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SPINNING ROUND IN CIRCLES?

01 Sep 05. The report in today’s FT by By James Boxell with regard to the CVF project discussions with John Reid, UK Defence Secretary, appears to pose more questions than answer them. Mr Reid reaffirmed his commitment to buying two multi-billion pound aircraft carriers for the Royal Navy with some curious caveats.

Mr Reid, speaking at the BAE Systems naval shipyard in Scotstoun, Glasgow, also said that while he was open to French involvement in the carrier-building programme, this would not come at the expense of delaying the project.

“We want to buy two carriers of 60,000 tonnes,” the minister said, “but we need them at a reasonable price.”

Officials at the Defence Procurement Agency, the government body responsible for buying new weapons systems, are negotiating with the industry to set a price for the project.

The initial cost had been set at about £2.9bn, although figures mentioned recently have ranged from £3.5bn to £5bn.

Mr Reid interrupted his summer holiday about three weeks ago to meet his French counterpart, Michèle Alliot-Marie, about possible co-operation on aircraft carrier building.

The French are considering one new carrier and British and French defence officials have long stated a desire to find savings by linking the two programmes. Mr Reid said: “The French have made a proposal but it will depend on whether they can give us a better time-frame.”

He also insisted the French would need to sign up for the design approved for the UK carrier project.

BAE, Britain’s biggest defence company, is understood to have agreed to a joint project as long as two-thirds of the work remains within the UK.

Mr Reid also said there were “serious issues” with the $245bn (£136bn) joint strike fighter project with the US.

The “jump jet” version of the JSF will be used on the new carriers but a row has developed between the UK and the US over the latter’s unwillingness to share technical knowledge.

The minister said: “I want to see these problems resolved. I am talking to those people with the greatest influence in the US.”

Any plan for building the carrier could be used as a blueprint for a deeper alliance of UK shipyards, owned by companies such as BAE and VT Group.

The naval alliance plan will fall under the umbrella of an industry-wide review being carried out by Lord Drayson, defence procurement minister. The review is expected by the end of the year although Mr Reid said a “one or two-month” delay would be acceptable.

Comment: The Minister wants a UK/Franco carrier project with BAE having a two thirds share ands with the capability for French and US jets at a price of less than £6bn. Firstly the French are unlikely to agree BAE having two thirds share particularly as Thales wants the lion share of the combat system; the price of £6bn for the 60,000 tonne ships is way out of line if the support costs of some £3.5bn are included and the continuing growth in the price of steel and general inflation; Lockheed Martin is believed to be reluctant to give JSF data if the French are involved and lastly the JSF V/STOL project is still having weight problems. Clarification or spin?

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