More than jobs lost as shipyard sinks: David Bowen rues the passing, finally, of the historic naval builder on Tyneside

ON FRIDAY, Swan Hunter lost its last battle: the company that built the Mauretania is sinking amid an unseemly squabble between CMN, the potential buyer, and the receiver from Price Waterhouse.

While CMN is keeping alive the hope that another shipyard may rise up on the other side of the Tyne, the people of Wallsend can be forgiven a little cynicism. They have been promised so much, so many times, that they are bound to raise their eyebrows at new promises.

Whatever happens at Hebburn - the dock across the river that could be turned into a shipyard - Swan Hunter will die. And while the receiver, Gordon Horsfield, and CMN's Fred Henderson tried to pin the blameon each other, the truth, as always, is more complex. Each of the three main players in this strange story - the buyer, the receiver, and the Government - is partly to blame.

Mr Horsfield can say that he was only doing his job, which consisted of getting the highest possible price for his clients, the banks. At every stage, he has had to take the cautious route - not necessarily compatible with winning naval orders.

CMN's credibility has been damaged because it has changed its mind - or has appeared to - so many times. First it said it would buy Swan Hunter only if the yard was awarded the contract to refit the Sir Bedivere. The yard lost the contract, but CMN almost immediately said it would still go ahead if it could find enough work for the yard. It then plunged into a series of complex negotiations with the Ministry of Defence and the receivers. Each time, it announced the move through the megaphone of the press: hopes were raised that should not have been. No wonder the discreet Mr Horsfield was annoyed.

The Government, meanwhile, was busy sending confusing signals to the French. On the day it said Rosyth had won the Sir Bedivere contract, it told Swan Hunter it had won a smaller refit contract - knowing it could not possibly accept it.

Defence ministers told Mr Henderson that they would be delighted if Swan Hunter bid for some of the big contracts now on the table - including two ships to replace the marine landing ship, Fearless. Swan Hunter is one of only three yards capable of building this vessel: Harland & Wolff has ruled itself out of naval contracts, leaving VSEL at Barrow, which is already busy building submarines. No wonder CMN sat up and took note.

Mr Henderson, who used to work for state-owned British Shipbuilders, is familiar with the strange way of Whitehall. But it seems clear that in this affair Whitehall has had not one strange way but several. The Treasury has been playing its traditional role of chief executioner, the Department of Trade and Industry has been sitting on its hands, while elements of the defence establishment have been keen to see Swan's closed down. If there is overcapacity in the shipbuilding industry, they say, it is pointless to keep the yard open: far better to get on with building a friendly relationship with the ones that are left.

Chief defenders of Swan Hunter live in Bath, at the Royal Navy's procurement organisation. The RN has been genuinely impressed with the quality coming out of the Tyneside yard and fears reliance on one supplier for anything bigger than a frigate.

As Swan's backers and opponents battled, the message CMN was picking up changed. That in turn affected its attitude; to the receiver, it looked like vacillation.

In the end, the closure clique won. There will be sighs of relief in the other yards - VSEL, Yarrow on the Clyde, and Vosper Thorneycroft in Southampton - because their futures are more secure. There will be groans in Wallsend, of course, and Bath.

But does it really matter, from an economic rather than social viewpoint, that a warship yard that is apparently surplus to requirements has been closed down? The answer is yes. First, Swan Hunter is a repository of some of the finest shipbuilding skills in the world. The Royal Navy said the last frigate it built was one of the best-built ships it had ever commissioned. The design team will now be scattered to the winds - quite possibly foreign ones.

Second, CMN always made clear that its long-term strategy was to export from Tyneside. Since its Cherbourg yard was bought by the Lebanese Iskandar Safa, it has hoovered up orders for patrol boats and other smaller craft. Shipbuilding nations will always build their own warships - but there are many navies without a home industry.

The Cherbourg yard cannot build large ships, but Swan Hunter could - and it seems plausible that CMN could have won export orders for frigates and other larger vessels. The Royal Navy orders it needed were a cushion to see it through until it had built up its own commercial order book. Swan's survival would not necessarily have increased long-term pressure on the other yards.

Finally, by allowing Swan Hunter to sink, the Government is throwing away its beloved principle of competitive tendering. This was introduced in the early Thatcher years to make sure the taxpayer got the best possible deal. If the Royal Navy needs a ship larger than a frigate, it will have to ask VSEL. Another private sector monopoly will have been created; we will need an Ofship to regulate it.