BAE accused of 'demanding' contract

BAE Marine Systems wants the contract for 12 destroyers

The country's biggest military shipbuilder has threatened to close shipyards unless the government gives it the entire contract for 12 destroyers.

BAE Systems Marine employs 8,000 workers in shipyards at Govan and Scotstoun on the Clyde and the Barrow Yard in Cumbria.

The company says getting all the £6bn contract for the Type 45 destroyers is the only viable means by which it can afford to build them.

Its managing director Simon Kirby said it might otherwise have to "review its position" in the industry, but other shipbuilders have accused the company of making "outrageous demands."

BAE Systems Marine new demands come as its parent company, BAE, announced a 61% reduction in pre-tax profits from £459m to £179m after a £300m overrun on the cost of the Nimrod airborne reconnaissance programme.

Defence Secretary Geoff Hoon has said BAE Systems will not have a monopoly

BAE Systems Marine is scheduled to build the first three destroyers with the Southampton based shipbuilders Vosper Thornycroft, but it has submitted an alternative bid which would see Vosper cut out of the deal.

BAE Systems Marine managing director Simon Kirby told BBC Radio 5 Live that it does not want to proceed with Vosper because the two companies jointly cannot get an affordable price.

He denied that the company was effectively looking for a monopoly from the Ministry of Defence (MoD) to build all 12 ships.

He said: "We need to have the order for 12 to have an affordable solution and to make an acceptable shareholder return.

"Any business that cannot make an acceptable shareholder return will need to review its position in that market sector.

"We are not looking at a monopoly. We are looking at a particular problem in the UK warship industry. We need to rationalise the capacity and restructure."

Mr Kirby said other shipbuilders would be involved as sub-contactors building parts of the destroyers.

'Working extremely well'

The managing director of Vosper Thornycroft, Martin Jay, said it was "totally wrong" to suggest that Vosper and BAE Marine Systems were not able to work together.

"We are working extremely well together on the initial design side. I'm sure we will work together on the remaining collaboration to build the first three warships.

I hope ministers reject their outrageous demands and tell BAE 'nice try but get on with competing like every UK shipbuilder is required to do'

Vosper Thornycroft managing director Martin Jay

"What BAE wants is for the government to make them a special case because they cannot make an adequate return for them to compete unless they have a monopoly.

"I hope ministers reject their outrageous demands and tell BAE 'nice try but get on with competing like every UK shipbuilder is required to do'".

Vosper say 3,000 jobs at their Woolston shipyard could go if they fail to secure the destroyer deal.

Last month Defence Secretary Geoff Hoon told local MP Syd Rapson that, while the government will consider BAE's new bid, the MoD does not intend to give the company a monopoly.

He also said that Vosper will have a major part of the contract.