Sir: I am sure that all those people connected with Swan Hunter, both past and present, will take grave exception to the comments 'View from City Road' (21 July) under the heading 'A shipyard destined to sink'.

The closure of Swan Hunter will seriously diminish competitiveness in the warship building industry, with consequent adverse cost implications for the Ministry of Defence, by establishing de facto monopolies in a number of products and markets. This is because a CMN-owned Swan Hunter is the only credible competitor for Vosper Thornycroft, VSEL and Yarrow Shipbuilders in their main areas of expertise.

This appears contrary to government policy: 'Our aim is a healthy competitive structure for non-nuclear refitting.' (Malcolm Rifkind, Secretary of State for Defence, 24 June, 1993).

You suggest that the loss of the Sir Bedivere contract was due to some shortfall in Swan Hunter's productivity. This is not the case. Since entering receivership, the company's workforce has been slashed from 2,500 to 660, without any deterioration in the standards of workmanship.

It is known within the industry that all five initial bids were around pounds 50m, well above the pounds 30m budget set by the MoD. Rosyth was able to reduce its bid by about 20 per cent in the second round, it is believed, by pricing its tender largely on the basis of variable costs only. It could only do this because of the guaranteed workload through to the end of the century, represented by the MoD's commitment to place 50 per cent of all surface ship refits with Rosyth. It is axiomatic that Rosyth will expect to recover any shortfalls through its pricing on the guaranteed non- competitive refits.

There is more at stake for the British taxpayer than nostalgia.

Yours sincerely,

FRED HENDERSON

Chairman

CMN Support Services UK

Lowestoft, Suffolk