SHIPYARD Swan Hunter said closer collaboration was needed to save UK shipbuilding but vowed to retain its independence amid rumours of a Government merger plan for the industry.

Newspaper reports at the weekend claimed BAE Systems and the Government were in discussions about proposals to merge the defence group's shipyards with Swan Hunter, VT Group and Babcock, at Rosyth, near Edinburgh.

VT Group, based in Southampton, confirmed yesterday it was expecting to have talks next month about an industry blueprint that could lead to a merger.

Swan Hunter chairman Jaap Kroese ruled out a merger for the North-East shipyard.

Mr Kroese said: "These are very difficult times and we certainly welcome closer collaboration between shipbuilders, but there is no suggestion of a company merger. That has not been discussed at all."

Mr Kroese's comments came after news yesterday that A&P Tyne is to close its Wallsend yard.

The Tyneside shipbuilder said empty order books had led to the decision.

Bosses said the workforce of 350 would be kept on but redundancies are expected to be announced within the next few weeks.

"It's terrible news," Mr Kroese said. "This is the biggest dip in orders we have ever experienced and it is taking its toll.

"But we are not going to give up. We intend to keep on fighting and stay open."

VT - formerly known as Vosper Thornycroft - will attend key discussions between shipbuilders and the Ministry of Defence (MoD) next month about a long-term shipbuilding strategy.

Companies hope the MoD will agree to a plan enabling the industry to avoid its traditional boom and bust cycle by sharing out work strategically over 15 to 20 years.

Swan Hunter is due to carry out work on a Ministry of Defence contract to build two aircraft carriers.

The shipyard expects to double its workforce to 3,000, but is facing a two-year period without orders before work on the vessels begins.

Published: 28/09/2004