Ministers seek state aid advice over Harland & Wolff rescue deal

The government has drafted in City lawyers to scrutinise a proposed rescue deal for Harland & Wolff, the shipyard-owner which built the Titanic.

Sky News has learnt that ministers have drafted in external advisers to assess whether the renegotiation of a Ministry of Defence contract to facilitate a sale of the company to Spain's Navantia would comply with European state aid rules.

The Treasury is understood to have indicated in recent days that it is minded to back the proposed deal, although officials cautioned that a final decision had yet to be taken.

Sky News revealed last week that Navantia wanted to secure more favourable terms for a deal to build three Fleet Solid Support ships (FSS) for the Royal Navy, with the Financial Times subsequently reporting that the recut contract would effectively necessitate the government paying £300m more for the vessels.

The Department for Business and Trade refused to comment on the identity of the law firm involved in the project, although two sources in the legal profession said they believed it to be Ashurst.

One source said the move to retain external lawyers was "standard" in a scenario such as this.

H&W's London-listed parent company collapsed into administration in September after seeing a plea for taxpayer support rejected.

Navantia, which is already partnering with H&W on the Royal Navy contract, is understood to have been providing financing liquidity to the company on a week-by-week basis since the company's filing for administration.

One source close to the Spanish company recently told Sky News that the fate of more than 1,000 workers at H&W's four UK shipyards now hinged on the government agreeing to renegotiate the FSS contract "on more realistic terms".

The British and Spanish governments have also been engaged in discussions about the prospective deal.

It is likely to incorporate jobs guarantees if the UK government agrees to recut the FSS deal.

H&W's four shipyards are in Belfast; Appledore, Devon; Arnish on the Isle of Lewis; and Methil, Fife.

Under the deal provisionally agreed in recent days, Navantia would acquire all four shipyards despite only having a current interest in the Belfast site.

Bankers at Rothschild have been running a sale process to gauge interest in the company and its assets since September.

Founded 163 years ago, Harland and Wolff built the most infamous passenger ship in maritime history, with The Titanic sinking on its maiden voyage across the Atlantic in 1912.

The government declined to comment.