hms iron duke

hms iron duke

Friday, 21 September 2012

BAE Systems: A Deal Too Far

Alphen, Netherlands.  21 September.  Sixty-eight years ago just up the road from here the British 1st Airborne Division was fighting to the death at Arnhem Bridge – A Bridge Too Far.  Four days before British paratroopers had been dropped behind German lines to capture the bridge over the Rhine which would have opened the door to Germany.  Brilliantly conceived it was an operation that was tragically beyond the capability of the forces asked to carry it out and reflective more of Allied politics than sound strategy.  Much the same can be said of the proposed takeover of British defence contractor BAE Systems by the Franco-German giant EADS – flawed strategy at far too high a price.  

Since last week’s blog I have been digging and it is becoming ever clearer that the British Government is up to its neck in this decision.  Sadly, it is a decision that reveals yet again the complete inability of London to understand let alone craft sound strategy.  London simply does not understand that this takeover will leave the British having to reconcile a defence–strategy embedded in the American-led Anglosphere with a defence-industrial strategy firmly embedded in the coming Eurosphere.  It is at best irresponsibility and at worst strategic negligence that will see Britain and its armed forces paying far too high a price.

Yes, the British defence budget is clearly too small these days to support BAE Systems.  However, why hitch BAE Systems to a European defence market that has fallen some 30% since 2008 and is still falling.  If BAE Systems is looking for increased volumes it should project partner an Asian company where there is double-digit year-on-year defence investment growth.  Or, if it is seeking to be a technology leader it should tie-up with one of the big American contractors as the US is determined maintain its defence-technology lead.  All the British will get from this deal are low volumes and questionable technology at high cost.  All the proposed new company’s shareholders will get are low returns on investment if any at all.

EADS wants BAE Systems because of its reasonably successful American business, but even this strategy is flawed.  The US business exists partly because BAE Systems is seen as a British company.  The moment BAE Systems becomes EADS (in whatever guise the new company adopts) then Washington will downgrade the company’s access to sensitive US defence contracts and technology.

Furthermore, the impact on British technology, industry and of course jobs will be profound to say the least. This Franco-German dominated giant would close down any British facilities which compete with French and German production, no doubt after assurances to the contrary.  In future Britain’s warships, nuclear submarines and warplanes will be designed and built in France, with some metal-bashing sub-assembly plants left in Britain for the sake of political politesse. This is not a rebalancing of Britain’s defence economy this is the eradication of it.  

Having been taken over the board members of both BAE Systems and EADS would make a lot of money, which is clearly helping to drive this deal.  BAE Systems has long got used to hidden subsidies and gross over-payment at the British taxpayer's expense and may see a takeover by EADS as an opportunity to get a kind of European ‘bail out’.   

Sadly, this whole deal reveals yet again the two contending diseases at the heart of government in Britain – short-termism and the enemy within.  There is the sheer strategic incompetence of a government that simply does not understand the difference between value and cost and which now subjects everything (even the defence of the realm) to its endemic short-termism in an increasingly desperate effort to get re-elected.  Second, too many senior civil servants and their political fellow-travellers no longer believe that Britain should have a national interest.  Rather these soft power warriors seek an end to a strong British military because it leads to too many foreign adventures and gets in the way of their 'successful'(not) management of Britain’s decline.  

This is by and large the same Whitehall group that wants to ‘integrate’ Britain into Europe at almost any price – the surrender lobby.  Last Monday the so-called Future of Europe group of foreign ministers met and called not only for an integrated European foreign policy, but also a European Army, supported by an integrated European defence industry.  Coincidence?   

It is time the sovereign power in the land, Parliament, got a grip.  The BAE Systems takeover must be stopped.  Parliament must examine properly the defence-procurement fiasco that has led to this desperate, defence-destroying move, the murky motives and individuals behind it and once and for all hold to proper account an increasingly apathetic British Government.  What hope the 2015 Strategic Defence and Security Review?

BAE Systems; a deal too far.

Julian Lindley-French

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