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11 Feb 04. The FT reported that BAE Systems yesterday sought to highlight its importance to the UK economy with evidence that it directly and indirectly supported more than 110,000 jobs in Britain in 2002. The findings, published in an academic study, are part of the defence group’s ongoing lobbying campaign amid a string of high-profile contract losses.

The study, conducted by Oxford Economic Forecasting, the independent analysis group, also found that BAE jobs were among the most valuable in Britain, with many of them high-value positions in specialised engineering and design fields. The £80,000 study, published yesterday, was commissioned by BAE a year ago during a bruising procurement fight about a new training jet for the Royal Air Force. BAE eventually won the contract, in which its Hawk was up against an Italian-built Aermacchi, but company executives said the difficulty in winning the deal raised concerns that the government was not taking domestic economic issues into account during procurement decisions.

Since the Hawk decision, BAE has lost out on several other significant contracts – including the £13bn programme to build air-to-air refuelling aircraft for the RAF – in which it made strenuous arguments about the domestic economic impact of the programmes. However latterly its partner Boeing’s CEO Harry Stoneceipher said that if he had his way again he would have offered new-build jets from the U.S. tanker line.

BAE acknowledged the report was part of an attempt to staunch the bleeding by showing that the company made a big contribution to British research and development and home-grown intellectual property.

The job card has been played in the bidding process for the UK’s multi-billion Support Vehicle contract being bid by MAN, Mercedes-Benz, Oshkosh and Stewart & Stevenson. The final recommendation is believed to have been sent to the IAB last month and returned back to the DPA with recommendations. Whilst the U.S. companies Oshkosh and Stewart & Stevenson put forward strong indigenous IP and job proposals within the U.K. automotive industry with S&S having strong union support, the MoD is believed to have favoured a fleet of trucks with a proven track record over all marques together with a strong dealer base where trucks could be supported world-wide.

MAN has long been regarded as the quiet favourite in some quarters of the MoD given its strong dealer base and its new range truck launched at DSEi last year. The company (See BATTLESPACE UPDATE Vol.6 ISSUE 4, January 30th 2004, U.K. SUPPORT VEHICLE REQUIREMENT GOING STATESIDE– MAN GOES ON OFFENSIVE?), announced a controversial deal tying in the offset of the Austrian Typhoon deal to the truck deal. This would give aerospace jobs protection for BAE and its partners in Typhoon but no automotive jobs in U.K., just Austria. The other three bidders have made no comment but are believed to be working hard to stave off this possible knockout blow by MAN which has found favour in many circles. Sources close to Mercedes say that the company is not happy stating that as they own 37% of EADS they could offer the same deal, but they don’t have a plant in Austria!

The MoD’s defence industrial policy, unveiled last year, emphasises that the health of the domestic defence industry should be taken into consideration when procurement decisions are made. But it makes cost – or “value for money” – the pre-eminent consideration. Mike Turner, BAE chief executive, has argued repeatedly that Britain was at risk of losing important skill sets if procurement spending was not more targeted.

“The defence industrial policy included some of these principles, but we want to make sure they’re not just words,” said a BAE official. “It’s important not just to spend the money but to spend the money in the right kind of way.” Although the study did

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