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Catalogue Reference:cab/66/11/45 Image Reference:0001

U DOCUMENT i s THE PROPERTY oi? H I S BRITANNIC MAJESTY'S.GWERNMENT:)2

T O B E K E P T U N D E R L O C K & KEY.

It is requested tha t special care may be taken to

ensure t he secrecy of t h i s document.

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S E C R E T . '

W.P.(UD) ^SC^S" .

9TH SEPTEMBER,'19U0. C O P Y N O . .

WAR CABINET,

MERCHANT SHIPBUILDING-.

J o i n t Memorandum by t h e M i n i s t e r w i t h o u t P o r t f o l i o , t h e C h a n c e l l o r of t h e Exchequer., the F i r s t Lord of t h e A d m i r a l t y and t h e Minister of S h i p p i n g ,

We h a v e d i s c u s s e d t o g e t h e r , i n t h e l i g h t b o t h of t h e e x p e r i e n c e of t h e l a s t t h r e e mon ths and of t h e p r e s e n t s i t u a t i o n , t h e p r o b l e m of m e r c h a n t s h i p b u i l d i n g , t o which r e f e r e n c e h a s b e e n made i n r e c e n t memoranda c i r c u l a t e d to , the War. C a b i n e t .

2 . D u r i n g t h e f i r s t y e a r of t h e wa r , t h e l o s s e s of B r i t i s h , a l l i e d and n e u t r a l s h i p p i n g i n c u r r e d t h r o u g h a l l fo rms of enemy; a t t a c k was a l m o s t t h e same a s t h e a v e r a g e a n n u a l l o s s d u r i n g t h e four years of the la S T , war., . , We m u s t , h o w e v e r , b e g u i d e d i n t h e main by the accentuated r a t e of l o s s which

"I a "H t h a t J _ S . S Ch a s b e e n suffered during the a 'h two or t h r e e m o n t h s . I np e r i o d , a t t a c k by submarine and from the a i r h a s been ; i n t e n s i f i e d a t s e a , t h e E b o a t has shown itself, and s h i p p i n g i s now b e i n g : s u b j e c t e d to bombardment from the air while it lies in p o r t .

3 o F o r t h e p u r p o s e s of e s t i m a t i n g our i m p o r t i n g c a p a c i t y d u r i n g . t h e s e c o n d year of the war, the M i n i s t r y of S h i p p i n g e x p r e s s e d the . v iew r e c e n t l y t h a t we s h o u l d assume t h a t ou*" t o t a l l o s s e s i n c l u d i n g m a r i n e c a s u a l t i e s would, d u r i n g t h a t p e r i o d , be of t h e o r d e r o f 5 m i l l i o n gross tons. The Nava l S t a f f h a v e p o i n t e d o u t t h a t i f our losses, e x c l u s i v e of m a r i n e c a s u a l t i e s , were t o c o n t i n u e a t the rate suffered in June and J u l y o v e r a p e r i o d of a y e a r , t h e y would amount to between %\% and 6 m i l l i o n g r o s s t o n s .

-ho War l o s s e s alone during the last three months have, been a s f o l l o w s % -

L o s s e s of Merchant (including t a n k e r s , but e x c l u d i n g mapifoe ca s u a l t x e s ) /opriofl' Tune August, 1940.

( g r o s s t o n s ) ^ ^ -C a l e n d a r B r i t i s h A l l i e d and T o t a l Month. n e u t r a l J u n e 2 6 7 . 0 0 0 2au. .CGC . 5 1 1 , 0 0 0 J u l y 21+4,000 111 \ 0 0 0 3 5 5 , 0 0 0 A u g u s t 2 5 5 , 0 0 0 7 2 , 0 0 0 3 2 7 0 0 0 s

I n a d d i t i o n , during t h i s period 117?0.00 gross tons of m e r c h a n t s h i p p i n g h a s b e e n l o s t while on commissioned s e r v i c e .

