Defence firms land £4bn MoD ship deal

When times are tough, you can't beat a good public sector contract. Particularly one worth £4bn...

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Last Updated: 03 Oct 2011

The Ministry of Defence has finally given the go-ahead for the construction of two massive new aircraft carriers, to be built by a consortium led by BAE Systems and VT Group. After nearly two years of umming and aahing, the Government has finally agreed to stump up about £4bn for the two ships – which means a big guaranteed pay-day for the consortium partners.

It’s clearly a huge deal for the defence industry, given that it’s compelled some of the biggest players to lay down their weapons and work together. The idea is that BAE and VT will put all their shipbuilding operations into a joint venture (of which they’ll own 55% and 45% respectively), while infrastructure company Babcock and electronics business Thales will also be involved in the design and construction. Just shows what people will do for £4bn…

But while the government is probably the most reliable client you can have during an economic slowdown (after all, you’d rather hope it wouldn’t go bust), the problem tends to be getting it to actually give the green light. This particular project has been caught up in budget wrangles since 2006, with the government well aware that heavy defence spending isn’t particularly popular at the moment.

Still, at least shipbuilders will be happy. This project – and the further £10bn the government plans to invest in the next 10-15 years – is also likely to guarantee the jobs of about 10,000 for the foreseeable future. Given its steady decline in the UK in the last 30 years, it seems slightly ironic that this, of all things, has suddenly become one of the country’s safest occupations...

At 65,000 tonnes, HMS Queen Elizabeth and HMS Prince of Wales (to be built at Portsmouth, Barrow-in-Furness, Glasgow and Rosyth apparently) will be the biggest warships ever built in the UK, able to carry about 40 aircraft. First Sea Lord Admiral Sir Jonathon Band reckons they will ‘transform the UK's defence capabilities’ when they enter service in 2014 and 2016 - although that may be because our current fleet will be so knackered and obsolete by the time they are finally ready that almost anything will be an improvement.

And of course, that’s assuming the consortium can actually deliver the goods. We just have to hope that our big shipbuilding projects run a bit more smoothly than our big construction projects – after all, you wouldn’t want our national security depending on the people who brought us Wembley and the Millennium Dome...

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