BAE secures £3bn ammunition contract

(PA)

Arms giant BAE Systems has signed a 15-year deal with the Ministry of Defence (MoD) to supply ammunition to British troops, it was announced today.

Defence officials said the contract, worth up to £3 billion, will ensure frontline forces have a secure supply of bullets.

The long-term agreement will also allow BAE to carry out much-needed modernisation work on munitions factories in the UK, some of which are relying on machinery dating back to the Second World War.

The announcement will safeguard 1,700 jobs at the firm's plants in Birtley, County Durham, Glascoed, South Wales, and Radway Green in Crewe.

A £120 million investment programme at the three sites will improve efficiency and make the facilities safer.

Under the arrangement, the firm will supply around 80% of the ammunition used by the military for operations and training, from 5.56mm bullets for the SA80 rifle to mortar rounds and artillery shells.

Armed Forces minister Bob Ainsworth said: "Today's partnering agreement secures the long-term supply of ammunitions to our Armed Forces.

"The 15-year programme will ensure that the UK has a modernised, sustainable munitions industry which will support British jobs and protect our capacity to produce ammunition.

"It is absolutely essential to the conduct of operations and training that we have a guaranteed UK-based high quality source of ammunition.

"This contract provides precisely that."

Senior MoD official Peter Northern said the Munition Acquisition Supply Solutions (Mass) agreement would help cope with the increased demand for ammunition as a result of operations in Iraq and Afghanistan.

He said it was "crucial" to award the contract to a UK company to protect against worldwide shortages in ammunition manufacturing capacity.

Colonel David Collins paid tribute to staff at the three plants for the way they had responded to the increased level of operations and training.

He said the factory in Crewe last year produced up to a million rifle and machine gun rounds a day, which was "quite a significant achievement".

Charlie Blakemore, managing director of BAE Systems Land Systems Munitions, said some of the machinery at the factories dated from the Second World War.

"You can imagine that the rate of production that we are now at, it's been some achievement to keep that going in that period to make sure that we deliver on time."

BAE hopes the modernisation programme will give the UK a "world-class" production capability, which could lead to export opportunities.

The deal comes just weeks after BAE's links with the Government were criticised following the Serious Fraud Office's (SFO) decision to drop its probe into the firm's multi-billion arms deal with Saudi Arabia.

The House of Lords ruled last month that then SFO Director Robert Wardle had acted lawfully to halt the investigation into corruption allegations in late 2006 in the face of Saudi threats to withdraw co-operation on anti-terrorism.

At an earlier hearing in the High Court, Lord Justice Moses and Mr Justice Sullivan said the SFO and the Government made an "abject surrender" to "blatant threats".

Campaign Against Arms Trade spokesman Symon Hill said people were "outraged and far more aware of BAE's influence among Government" as a result of the case.