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Government tsar ruled out of the running for top job at BAE

Sir Peter Gershon, the civil servant heading the push to improve government efficiency, has been ruled out of the race to become the next chairman of BAE Systems.

The head of the Office of Government Commerce was viewed by the City as a leading candidate after National Grid Transco chairman Sir John Parker pulled out of the running. But a well-placed source said Sir Peter had, in effect, been ruled out because BAE is searching for someone with many years' experience running a large corporation. Before moving to Whitehall, Sir Peter headed GEC's defence business, now part of BAE.

With headhunters Spencer Stuart, BAE is understood to have narrowed its search down to two or three candidates to replace current chairman Sir Richard Evans. Sir David Lees, the outgoing chairman of defence and engineering group GKN, and John Gardiner, who retires from Tesco in the spring, have been named as possible contenders. The new chairman will take over at BAE's AGM on 5 May.

Sir John Parker ruled himself out of the contest last month after pressure from shareholders. They were worried that his appointment would flout the new Higgs corporate governance code, which recommends that executives don't chair more than one FTSE 100 company.