BAE faces bribery inquisition

BAE Systems was today facing tough questioning from shareholders after allegations of a Ministry of Defence investigation into a £60m slush fund and reports of a stand-off with the Government over the profits it should be allowed from military orders.

Investors at today's annual general meeting were expected to quiz chief executive Mike Turner and his board about their increasingly fractious relationship with the Government.

Few doubt that there are serious tensions between the MoD and the defence contractor over who should bear the brunt of £700m of cost overruns on the controversial Eurofighter Typhoon project.

Although the group yesterday said it would not have to make any provisions against the contract, investors will be seeking clarification and reassurance over the issue.

The reports come against the backdrop of a stand-off between the company and the MoD over drafting a contract to build two aircraft carriers worth £2.9bn. BAE is keen to avoid bearing the huge costs of contract overruns.

Some analysts have praised Turner for sticking to his guns in tough negotiating with the military mandarins. While the group faces being demoted from its current post as prime contractor for the ships, investors only want to see the deal done on safer terms.

Meanwhile, the company has denied wrongdoing after reports in the Guardian made serious bribery allegations related to Saudi contracts.