In 1936, the company were contracted to build two new destroyers, to be named HMS Kelly and H.M.S. Jervis. The keel of H.M.S. Kelly was laid on August 26 1937 and she was to become the most famous ship built by the company, being commanded by Lord Louis Mountbatten.

H.M.S. Kelly was named after the Admiral of the Fleet, Sir John Kelly, was launched by his daughter Antonia on 25 October 1938 and finally commissioned on 23 August 1939, just prior to the out break of the war. The Kelly's first action was on 4 September and achieved a "probable" sinking of a German "U" boat. Soon after, the Kelly was chosen to bring the Duke and Duchess of Windsor back to England from France.

Having been torpedoed off the coast of Norway in May 1940, the Kelly survived a 92 hour tow back to Hebburn in spite of being badly damaged. The Navy Controller wrote in a report that this was achieved "....not only by the good seamanship of the officers and men hut also on account of the excellent workmanship which ensured the watertightness of the other compartments. A single defective rivet might have finished her". After major repair work, H.M.S. Kelly rejoined the war, only to be sunk in May 1941 during the invasion of Crete with the loss of more than half the ship's company.

The film "In Which We Serve" (1942) which starred (as well as being written, produced, co-directed and scored by) Noel Coward was based on the story of the sinking of HMS Kelly (Coward was a friend Lord Louis Mountbatten).