5o We are informed, by the Controller of Merchant Shipbuilding that the present rate of m reliant shipbuilding is not likely to reach more than 1 million gross tons during the next year, as contrasted with the target of 1 -g- million gross tons to be attained by February next under the arrangements made when the responsibility for merchant shipbuilding was transferred from the Ministry of Shipping to the Admiralty in the early part of this year0 This reduced rate of construction represents a reduction of no less than one-third and., even so, may make, insufficient allowance for adverse effects due to damage to the '/shipyards or to prolonged Interruption of work as the result of enemy attacko

6A It is obviously a matter of grave consideration whether this reduced rate of merchant shipbuilding can be accepted in view of the increased rate of Xom which we are forced to envisage as compared with that prevailing six months agoo 7o The Ministry of Shipping has purchased, mainly from the United States, some hO vessels and is in negotiation for 6 additional ships at the moment o It is anticipated that the unexpended portion of the sum already made available by the Treasury should be sufficient to defray the cost of these vesselso The opportunities for purchase, however, are limited and the vessels acquired are 20

:years old or more, It would be unwise to buy vessels which have:not been in service as they might well prove not only very .

costly but extremely inefficient* Purchase of tonnage of this type is in any oase merely a stop-gap, war measure which will, leave us after the war Kith oil .3 expensive, and inefficient .* ­tonnage which will have to be rapidly scrapped.; and does, nothing . to replace the British Mercantile Marine, of which the -average age in all section is already too high,- Notwithstanding these consideration we think "that any opportunity of acquiring serviceable ships at reasonable prices should continue to be taken,. The tonnage hitherto bought has cost on the average about I1.5 to 50 dollars a dead­weight . t oho 8b New construction in the UnitediSt-ateSoi Construct! on of tonnage in the United States was put "rapidly in hand in the later . stages of the last war and was brought to a high rate of output3 We consider it essential that our programme of home construction should be supplemented, by the immediate placing in the United States of as substantial an order for new tonnage as can be laid ­down in the near future * and preliminary inquiries have been made as to the possibilities6 It may be practicable to place orders for say? 60 ships of 10,000 tens deadweight with United States, syards for delivery at the end of 19U10 The Controller of Merchant Shipbuilding thinks that it would be unduly optimistic to look for any earlier date of delivery. We recognise that the- cost- of this tonnage must be high., but our wastage of shipping must be made good. An expenditure of 520 million of which not more than £5 million would be required before the 31st March would be necessary for the. acquisition of this tonnagei The Chancellor of the Exchequer has definitely agreed to orders being placed for 30ships-in order that the immediate negotiation? may be undertaken,,

1

9. We are also of opinion that negotiations should he pursued v/ith a view, to ' securing the transfer- of vessels already under construction in the United States to ourselves. There may he at. the moment some political' -difficulties' in persuading'the United States -authorities .to agree to "such transfer of'contracts already placed "by the Maritime' Commission and special inquiries are "being made upon this point. Insofar as-any such transactions could.he carried through, we should gain the advantage, of earlier delivery,'; though,., of course, we should have to undertake to meet -the cost of replacing at a latex" date4 the vessels ceded to us. 10 B Let us assume that we shall he successful in securing some 1 5 months hence about -h.00,000 tons gross of shipping constructed in the United Sta.tes, together with perhaps another 100,000 tons gross of old ships purchased in the marketo On this "basis, if our own programme remains at the level of 1 million gross tons per1 annum and if the rate of loss over the period amounts to something of the order of 5 million tons gross from all sources, we shall he replacing only 50 per cent., of our losses. This we consider quite inadequate.

