look after its four Victoria class diesel submarines. Some 50 of the 250 personnel working on the subs are from the UK. “We got the Canadians into the idea of them concentrating on running the submarines and operating them but leave it to us to keep them operating,” he says. “What we are trying to do is give them a much higher level of availability out of the submarines.”
The company is also doing submarine and support work in Australia and earlier this year won a contract for supporting refits of ten frigates. It has been working for the New Zealand navy for the past seven years looking after its ten ships and is also bidding for a contract in South Africa and looking at opportunities in Brazil. “I am always looking for a customer who has got to that stage when he wants to spend on his navy and not on his dockyards,” says Bethel. “What tends to happen to publicly owned dockyards is they become inefficient with too many people in them. The navies then start to complain that too much of their scarce resources are getting spent on the dockyards and not enough is being spent on the ships. We come along with a model which tries to get a bit of balance to that.”
The marine and technology division is one of the three divisions in the group. Bethel says the other divisions are trying to do the same things for the army and the air force. The non-military division’s biggest business is civil nuclear, which started life as part of Bethel’s division. In Scotland it has a 15-year contract to decommission the Dounreay facilities. “We are in every single nuclear facility in the UK now,” says Bethel. “Six years ago we weren’t even in the market.”
Bethel, who spends a lot of time travelling around the world, still has his main house at Newton Mearns in Scotland and also has a home in Devon and an office in London. “The big push for the last couple of years has been this international development,” he says. “It has come from nothing to this year it will be about 20 per cent of my division’s turnover. My target is to try in the next two or three years to get it to between 30 and 40 per cent.”
With Bethel’s track record you can be pretty sure he will hit that target.