Serco contract extended to October 2019 as Yousaf seeks to take ferry contract in-house

Scottish transport and islands minister Humza Yousaf pictured with Serco NorthLink managing director Stuart Garrett earlier this year. Photo: Shetland News/Neil Riddell.

THE NORTHERN Isles ferry contract will continue to be operated by Serco NorthLink until October 2019 and the Scottish Government will decide by the spring whether it will be possible to make a direct award to a public sector operator.

Transport minister Humza Yousaf announced in the Scottish Parliament on Wednesday afternoon that the government intends to award ferry contracts directly to in-house operators “if certain criteria can be met and subject to the views of local communities”.


The Northern Isles contract had previously been due to expire in April 2018 before it was extended to allow a government review to conclude.

“As we said at the start of this review process, it is the Scottish Government’s preference to directly award ferry contracts to an in-house provider, subject to the views of local communities and stakeholders,” Yousaf said.

“I’m pleased to say that the indications so far are encouraging, but Transport Scotland officials are still working on the potential impact of complex state aid requirements on making such an award.”


Yousaf said government officials had more work to do to ensure they are able to satisfy European Commission state aid criteria designed to ensure governments do not provide subsidies that interfere with commerical competition. 

“In the case of the Northern Isles ferry services, we will extend the contract until October 2019 with a view to making a decision on future tendering in spring 2018,” Yousaf continued.

“As part of this process, we will take account of progress made on further consideration of the Teckal exemption and state aid rules.


“We will also follow up on our earlier engagement by writing to key local community stakeholders in order to build a better understanding of their preferences for the future approach to the procurement of their ferry services.”

ZetTrans chairman Ryan Thomson said in response: “The short-term clarity on the the North Isles ferry contract is welcome news, particularly for businesses operating in the isles, and i’m sure the time this extension allows will be used to establish a medium to long term strategy which will allow businesses to plan long term.”

Speaking at Holyrood following the minister’s statement, Shetland MSP Tavish Scott asked whether Yousaf accepted that people in Orkney and Shetland “will be disappointed that he hasn’t announced the re-tendering” of the Northern Isles route “because that is very much what they wish to see”.

Yousaf said that was the “first time I’ve had an indication from the constituency member that [islanders] would be opposed to a direct award”, and that when he travelled to Orkney and Shetland islanders if anything seemed “agnostic” or “openly hostile” to a re-tendering.

Highlands and Islands Conservative list MSP Jamie Halcro  Johnston received an assurance from Yousaf that the extension “won’t have any adverse impact on the current service”.


He said Serco NorthLink managing director Stuart Garrett had been “very helpful, very constructive, from day one” and “there will be stability for the Northern Isles for the service they receive”.

Scott said afterwards that it was “disappointing that despite the clear views from Orkney and Shetland in favour of tendering, the government have not made a decision”.

“Local people, the freight industry and business see many advantages to tendering in service improvements that benefit Shetland,” he said. “The current operator Serco NorthLink is noticeably quicker at responding to local needs.

“I do not want to see our lifeline shipping services go backwards. A government-run service is no guarantee of a better service. I also believe that if the government decide they are the best people to run the North[ern] Isles links to Aberdeen, the private sector freight operators will set up in competition. This is what happened before with Norse Island Ferries and it could happen again.”

The Liberal Democrat MSP continued: “I want the government to listen to their own feedback, accept that tendering improves the service on behalf of the islanders who depend on it and get on with tendering the next North Isles contract.”

Scott raised the matter of a review of freight fares, which has been underway for three years, with Yousaf in parliament. The minister said he “wholeheartedly” accepted the need to complete that review as it is “an issue that raises much concern” in the islands, adding the government was “working to get to a solution”.