James Ashton: BAE Systems deal may be good for the company, but will it also benefit Britain?

  • @mrjamesashton

Just as Britain's manufacturing renaissance is taking off, our most strategically important company is falling into the arms of a European rival.

A day after Vince Cable laid out an industrial strategy for the nation, I'd love to see the Business Secretary pick a winner out of this.

Some people get squeamish that our largest manufacturing company is in the defence industry, but BAE Systems is a huge employer of engineers and apprentices, mainly in the regions outside the prosperous South-east, and it is also one of the country's largest exporters.

What hope for it subsumed into a pan-European concern that is often kicked around like a political football between France, Germany and Spain?

In truth, BAE has been fretting over its future for a while.

Should it hive off its American arm, which through acquisitions has become one of the largest foreign suppliers to the Pentagon? Or should it spin off its slow-growing shipbuilding operations, which have a proud past but only choppy seas ahead of them?

BAE's chief executive, Ian King, has a strained relationship with his shareholders, some of whom think he shouldn't be trying to cut his way to glory.

His is a business that is changing fast. Building warships and fighter jets has given way to hi-tech cyber security, but state budget cuts on the former have not been made up with expenditure on the latter.

The rationale to marry the deep pockets of EADS with BAE's passport to America could help to create a bigger, better business. To get that far it must win the approval of numerous governments, not least the United States, which will account for almost a quarter of group sales. It's not clear that the White House will be happy to buy its defence kit from a firm part-owned by the French government.

In addition, the new company would surely be headquartered in Toulouse or Paris and led by Tom Enders, the EADS chief.

A base in Britain would lead the defence and security businesses, and because the Government might insist on a Brit in charge, Mr King could remain.

So can what is good for the company be good for the country as well? We shall see.