David Cameron's efforts to sell a multi-billion pound contract for the United Arab Emirates to buy British-built fighter jets failed last night as the Gulf state pulled out of talks
The failure will be a bitter blow to thousands of workers at BAE Systems' plants near Preston, which were to build the front fusilage and other systems within the 60 Eurofighter Typhoon jets.
Mr Cameron had pressed the case for the deal at the Dubai Air Show just weeks ago in the hope that the Gulf State would pick Eurofighter to replace its old fleet of Mirage jets rather than France's Dassault Systems Rafale aircraft. However, there was no formal competitive bidding process and it is not clear whether UAE will now go with the French.
"The UAE have advised that they have elected not to proceed with these proposals at this time," a spokesperson for BAE said last night.
The UAE's decision is a major blow for both the company and the Prime Minister, who regularly cites Britain's excellence in defence industries when talking positively about the economy. Negotiations have been going on with the UAE for most of this year.
A spokesman for Number 10 Downing Street said: "This was a commercial decision. It was always going to be a difficult deal to do."
BAE and No 10 pointed out that the contract had not been built into its business plan, so it would not lead to any significant drop in profit forecasts. However, another massive Typhoon deal – a £5bn project to sell 72 aircraft to Saudi Arabia – will.
The Saudi agreement, which has seen 34 aircraft delivered so far, had built into it a deal in which Britain and Saudi would, mid-contract, agree by how much each plane would increase in price. This was because of the vast scale of work involved, which would take years to carry out from the date at which the price was first agreed, in 2005.
However, those negotiations, which were hoped to have been completed by the end of this year, have still not reached a conclusion, meaning it is still only getting paid the 2005 price for the jets.
The company said in October that a failure to reach an agreement before the new year would hit 2013 profits to the tune of 6p to 7p a share this year. Previous forecasts had been for 43p a share.
Had Eurofighter won the UAE contract, its partners in Spain and Italy would have built the wings while final assembly would have been carried out in Britain.
Overall, the UK would have carried out nearly 38 per cent of the work.Reuse content