BAE Systems

Part of Backbench Business — [Un-allotted Day] – in the House of Commons at 1:03 pm on 24th November 2011.

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Photo of Peter Luff Peter Luff The Parliamentary Under-Secretary of State for Defence 1:03 pm, 24th November 2011

I know the decision to which the hon. Gentleman refers, and it will of course please other parts of the country, because BAE Systems will do the work elsewhere in the UK, but I shall happily talk to him about it privately afterwards if he would find that helpful.

I do not want to labour the point, but we all know how important defence is as an integral part of advanced manufacturing in this country. It sustains about 300,000 jobs, many of which are highly skilled, in thousands of companies of all sizes. Those employed are at the pinnacle of manufacturing and engineering ability, and they do a significant job in helping to keep our country secure. The industry is a key sponsor of manufacturing apprenticeships and training, the quality of which is acknowledged by employers across a range of industries, and intensive research and development programmes also mark out the defence sector as a source of innovation and intellectual property.

The House will also be aware—this was at the heart of the two speeches that we have heard—that defence is a major contributor to export revenues. UK industry has an outstanding record of export success, second only to the US as an exporter of defence equipment and services. Despite the challenging market conditions experienced by many sectors of the wider manufacturing base, the UK has in the last year won almost £6 billion in new defence exports business. That represents an increase in our share of the global defence market from 18% to 22%, and we are committed to continuing that trend with strong support for future defence export campaigns, including the products mentioned by the Members who have spoken.

Within that vital and dynamic sector of the UK economy, BAE Systems has a significant role. It has been the MOD’s largest defence supplier for some time; it is the fourth largest supplier to the US Department of Defence, which accounts for 50% of its revenue; and it is, indeed, the world’s second largest defence company. I should like to pay a tribute to BAE Systems: its speed and adaptability in updating software for the Typhoon aircraft’s radar and defensive aids systems was one of the keys to the success of the recent action in Libya, and we owe all its staff a great debt of gratitude for that.

BAE Systems’ wider involvement, beyond Typhoon, extends to many of the MOD’s largest programmes, including the Astute submarine, the Type 45 destroyer, the Queen Elizabeth class aircraft carrier, the joint combat aircraft, general munitions and support for the armoured fighting vehicle fleet. Overall in 2010, BAE Systems’ revenue from the UK amounted to just over £4 billion, representing 20% of the company’s total revenue. So hon. Members should be in no doubt about the importance that the Government attach to the contribution of the UK defence industry in general and BAE Systems specifically to a re-balanced economy and export-led growth.

Let me turn to the specific programmes that are relevant to today’s debate. In the air, Typhoon, a triumph of European engineering, has really come of age. It is a first-class aircraft and the envy of discerning nations throughout the world. Already in service with six air forces—in the UK, Germany, Italy, Spain, Austria and Saudi Arabia—and at the forefront of the world’s media coverage following its recent exemplary operational deployment in the skies above Libya, the prospects for expanding Typhoon’s user community have never been better, and Ministers are working hard to ensure that we crystallise those opportunities.

Those export prospects meant that some changes were needed to the Typhoon programme. In May 2010, a request was made by the Eurofighter GmbH industrial consortium—I emphasise industry, not Government—to slow down the rate of Typhoon aircraft production in order to free up and sustain sufficient industrial capacity in the Eurofighter partner companies, comprising Alenia, BAE Systems and Cassidian, and to service export orders.

The UK, along with the other partner nation Governments, agreed to the industry’s proposal in July 2011—on the basis that it would not adversely affect the build-up of our own Typhoon fleet. As a result, there is now the prospect of Typhoons being made over a longer time frame, with the production lines open to 2018 rather than closing in 2015 as previously planned.