BAE plays nationality card in MoD bid

BAE Systems warned yesterday that it would be presented with "real problems" if the Ministry of Defence awards a £10bn aircraft carrier contract to a rival French-led consortium.

The company estimated that 8,000 UK jobs and potential export orders worth £12bn depended on BAE winning the order for the two giant new carriers.

The 290-metre long vessels will be twice the size of the Royal Navy's current fleet of Invincible class carriers and will be the spearhead of any future UK expeditionary force.

They will be equipped with up to 48 F-35 Joint Strike Fighters, six Merlin anti-submarine helicopters, four maritime surveillance aircraft and 800 tonnes of ammunition.

Chris Geoghegan, BAE's chief operating officer, said that if the rival consortium led by the French defence group Thales was selected as prime contractor, it would undermine a key part of the UK's defence technology capability.

"There is no doubt that if BAE Systems is not the prime contractor, then it will give us some real problems," he added. Mr Geoghegan said that if France were awarding a similar contract there would be no question of it going to anything other than a French company. It was "incredulous" that BAE was even having to make the case for the contract staying in the UK.

The MoD's defence procurement agency is expected to announce the winner of the contest next February. The construction contract is worth £2.9bn and in-service support a further £7bn. Construction will begin in 2004 and the first carrier will enter service in 2012.

BAE's decision to play the nationality card makes the carrier contract one of the most bitterly fought procurement battles in recent years.

Both bidders have pledged that the two vessels will be built entirely in UK yards. Thales has also indicated that if it does not win a major defence procurement contract soon then it will be forced to review its presence in the UK, where it employs 12,000 staff.

Some observers believe that France may yet decide to build a new carrier itself and then seek to persuade the UK government to turn the entire programme into an Anglo-French joint venture with BAE and Thales participating as equal partners. But Mr Geoghegan dismissed this idea, saying there could still only be one prime contractor.