Job fears after BAE loses out in £7bn Indian fighter jet deal

http://www.guardian.co.uk/business/2012/feb/01/fighter-jet-contract-british-manufacturing

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The government is again under fire for failing to support UK manufacturing after the Indian government declared France the preferred bidder to build 126 fighter jets in a deal worth £7bn.

New Delhi said the French company Dassault, which makes the Rafale fighter, was frontrunner for the contract, robbing Eurofighter's Typhoon of one of its most important export orders to date.

BAE Systems, Britain's biggest manufacturer, owns 33% of Eurofighter and unions are worried that jobs could be jeopardised, though this was denied by the company. David Cameron also denied there would be job cuts after he was quizzed during prime minister's questions in the Commons.

Downing Street said it would ask Delhi why it had chosen the French. There was also suggestions that the British might ask the European commission to examine whether EU state aid rules had been breached, but officials said it was premature to speak in those terms.

There was uproar last year when Siemens of Germany was awarded a £1.4bn contract to build 1,200 carriages for the London Thameslink route instead of Bombardier of Canada, which could have built them at its Derby plant. Bombardier has since announced plans to cut 1,400 jobs at the East Midlands factory.

The Indian decision is a bitter pill for the British government, following remarks by French president Nicolas Sarkozy that Britain has destroyed its manufacturing base, and in the light of pledges by the government to boost the private sector – and make the UK less dependent on banking.

Cameron, who last year led one of the largest-ever business delegations to India to persuade its government of the value of British industry, had lobbied heavily in favour of Eurofighter, but the Indians are now talking exclusively to the French.BAE's shares initially fell in the City.

Tory MPs are complaining about the wisdom of the UK aid programme to India if New Delhi goes ahead and awards the contract to France, although observers said the Indians could still change their minds. In the House of Commons, Cameron said the Typhoon was a "superb aircraft, far better than Rafale. Of course, I will do everything I can to encourage the Indians to look at Typhoon, because I think it is such a good aircraft."

He added: "The decision is obviously disappointing, but it is about who the Indians have assessed as making the lowest bid and therefore asked to enter into further negotiations. They have not yet awarded the contract."

But the shadow defence secretary, Jim Murphy, said: " If he [Cameron] is serious about jobs and growth this will be a priority as it could have a real impact on the future of UK aerospace. Workers at BAE plants in Lancashire, Yorkshire and across the country will be worried and will want to see real leadership.

"The government appears unable to produce an industrial strategy for the UK defence industry. This is now more essential than ever."

The row over the Indian contract came on the same day the government published a defence procurement white paper which critics said would favour foreign companies over British ones, although the government denied there had ever been a "British first" policy.

Observers said the paper underlined the government's shift to buying "off-the-shelf" defence equipment rather than developing new technologies, as part of a bid by the Ministry of Defence to cut tens of millions from its budget.

"Off-the-shelf" is viewed by some as a euphemism for buying cheaper equipment that is already in use by other countries, although a spokeswoman for the MoD said the move did not preclude buying from British companies and that a proportion of the budget would be specifically earmarked for developing new technologies and systems.

Peter Luff, the minister for defence equipment and technology, said: "Given the defence black hole we inherited, my priority must be to get the best equipment to our armed forces at the best price for the taxpayer."

But the Unite union accused the MoD of a "stunning betrayal" of British manufacturing as it intended "to end giving UK companies priority over their foreign rivals when buying equipment and weapons for the armed forces".

Unite national officer Ian Waddell said: "This government should be using procurement to support British companies rather than using it against them."

Alison Seabeck, Labour's shadow minister for defence equipment, said: "This is a huge missed opportunity. The report is emblematic of the problems facing defence procurement – delayed, diminished in ambition, willing the ends but not the means."

"The government still appears unable to produce an industrial strategy for the UK defence industry. This is more concerning coming a day after the government looks set to lose out on a major contract which would boost British companies and support jobs.

"Industry needs certainty and delaying further their equipment plan can only undermine potential investment both into, and within the UK."