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09 Sep 03. In his opening speech at DSEi today, Reuters reported that, Lord Bach, UK Defence procurement Minister said that the UK ownership of defence firms was no longer a key issue. He stopped short of saying if it would remove a shareholding limit on the UK’s biggest military contractor BAE Systems Plc (London:BA.L – News). This confirms indications reported by BATTLESPACE, (See INDIA CONFIRMS HAWK DEAL BATTLESPACE UPDATE Vol.5 ISSUE 34, August 29th 2003), that this government is quite happy to see control of the UK defence industry pass into US hands.

The current 15 percent shareholding ownership limit on BAE has been viewed as a possible barrier to any takeover or merger.

However, Defence Procurement Minister Lord Bach told an arms exhibition that the government was much more interested in where the technology was developed and where jobs were created.

“So the ownership of companies is frankly no longer the most important thing to us,” Bach said in a speech. He said it was up to industry to structure itself in line with commercial logic and that the nationality of ownership or control was less relevant in today’s global defence industry.

BAE Chief Executive Mike Turner had told Reuters at the Paris Air Show in June that a limit on holdings in the company was not a barrier because any takeover or merger would require British government approval.

“Nobody is going to take over BAE Systems and we’re not going to merge with anybody without first going to the UK government and getting their approval. And you only get their approval if you explain what’s in it for the UK government and UK Ltd,” Turner told Reuters in June. BAE has long talked about establishing a transatlantic link with a contractor in the United States. Bach declined to comment further when approached by Reuters after his speech.

Comment: It is really up to BAE Systems’ management to state whether the company is ‘Up for Sale’ to any willing bidder? Should the management be committed to the long-term stability of a UK defence industry or is this the work of government? Should they cast aside short term gains for long-term stability?

There has been little comfort emanating from the BAE PR machine to give any comfort to any of these questions to BAE shareholders at a time of a low share price. Is the management is committed to its US policy come what may? Having overcome the Nimrod and Astute problems reported so often in our columns, is the UK going down the same road as ships, cars and electronics and to surrender a key industry to foreign domination for the short-term return of ‘supposed’ contract improvement to the loss of a huge R&D asset built up over many years with taxpayers money? Where BAE follows what happens to Rolls-Royce, Ultra and Smiths, no doubt the City merchant banks are rubbing the hand with glee at the thought of fat retainers?

No doubt we will find out in due course but there is little doubt that the taxpayer and the BAE shareholders will be the losers.

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