British tank industry on the wrong track?

If the Scout deal goes to a US firm it will kill the British tank industry, and shine a spotlight on the UK's open defence policy. Sarah Arnott reports

BAE Systems yesterday launched a last-ditch attempt to win the £2bn deal tank deal which the Ministry of Defence (MoD) is poised to give to US rival General Dynamics.

Taken in isolation, the decision on the 600-vehicle first phase of the multibillion-pound "Future Rapid Effects System" (FRES) programme simply proves the unrivalled openness of the UK defence market. But, coming just a week after Europe's EADS pulled out of the bidding for a $35bn (£23bn) US defence contract claiming that the terms of the deal "clearly favour" Chicago-based Boeing, the decision is reigniting the debate about the long-term impact of Britain's "level playing field".

BAE Systems has spent £50m over five years developing its CV90 vehicle to compete for the 600-vehicle FRES "scout" contract. But the Government is reportedly about to hand the deal to General Dynamics' Spanish and Austrian-built Ascot. In desperation, BAE is playing the jobs card – offering to bring elements of the programme that were to be done in Sweden back to its Newcastle factory, creating 400 new jobs and reversing redundancy plans for 400 others in the process. If the deal goes to General Dynamics, it will be the death knell for Britain's century-old tank-building industry, the company is warning.

It is probably too late for BAE. Insiders claim that the decision has already been through the MoD's full evaluation procedure and that considerations about jobs do not carry so much weight in current cash-strapped times.

Leaving aside the furore over the specifics of the deal – critics' claims that the General Dynamics vehicle is as much as three years' behind BAE's in development terms, for example – the broader concern is that the same kind of open competition is in scant supply elsewhere.

None of the big European markets is as open as the UK. But the most protectionist of all is the US, which is both the biggest market and the home of the most dominant industry. Last week, EADS announced its withdrawal from the bidding for the US Pentagon's KC-X in-flight refuelling tanker programme over concerns that the competition was weighted heavily in favour of the Boeing aircraft. The decision prompted a string of condemnations across Europe. Lord Mandelson, the Business Secretary, said he was "extremely disappointed" at the situation – sentiments echoed by the French Finance Minister and the EU trade commissioner.

Worse still, the refuelling tanker is not a one-off. The competitions for combat search and rescue helicopters, and the Marine One choppers for flying the US President, both raised questions about European technology included in the bidding.

"It is not a level playing field, it is one where the US side tips 90 degrees and in the UK it slopes the other way and is open to everybody," Howard Wheeldon, at BGC Partners, said. "The US is operating a fully protectionist policy – EADS pulled out because it knew it didn't have a chance."

The implicit protectionism in the US defence industry is not only a question of awarding the contracts. It also extends to US companies' activities abroad. Washington's International Traffic and Arms Regulations (ITAR) are designed to keep US technology out of the hands of its enemies. But in practice the onerous restrictions on, for example, sharing of software coding, have major implications for support, upgrades and competition from other suppliers.

The US market is by no means closed to non-US suppliers. But those that do business there find the terms skewed in favour of the US, unlike the equivalent in the UK. "Winning contracts in the US is either because you have something that they don't or because you site a lot of the work there," one company said. "But then the intellectual property rights remain in the US and you can't export without permission."

Against such a background, critics are increasingly sceptical about Britain's much-vaunted open competition policy. And with the all-important Strategic Defence Review due to start soon after this summer's general election, and the Government's parlous financial position already weighing on expectations for future budgets, the industry is increasingly concerned that bids will be judged on headline price alone. There is a real danger to both Britain's industrial capability and its independence. "This is potentially hugely, hugely damaging," Mr Wheeldon said. "We destroy the defence industrial base in the UK at our peril because once it is gone we can't rebuild it and, as a country, we will then be reliant on the US and others."

The concerns are particularly pointed in the light of Lord Mandelson's trumpeted strategy to rebalance the economy with "less financial engineering and a lot more real engineering". The last 12 months have seen a renewed focus on Britain's manufacturers, backed up by a £950m strategic investment fund. It has born fruit, with a string of recent investments in the nascent off-shore wind sector, for example. But such advances mean little if existing industries lose out elsewhere.

"Talk is good, but actions speak louder – and the question with the tank contract is how is the Government in making sure this is sustainable?" Graeme Allinson, head of manufacturing at Barclays, said. "What we need is not just a long-term understanding from the strategic defence perspective but also from the manufacturing perspective."

A century of British tank building: Running into the sand?

