BAE blasts Hoon over 'daft' claim that defence giant is not a British company

Relations between BAE Systems, the country's biggest defence contractor, and the Ministry of Defence sank to a new low yesterday after the Defence Secretary, Geoff Hoon, asserted that the company was "no longer British".

Mr Hoon's remark, made at what the Ministry of Defence described as a routine briefing for US correspondents, has provoked a furious backlash and raised fresh doubts over whether the Government will award BAE a £10bn aircraft carrier contract.

Asked whether BAE would have a political advantage over its French competitor Thales when it came to awarding the contract, Mr Hoon replied: "If you look at the share ownership of BAE Systems you'll find that on your terms, it's no longer a British company. The majority of shares are no longer owned in the UK."

Coming on top of the furious row between BAE and the MoD over delays and cost overruns on the Nimrod surveillance aircraft and Astute submarine programmes, Mr Hoon's comments sparked an angry response.

Last night, a BAE spokesman said of Mr Hoon: "This seems to us to be pretty daft stuff. It doesn't make us worry about the carrier contract but it does demonstrate to a lot of people the problems we are up against with the MoD. It underlines the way we were treated over Nimrod and Astute which wiped billions off our share value. We greet Mr Hoon's comments more with sadness than anything."

Bernard Jenkin, the Conservatives' defence spokesman, weighed into the row saying: "BAE Systems is a British company and Geoff Hoon sounds as if he is trying to cover his back. Whichever company wins this contract, we must not lose proprietary technology and British jobs as a result."

Defence analysts said that Mr Hoon's comments appeared to be part of the softening up process in advance of awarding the carrier contract to the French. However, BAE sources said that if this was the case, then Mr Hoon's tactics were in danger of backfiring on him.

One industry source said that Mr Hoon's comments about BAE's lack of Britishness reflected the tone he had taken in private discussions with the company. The source said: "He has this classic attitude that BAE is just another company on the make. He doesn't regard it as a national asset, which is disappointing. Can you imagine a French or German or American defence minister saying this sort of thing? It is unthinkable."

An MoD spokesman said that Mr Hoon had merely been reiterating what the Government's position was on the issue of UK ownership of defence contractors. However, his comments, directly linking BAE's nationality to the ownership of its shares, appear to contradict directly a defence industrial policy paper published by the MoD last year.

That said: "One result of the defence industry's internationalisation has been to blur the definition of what comprises the UK defence industry. The UK defence industry should therefore be defined in terms of where the technology is created, where the skills and the intellectual property reside, where jobs are created and sustained and where the investment is made."

BAE said that on the MoD's own criteria, it could not be more British. The Government's golden share in the company stipulates that the chairman, chief executive and majority of the board must be British, more than 50 per cent of its sales and its workforce are British, it is headquartered in the UK and its biggest single customer by far is the MoD.

Seven reasons why Hoon is wrong

* The Government's golden share stipulates that BAE's chairman, chief executive and a majority of its board must be British

* The golden share also limits individual foreign shareholdings to a maximum of 15 per cent

* BAE employs 50,000 people in Britain – more than half its total workforce – and is the UK partner in the Airbus jet programme

* BAE is headquartered in the UK, is listed here and £6.3bn of its sales originate from Britain

* The MoD is BAE's biggest customer, with £2.3bn of sales

* BAE dates back to 1910, when it founded the world's first aeronautics company, AV Roe

* It is the UK's biggest employer of engineering graduates