QinetiQ loses £14bn contract as Government makes first cuts

A taste of things to come, as one private firm loses out big-time in the Strategic Defence Review...

by Emma Haslett
Last Updated: 06 Nov 2012
So where's the Government axe going to fall this week? Well, as a sort of precursor to the main event on Wednesday, Tuesday saw the release of the Strategic Defence Review - and it contained some painful news for the private sector. One of the biggest casualties (apart from the Harrier jump jet, which is being retired) is a £14bn academy in Wales that would have combined training for the army, navy and air force in one location. The St Athan facility was run by Metrix, a joint venture between UK-based defence consultancy QinetiQ and facilities management giant Sodexo. Now QinetiQ says it’s going to have to write off £37m it’s already spent on the project. Ouch.

According to defence secretary Liam Fox, who issued a statement to MPs about the project earlier today, the St Athan facility has been dogged by delays and, for what was on offer, was far too expensive (£14bn does sound a lot of cash - though it's kind of useful to have well-trained armed forces, we'd argue). Fox said Metrix has failed to deliver ‘an affordable, commercially robust proposal within the prescribed period’ – which is basically another way of saying it’s been far more trouble than it’s worth.

QinetiQ had already been subject to much speculation over how it would fare in the SDR. As defence companies go, it’s practically a small business (compare its teeny £1.6bn revenue last year to BAE Systems’ £22.4bn), and has a fairly narrow remit compared to its competitors. Partly because its size makes it vulnerable, the company has apparently become a target for short-sellers in the last couple of days, as investors betted that it was likely to fall victim to the cuts.

QinetiQ hasn't been the only victim of the SDR, of course: now David Cameron has confirmed he’s going to cut the defence budget by 8% over the next four years, the MOD is set to lose 25,000 civilian jobs over the next five years, while 5,000 RAF personnel, 5,000 Navy personnel and 7,000 army personnel will all lose their jobs as well. But it acts a reminder that it won't just be state employees who feel the pinch from this week's cuts.

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