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BAE tries to polish corporate image ahead of Armor deal

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But sources close to BAE have been hinting privately that a let-off for the UK taxpayers could be in the offing. Of course, this is unsubstantiated thus far; and it could be no more than an attempt to prevent the UK from starting serious talks with its European partners about cancelling Tranche 3 of the Eurofighter programme, which would be possible if the nations were unanimous.

Regardless of what secret deals BAE may have done with Whitehall and the Saudis, it can't ignore the US government. America has already expressed its displeasure over the SFO probe being dropped. There are some on Capitol Hill who don't want the Saudis to acquire a new generation of cutting-edge fighter jets in the Eurofighter deal; there are others who would prefer the Arabs buy American planes. Both factions will now be angry with BAE and the UK government.

This could be serious for the Armor Group deal, which will need US government approval to proceed. To date, BAE acquisitions in America have typically gone through on the nod and the company now does much of its business in the States.

This close relationship with the US arms market has many benefits. Not only does BAE make a lot of money right off, it can sometimes re-sell expertise developed at the American taxpayer's expense overseas - and not just to the UK either.

One example is last week's deal in which BAE will teach the Spanish submarine industry how to make modern pressure hulls, a trick which BAE itself only recently learned from America. In future, BAE (again with British government help) hopes to acquire classified American technologies from the F-35 Joint Strike Fighter. A US company would probably never get federal clearance to export Stealth tech, for example, to places like Saudi Arabia or Indonesia; but looking at the track record, that isn't something one can necessarily say of BAE and the British government.

Washington protectionists and arms-export critics alike may be starting to doubt that BAE is the sort of company which should be invited further into the American military-industrial complex. They might carry the day no matter how much cash BAE may be able to raise by selling UK factories which were gifts from UK taxpayers, and which have since been fattened up largely by those same taxpayers.

Still, this is a world where BAE has been able to get both the Observer and the BBC to describe the imminent launch of HMS Astute as "two months early" and "on time" - rather than several years late, which is the reality.

BAE has also earned praise for "the fact that a company can make a return on such a complicated programme," and lauded for its brilliance in turning the disastrous Astute project around. Some would argue that making a return on a complicated project isn't too hard if you're allowed to almost double the so-called "fixed" price as you go along, and if you're able to call in consultants to provide highly-classified American knowledge to boot. Such commentators aren't writing for the UK business press, however.

If BAE is able to spin the US media as effectively as it has done the British, there's no telling what deals it might be able to do across the pond. A mere third of BAE's people are now employed in the UK, and this number has fallen steadily over time. Brits working for BAE should probably beware of being sold off in favour of Americans who cost no more to hire and whose politicians control a defence budget at least 10 times as big. The Armor Group deal should certainly not be written off yet. ®

*According to Richard Tomlinson, the exiled former SIS officer.

Lewis Page is a former Royal Navy diving officer and commando. His splendid book, Lions, Donkeys and Dinosaurs, which documents the British forces' long and damaging relationship with BAE, is out now in paperback. Even if you don't like it, it's printed on lovely absorbent, flammable paper and has dozens of uses around the home.

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