"Ressession - what ressession??", says Arms Trade

south west | peace | news report Thursday May 14, 2009 14:00 by Arms Trade Watch South West

Britain is expected to decide on Thursday that it remains committed to the Eurofighter defence contract, though it wants to trim some costs related to the multi-billion dollar programme, government sources say.

Talks involving Business Secretary Peter Mandelson and officials from the Ministry of Defence, the Treasury and the prime minister's office have concluded that cancelling the contract would have too much of an impact on jobs and Britain's reputation, as well as incurring fines of up to $1.5 billion (992.5 million pounds).

The MoD said that at peak production, the Typhoon programme will help sustain 5,000 jobs atBAE Systems, 4,000 throughout aero-engine maker Rolls Royce and its supply chain and up to 16,000 in total in the UK aerospace industry.

A EADS Eurofighter Typhoon takes off

The cost of getting out, not just financially but in terms of reputation and the economy -- up to 40,000 Britons are directly or indirectly employed by Eurofighter and related aerospace contracts -- made it very likely that the government would reiterate its commitment.

However, they said that the final decision would be made by Prime Minister Gordon Brown, a former finance minister who is not regarded as supportive of massive defence spending.

One source said Britain's Attorney General, the chief government law officer, had advised the UK could be sued for damages if it pulled out. A spokeswoman declined to comment.

Britain has delayed for months over what to do with Eurofighter, concerned that the high cost of the programme, conceived nearly 25 years ago, was becoming unaffordable at a time of economic crisis and budget constraint.

Under the original deal for the aircraft -- being built by BAE Systems, Italy's Finmeccanica and EADS for Germany and Spain -- Britain was obliged to buy 232 planes.

The majority are already in service, but the third tranche, which involves a further 88 aircraft for Britain and others for Spain, Germany and Italy, has yet to go into production.

That tranche has already been split into two parts, so that Britain is now obliged to pay for and take delivery of 40 aircraft, with the remainder set aside for future production.

Britain has weighed various methods of reducing its costs, including selling some of its allotment on to other countries or altering the finance schedules. Tinkering with the numbers may reduce the total cost by a small degree, but ultimately defence experts expect Britain to go ahead with the contract.

"We have a commitment to our partners, cancellation is costly, and tranche three is the one that the airforce really wants," said Keith Hartley, a defence economist.

"Eurofighter is central to Britain's aerospace industry. The costs may be high, but it's something Britain has a strength in and needs to stay committed to."

Defence sources last month that Britain had won agreement to take just 16 new aircraft out of its allotment, by allocating the other 24 to a recent export deal with Saudi Arabia. But it came under pressure from European partners after refusing to sign up to the agreement until it had reviewed the costs.

A third batch of Eurofighter Typhoon aircraft are to be bought for the RAF, the Government has confirmed.

The Government will buy a new fleet of Eurofighter Typhoons for the RAF

Announcing the decision, Prime Minister Gordon Brown said it would strengthen Britain's defence capability.

And he said it would "create new jobs in advanced manufacturing that Britain needs to emerge stronger and fitter from this global downturn".

Defence Secretary John Hutton said: "We look forward to receiving an affordable bid from European industry that will allow us to proceed with a programme that will deliver advanced multi-role aircraft to the Royal Air Force.

"Subject to the satisfactory outcome of these negotiations, I hope that we will be in a position to sign a contract later this year."

John Hutton

The Ministry of Defence said a contract for the new jets would be signed once negotiations involving the manufacturers and the Eurofighter programme's partner nations - the UK, Germany, Italy and Spain - had concluded.

The number and cost of the aircraft are still to be determined as part of these negotiations.

The MoD said that at peak production, the Typhoon programme will help sustain 5,000 jobs atBAE Systems, 4,000 throughout aero-engine maker Rolls Royce and its supply chain and up to 16,000 in total in the UK aerospace industry.

The announcement will quell concerns that the order for a third batch of the controversial jets might be cancelled.

The other partner nations would have expected to be compensated for extra costs
if Britain withdrew from the third production run.

The Eurofighter, seen as a replacement for the Tornado, has been dogged by delays and cost over-runs.

Critics claim it was conceived during the Cold War as a counter to the latest Russian fighters and is no longer a military priority.