Comment: Politics plays its hand in dogfight over defence deal

By TERRY MURDEN
Published on 07/10/2012 00:00

IF DAVID Cameron really wants to show that he will stand up for British interests in Europe then the proposed merger between BAE Systems and EADS presents him with the perfect opportunity.

The governments of Britain, France and Germany are jostling for position over their respective levels of influence in what would be the world’s biggest aerospace and defence group and there is a risk of Britain being nudged to the sidelines.

France already owns 15 per cent of EADS which would be diluted to nine per cent in a merger, but could potentially increase should it buy the 7.5 per cent owned by French group Lagardere. The Germans are worried by this and are hinting at acquiring Daimler’s 22.5 per cent in EADS.

With Britain having no stake in BAE it would see one of the country’s key industries slip into French-German hands and raise concerns for the future of the whole UK supply chain.

Alistair Darling, the former chancellor, is among those now demanding Britain insists on a stake in any merged group to protect British interests, or that there are no state holdings. Cameron has given his conditional backing to the tie-up but with 45 Conservative MPs calling for the merger to be vetoed it looks like this issue will spill over into the party conference this week.

A deadline for agreeing a deal has been set for Tuesday but against such political infighting an extension looks to be on the cards.

Big ticket items are off the rails

THE fiasco over the west coast main rail line is forcing a re-think over the whole franchising system. It is also threatening the future of that other big rail project: HS2.

This is the one that will either bring Britain into the high-speed rail league and transform the economic prospects of the regions, or will end up as one of the costliest white elephants yet.

I’m leaning towards the latter. I simply see no need for it. It now seems that there is a growing view in Whitehall that the £32.7 billion (surely soon to be much higher) initiative will hit the buffers. The government’s Major Projects Authority classifies it as amber/red, which is said to be Whitehall code for “in doubt”.

The scrapping of the west coast tender on the grounds that the number-crunchers in the Department for Transport got their sums wrong has raised concerns over its financial modelling and whether the building costs and supposed benefits of HS2 can be relied upon.

No saving Hall’s bacon

FINANCE Secretary John Swinney is promising to keep battling to save Hall’s of Broxburn, due to close in February. With few interested parties emerging and parent group Vion stating it has run out of alternatives, it looks like a forlorn hope.

This will be a big blow to the area, the worst in job terms since Motorola closed its Bathgate plant a decade ago with the loss of 3,000 jobs. One difference this time is that many of the workers are from eastern Europe and they will move on, perhaps to England, or return home.

The problem lies in the inefficient plant itself. Even with the offer of taxpayers’ support, Vion has been unable to find a viable option that would allow it to compete. A buyer could yet be found to maintain a scaled down operation, but it would require a leap of faith in an industry suffering from overcapacity.

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