A planned multi-billion pound merger between two major military contractors has raised questions about how key government projects such as the Trident nuclear weapons programme would be managed.
The Ministry of Defence is said to be demanding safeguards over the Trident programme as a condition of the planned merger between BAE Systems, which is currently designing the 'Successor' Trident replacement submarine, and European aerospace corporation EADS.
BAE Systems plc and EADS NV have announced that they are in advanced talks to create an industry giant that would overtake American rivals Boeing and Lockheed Martin in sales and be better placed to reduce costs to contend with shrinking global defence spending. BAE Systems is involved not only in construction of the Successor and Astute class submarines for the UK Ministry of Defence, but also the Queen Elizabeth aircraft carrier and F-35 Joint Strike Fighter programmes, while the EADS group develops civil and military aircraft, including the Airbus family, communications systems, missiles, satellites and space rockets. The two companies have a history of collaboration and are partners in a number of projects, including the Eurofighter consortium and the European MBDA missile joint venture.
According to the Press Association the British government has drawn up a list of "red line" issues covering national security concerns over the proposed deal, which would ensure that the Trident replacement programme will continue as planned and limit the risk of transfer of sensitive technologies.
Potential security risks associated with the deal are likely to be a concern not only to the British government, but also to the French, German, and Spanish governments, which are shareholders in EADS. EADS contributes to the French nuclear weapons programme and France shares similar concerns to the British about the possible transfer of nuclear secrets. Similarly, the US government is expected to have concerns about the risk of sensitive American technologies being transferred to Europe through BAE Systems' projects in the USA and collaboration with the British nuclear programme which takes place under the terms of the US-UK Mutual Defense Agreement.
The Ministry of Defence wishes to ensure not only that its nuclear secrets remain confidential, but that construction of nuclear powered submarines remains a sovereign national capability for the UK and that jobs will not be lost at the Barrow-in-Furness shipyard where the UK's submarines are built.
The Ministry of Defence currently has a 'golden share' in BAE Systems which gives it a controlling stake over corporate decisions, and France, Spain, and Germany hold shares in EADS which allow them to defend their national interests. The two companies propose issuing special shares in BAE and EADS to each of the governments to replace the existing share held by the British government in BAE and the shareholdings in EADS.
The proposed deal would give BAE shareholders 40% and EADS investors 60% of a combined group with a dual stock listing, where BAE and EADS would be preserved as separate structures and a new umbrella group would be created to manage the corporation. The group's military interests would be based in the UK under the BAE Systems flag.
The merger would create the world's biggest aerospace company with a market value of more than £30 billion, combined sales of about £60 billion, and 220,000 staff