GKN wins 500m pounds order for tanks: Kuwait contract will secure 500 jobs

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GKN, the engineer, has won a pounds 500m order to supply Desert Warrior tanks to the government of Kuwait.

The contract will secure 500 jobs at GKN Defence, the company's subsidiary in Telford, Shropshire. The factory, hard hit by the worldwide slowdown in defence spending, should be safe for at least four years.

Kuwait is buying the tanks as part of its programme to rebuild its defence capability after the invasion by Iraq two years ago.

Malcolm Rifkind, the Secretary of State for Defence, said he hoped the GKN contract would be the first of a string of significant purchases by Kuwait.

GKN's Telford plant is currently meeting an order from the Ministry of Defence, but the scarcity of other work had placed a question mark over its future.

Exact details of the deal, particularly prices, remain to be hammered out between the Kuwaitis and GKN. But agreement in principle, brokered by the UK government, has been reached.

The Kuwait contract is likely to be more profitable for GKN than the order it is currently filling for the MoD. This is because the MoD helped with some of the development costs, and consequently claimed price relief.

But according to Sandy Morris, engineering analyst at the stockbroker Natwest Securities, GKN will not draw any benefit from the deal until the end of next year.

He has left his profit forecast for this year unchanged at pounds 115m and he still regards the shares - up 1p at 500p yesterday - as a sell.

He added: 'I am far more concerned about the environment among Continental car manufacturers than about export orders to Kuwait, nice though they are.'

The Desert Warrior tank, which saw action in the Gulf War, is one of a family of Warrior class tanks, specially modified for desert conditions. A close relative is being used by the British Army in Bosnia.