If the contract for the next-generation armoured "scout" vehicles goes to General Dynamics rather than BAE Systems, it will be the end of nearly a century of British tank-building.

Tanks were invented in the First World War by Lieutenant Walter Wilson (pictured right) and the Mark 1 – from a prototype dubbed "Mother" – first went into battle at the Somme in 1916. The development was a desperate bid to smash the stalemate of trench warfare, and the so-called "landships" became known as "tanks" because the top-secret designs were disguised as water tanks to outwit spies.

The main battle tank on which the modern British Army relies is the Challenger 2. It was built by Vickers, which was subsequently bought by BAE Systems, at factories in Barnbow in Leeds and Elswick in Tyne and Wear.

But after more than nine decades, the industry now hangs by a thread. The last Challenger was built in 2002. The Leeds factory is already closed. And the Newcastle plant does little manufacturing. It is engaged in building the lightweight Terrier, but the programme concludes in 2014. Otherwise it is used for upgrade and maintenance. The skills to make tanks do still exist in the UK, but not for much longer if the FRES contract is lost, warns BAE.

Sport
Raheem Sterling and Luis Suarez celebrate during Liverpool's game with Norwich
football Another hurdle is out of the way for Brendan Rodgers' side
Life & Style
The writer, Gerda Saunders, with her mother, who also suffered with dementia before her death
healthGerda Saunders on the most formidable effect of her dementia
Sport
Manchester United manager David Moyes looks on during his side's defeat to Everton
footballBaines and Mirallas score against United as Everton keep alive hopes of a top-four finish
News
With its new studios in Paris, Dailymotion has reinforced its position as Europe’s most-visited website
mediaEuropean rival Dailymotion certainly thinks so
VIDEO
Arts & Entertainment
The original design with Charles' face clearly visible, which is on display around the capital
arts + ents The ad shows Prince Charles attired for his coronation in a crown and fur mantle with his mouth covered by a criss-cross of white duct tape
Arts & Entertainment
‘Self-Portrait Worshipping Christ’ (c943-57) by St Dunstan
books How British artists perfected the art of the self-portrait
Sport
Luis Suarez celebrates after scoring in Liverpool's 3-2 win over Norwich
Football Vine shows Suarez writhing in pain before launching counter attack
News
People White House officials refuse to make comment on 275,000 signatures that want Justin Bieber's US visa revoked
News
Sir Cliff Richard is to release his hundredth album at age 72
PEOPLE
Sport
Lukas Podolski celebrates one of his two goals in Arsenal's win over Hull
football
Arts & Entertainment
Quentin Tarantino, director
film
News
The speeding train nearly hit this US politican during a lecture on rail safety
news As the saying goes, you have to practice what you preach
Sport
Mercedes Formula One driver Lewis Hamilton of Britain (front) drives ahead of Red Bull Formula One driver Daniel Ricciardo of Australia during the Chinese F1 Grand Prix at the Shanghai International circuit
sport
Arts & Entertainment
Billie Jean King, who won the women’s Wimbledon title in 1967, when the first colour pictures were broadcast
tv
News
Snow has no plans to step back or reduce his workload
mediaIt's 25 years since Jon Snow first presented Channel 4 News, and his drive shows no sign of diminishing
Life & Style
food + drinkWhat’s not to like?
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Telesales & Sales Support Apprentice

£221.25 per week: QA Apprenticeships: This company is a well established Inter...

Client Relationship Manager - SQL, Python

£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

**Financial Services Tax**

£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

Day In a Page

How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

How I brokered a peace deal with Robert Mugabe

Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

British Muslims's Happy video attacked as 'sinful'

The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

Michael Williams: Do as I do, not as I pray

Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

A History of the First World War in 100 moments

A visit to the Front Line by the Prime Minister's wife
Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

Jenny Collier: 'Sexism on stand-up circuit should be extinct'

The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

Cannes Film Festival

Ken Loach and Mike Leigh to fight it out for the Palme d'Or
The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

The concept album makes surprise top ten return

Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

Lichen is surprise new ingredient on fine-dining menus

Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
10 best baking books

10 best baking books

Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
Jury still out on Manchester City boss Manuel Pellegrini

Jury still out on Pellegrini

Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
Ben Stokes: 'Punching lockers isn't way forward'

Ben Stokes: 'Punching lockers isn't way forward'

The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
Mark Johnston: First £1 million jackpot spurs him on

Mark Johnston: First £1 million jackpot spurs him on

The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit