Suspicion over BAE sell-off plan

DEFENCE giant BAE Systems stands accused of political manoeuvring over plans to sell its UK shipbuilding operations.

BAE confirmed it is reviewing its naval shipbuilding operations. Potential buyers include VT Group and America's General Dynamics.

City sources suggest the sale talk may be a bluff, designed to speed up progress of the Royal Navy's order for two new aircraft carriers or to ensure that BAE continues as prime contractor.

A defence expert said a key meeting is coming up about the carriers and BAE's position on the project.

'If BAE lose it, they could say they are going to exit that business,' he said.

The Ministry of Defence and its two contractors, BAE and Thales, have not yet agreed on the price and design of the carriers, though this was due by the end of last year.

The delay is a frustration for BAE. 'The Government is still deliberating size, cost etc. BAE and Thales are up to date. It comes down to budgets,' said an industry source.

The MoD might hasten the process if it feared BAE would quit shipbuilding. 'If they were to sell, and sell to a foreign-owned group such as GD, that would cause a political storm for the Government and it might prefer to avoid that,' said one defence expert.

BAE has recently cut jobs at the naval business.

Though it has annual sales of £800m, it is thought to be loss-making. Another theory is that off-loading the submarine and warship division could encourage a US deal.

BAE, under chief executive Mike Turner and outgoing chairman Sir Dick Evans, has long been seeking a transatlantic merger. Boeing chief executive Harry Stonecipher said in February he had no interest in buying BAE because it is in shipbuilding.

GD's bid for UK tank maker Alvis is to be assessed by the DTI on the grounds of 'national security'. No major obstacles seem likely.