Warships to get nod from MoD at last

By Russell Hotten

A long-awaited £3.9bn contract for two new Royal Navy aircraft carriers is due to be announced this week in a move that paves the way for BAE Systems and VT Group to merge their shipbuilding operations.

Whitehall officials and the consortium that will build the 65,000-tonne vessels were said to be finalising terms this weekend ahead of a probable announcement on Tuesday.

Hopes that the contract, almost two years behind schedule, was nearing completion were raised last week when VT's chief executive Paul Lester said that a deal might be concluded soon.

The shipbuilding industry estimates that the contract for the HMS Queen Elizabeth and HMS Prince of Wales will safeguard 10,000 jobs and create more than 1,000. Babcock, which owns Devonport and Rosyth dockyards, and Thales, the French defence electronics company, are involved in the design and construction of the vessels.

Once the MoD announces the contract, BAE and VT will put shipyards at Govan and Scotstoun, in Scotland, and in Portsmouth, on England's south coast, into a joint venture called BVT. BAE will hold 55 per cent of the merged venture, with VT the rest. They run a 50-50 joint venture, Flagship Training, which will revert to VT's control.

Following almost two years of wrangling over the two warships, the deal got embroiled in defence budget reviews ordered by the Treasury.

According to one analyst, BAE and VT had recently "put the armlock on the MoD" that unless it placed the order soon, the terms of the companies' proposed joint venture would unravel.

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