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BAE slimed from all directions

Teflon deathware colossus unable to escape own smell

Internet Security Threat Report 2014

Brobdingnagian arms firm BAE Systems plc's recent run of luck may be coming to an end, as a flurry of bad-news revelations have emerged in recent days. The UK-headquartered multinational may soon be the focus of criminal charges in Tanzania; is the subject of a new American lawsuit; and US investigators continue to pursue the long-running Arabian corruption case which has dogged BAE for most of its history.

In recent times the outlook has seemed relatively rosy for bullet-dodging BAE. The UK's Serious Fraud Office (SFO) was made to close its files on the al-Yamamah Saudi kickbacks affair last December, on the orders of Tony Blair. Also the company managed to bail out of Airbus before the A380 assembly line traincrash became public last year, too, abandoning the last of the serious British civil aviation business to its fate. (The Airbus wing factories in the UK have since been restructured in such a way that Airbus - now under firm French control - can quite easily shed those workforces when the time comes. Which may be quite soon now.)

Having sold off wing factories which were originally gifts from the UK government, BAE sought to move this taxpayer-provided capital to the States. This move was in the wake of the enormous US crash spending on armoured trucks for the Iraq war. But SFO prosecutors, angered at being called to heel by the Blair government, made a targeted leak from their files, disclosing the details of payments from BAE to a Saudi prince via an American bank.

The SFO information was carefully chosen to draw the interest of US lawmen, and a Justice Department probe was duly begun. But BAE has a lot of friends in Washington, and the mere fact that the company was under the Justice spotlight was not allowed to impede its acquisition of American armoured-vehicles builder Armor Group. (This was in rather stark contrast to the attitude taken by US legislators to other purchases by foreigners in America.) Even as the deal went through, Armor won a $500m US order for armoured trucks.

So things were looking good for BAE; better still earlier this week, when the long-discussed sale of 72 brand new Eurofighter combat jets to Saudi Arabia finally went firm. The Saudis say that they will pay £4.43bn, putting each jet at £62m - "similar to the price of the plane when it is sold to the Royal British Air forces".

In fact, under current plans 232 Eurofighters are projected to cost the British taxpayer £20bn, or £86m per jet. In reality things are worse than that; the RAF can actually use no more than 140-odd Eurofighters, so effectively Blighty will pay £20bn for a 140-jet fleet. That makes £140m per plane, so it's clear that the Saudis are getting an excellent bargain.

What's less clear is the benefit of this deal for Britain. Eurofighter manufacture is distributed around Europe, so some large proportion of the Saudis' £4.4bn will not come to the UK. A poxy couple of billion in export revenue - spread over some years - is not significant to the British economy, with annual exports of £230bn.

Oh, but not to worry, old boy. This is a much bigger deal than it seems. The usual suspects among the biz press have been happy to repeat unsubstantiated assertions that "contracts for maintenance and training are expected to take the bill to £20bn".

For sure - Blighty pays £20bn to get a 232-jet fleet, and the Saudis will happily spend the same money for less than a third as many planes. Or maybe not.

But hey, who wants to rain on this party? £20bn of real British manufacturing/engineering exports is a good day for everyone. How nice to see someone in Blighty doing something actually technological and high-value, rather than just mucking about with money and bits of paper in the City.

If only it were true; but it's not. Actual real engineering exports, where Brits make stuff and sell it, will be confined to the UK part of the £4.4bn fighter sale. We really are talking about one or two billion of praiseworthy tech activity, tops (always assuming that you're happy to sell advanced weapons to Islamic dictators).

Let's suppose that the figure of £20bn for Blighty in this thing is vaguely kosher (bullshit, but let's assume). £16bn+ of that will be "maintenance and training," according to the Beeb.

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