BAE defenceless over job cuts

BAE Systems is shedding nearly 3,000 jobs in the UK, on the back of defence cuts and less-than-thunderous Eurofighter sales. When you put all your eggs in one basket, they're easily shot down...

by Dave Waller
Last Updated: 23 Mar 2012
The cuts will mainly affect sites in BAE’s military aircraft wing: Warton and Samlesbury, both in Lancashire, will lose 822 posts and 565 posts respectively, while some 900 will go from Brough in East Yorkshire, a historic site that’s had new planes chugging out of its hangars since 1914. A further 655 jobs will also be lost at smaller sites, taking the total to 2,942.

If the Government wants to duck the flak over these figures, it’ll have to perform some eye-catching manoeuvres. The PM has made a big play of the need to build on our legacy of high-end manufacturing, and it’s no secret that defence is massively valuable to our economy (even if it basically involves making stuff that kills people). It’s certainly valuable to areas like Brough and Warton – former manufacturing centres that cry out for key employers with BAE’s scope.

But there are a couple of factors at play here which even the Eurofighter would struggle to outgun. One is that the Government’s shaving 10% off its defence budget. The other is that everyone else is doing the same. BAE Systems owns 33% of the Eurofighter joint venture company, making parts including much of the fuselage and the tail fins. The program employs 3,000 staff, mainly at Samlesbury and Warton, but with other countries slashing their budgets too, there’s a gap emerging between the amount it’s producing and the number being ordered.

While existing orders are slowing, BAE is still hoping to win new contracts to supply the likes of Malaysia, India, Oman, Saudi Arabia and Japan. Which puts it into a bit of a pickle: it can’t afford to lose too many skilled staff, as it could easily find itself out of the all-important high-added-value manufacturing game should things pick up again. And then we’d really be in the stink.

Of course, things could still get worse. The defence industry accounts for 300,000 jobs here, and with the Government cutting 10% budget it could in theory put an end to 30,000 posts. BAE’s predicament reveals starkly the problem of sticking all your eggs in one basket. Over the years the defence behemoth has swallowed up the nation’s other significant aerospace outfits, from Hawker Siddeley to Blackburn. So when it suddenly finds itself jettisoning jobs, it has a massive effect, resulting in flak over where poor defence budgets leave not only our frontline forces, but the wider UK economy too.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today