Interest threat on BAe sweeteners

BRITISH AEROSPACE shares continued their downward spiral yesterday as it emerged that the European Commission may demand not only the repayment of the pounds 44.4m sweetener the company received to buy Rover, but also interest on the sum.

This could take BAe's repayment to the Government to more than pounds 60m, putting further pressure on the finances of the ailing defence, aircraft, property and cars group.

The EC's 17-strong Commission had been expected to issue a fresh order for repayment of the pounds 44.4m this Friday, following a report into the affair by Sir Leon Brittan, the competition commissioner.

But EC sources said yesterday that a decision had been postponed until September at the earliest, so that Sir Leon's officials could examine whether BAe should also pay interest on what Brussels regards as illegal state aid.

The disclosure that the EC was poised to issue a fresh demand for repayment of the sweeteners prompted an 11p fall in BAe shares to a close of 179p.

BAe's controversial pounds 150m purchase of Rover in 1988 was accompanied by a pounds 547m injection of state aid from the Government. It subsequently emerged that BAe had received an additional pounds 44.4m in sweeteners that had not been approved by the EC.

The Commission has already ordered the Government to recoup the pounds 44.4m, but BAe successfully appealed to the European Court of Justice, which ruled in the company's favour in February on a legal technicality.

Sir Leon immediately reopened his investigation. BAe is entitled to appeal against any fresh order for repayment, but should it lose, then the time taken on court proceedings could be taken into account in deciding the interest.