BiFab: intervention analysis

Economic Appraisal: Benefit Assessment – Future investment

Step 1: Strategic Benefit

At the point of the first intervention, SG were aware of a potential third party acquisition of BiFab. The investor had a short term aim to crystalise tender opportunities and build BiFab’s reputation, ultimately establishing BiFab as a world class fabricator serving both the domestic and international markets.

Step 2: Theory of Change

i. Strategic Driver

A world class fabricator is required to help expand offshore wind, oil and gas and decommissioning markets

ii. Intervention

Provide loan to BiFab to prevent firm going to administration

iii. Enabling Change

BiFab’s future investor would expand scope and remit of company to target markets

iv. Outcome

The future contractor wins international contracts in target markets

v. Impacts

Facilitates higher growth in these markets and their related supply chains

Step 3: Achievement of benefit

• The future investor in DF Barnes secured contracts at Moray Offshore Wind Farm (£20m) and for the supply of a midwater arch for an oil and gas contract with First E&P. However it is noted that further SG interventions were required to secure these.
• Attempts to secure further contracts were less successful. BiFab was consistently priced comparatively to other European yards, but cost pressures in the offshore renewables sector resulted in competitive pricing from non-EU yards (notably Asia and the Middle East), which EU yards could not match.
• DF Barnes’ pre-acquisition business plans for future growth and diversification ultimately proved to be undeliverable.

Approach to monetising benefit and counterfactual case

• DF Barnes was not able to expand BiFab’s business model into target markets and BiFab did not become a world class fabricator in these markets.
• It is therefore not possible to conduct quantitative analysis into the economic impact related to this benefit, as the intervention did not result in higher growth in any of these target markets. Had the intervention resulted in such growth, the value of the contracts could have been used to estimate additional direct, indirect and induced employment and GVA, which could have provided evidence of economic impact related to the intervention.
• A qualitative assessment is therefore required to assess the impact of the intervention on this benefit.

Step 4: Review the additionality of the intervention

• The intervention in BiFab did not result in the firm becoming a world class fabricator in target markets either domestically or internationally. The intervention, therefore did not help deliver additional growth in these markets or help protect domestic supply chains.
• The future demand for local fabrication is still likely to be driven by demand in the renewables market in the UK and therefore, for the Scottish supply chain to develop a world class fabrication sector, it will be important for incumbent firms to win and deliver new contracts in this market.
• As a result of the intervention, the assets at the sites remain in a useable condition which may be attractive for future investment.