1 1 o The only other way of making good the wastage in tonnage is to increase our home programme. The Admiralty areof the opinion that, in existing conditions, any increase in the rate of merchant shipbuilding above about 1 million gross tons could only be secured, at the expense of the naval programme or by .some allocations of steel and other- light materials in excess-of the amounts allotted to the merchant shipbuilding programme tinder existing- priority decisions,

1 2 . . There are further difficulties in securing suitable labour for the necessary marine engineering output for merchant shipbuilding purposes? 1 3 . : So far as steel is concerned, -we would remind the War Cabinet .that every ton of steel employed In shipbuilding yields a .return in deadweight carrying capacity equivalent to an importing power of 12 -cons, of goods per annum. We think that every effort should be made to increase the home production sxibstantially above the level of 1 million tons and to bring the rate ox" construction at least to the rate of million tons gross per annum by the early part of next year, and that the necessary requirements which the Controller of Merchant Shipbuilding puts forward should receive the most favourable consideration,, 1h..o If further inquiry, as to the possibilities of construc­tion In the United States prove disappointing, the whole situation of our home production will obviously have to be further considered as a matter of the roost vital importance. 1 5 , ' We do not overlook the possibility that under the system of Navicerts and-Ships Warrants we may yet be able to induce or force into our service additional neutral shipping, but there are many difficulties in the use of neutral and even allied shipping which cannot be ignored, We need only refer to the recent action of the Greek

Government in withdrawing, under German pressure j all official' support from G-rSeK shipowners in enforcing the'observance o f existing agreements concerning war "bonus for Greek crews - a step which may lead to substantial delays in the sailing o f these ships, and to reluctance to charter except at extravagant rates. We have also in mind the probability o f increasing demands upon merchant shipping for the mamn­tenahce of theferbes in the Middle East and other essential . naval and military operations^ We think it essential to restore, as far as possible, our actual losses by the creation of hew tonnage over which we have absolute control rather than to rely upon bringing into our service tonnage over which we have no such absolute control, and which in present circumstances we can only secure by negotiation and pressure.

j^unmarv^

16. We recommend:­

(a) that our programme for the building of merchant shipping in this country should if possible be raised at least to the rate of 1̂ million gross tons per annum;

(b) that immediate steps be taken to increase our merchant tonnage;

(i) b y p l a c i n g o r d e r s a t o n c e i n t h e U n i t e d S t a t e s f o r t h e c o n s t r u c t i o n of a n o t h e r 30 s h i p s e a c h of 10,000 d e a d w e i g h t t o n s ( a t o t a l of, s a y , 200 f 000 g r o s s t o n s ) ; '

(ii) b y s e c u r i n g ( i f no p o l i t i c a l o b j e c t i o n s p r e v e n t i t ) s h i p s a l r e a d y p a r t l y c o m p l e t e d f o r t h e U n i t e d S t a t e s M a r i t i m e Commiss ion; t h e s e , t o b e r e p l a c e d b y s h i p s t o b e c o n s t r u c t e d u n d e r (j .) a b o v e ;

(iii) b y t h e p u r c h a s e by t h e M i n i s t r y o f S h i p p i n g , a s o p p o r t u n i t y o f f e r s , of s e r v i c e a b l e s e c o n d hand s h i p s so l o n g a s t h e s e a r e o b t a i n a b l e a t r e a s o n a b l e p r i c e s ;

( c ) t h a t t h e c o n s t r u c t i o n of a f u r t h e r 30 s h i p s a d d i t i o n a l t o t h o s e r e f e r e e ! t o i n (b ) ( i ) above s h a l l be c o n s i d e r e d n o t l a t e r t h a n November , 1940 i n t h e l i g h t o f t h e c i r c u m ­s t a n c e s t h e n e x i s t i n g , o r a t a n e a r l i e r d a t e , i f i n t h e o p i n i o n of t h e A d m i r a l t y and t h e M i n i s t r y of S h i p p i n g e i t h e r i n c r e a s e d l o s s e s o r i n c r e a s e d demands f o r s h i p p i n g make t h i s n e c e s s a r y .

I I I n t d 0 ) AcGo / " ) X0W0

( " ) AoVoA, ) RoHoCn

Treasury Chambers, S.W . 1 . , 9th September, 1940.