BAE bulging with cash and wardroids, worried about future

Arms biz nervous as MoD finances circle the drain

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Global war-ware behemoth BAE Systems announced bumper results this week, and puffed its new robot stealth bomber and other battledroid offerings. But chief executive Mike Turner, speaking against a background of serious financial difficulties at the UK Ministry of Defence, joined other weapons-biz kingpins in dropping heavy hints that the arms sector should get more taxpayers' cash in future.

On the new tech side, BAE was pleased to announce that assembly of the Taranis robot stealth bomber has begun.

The £124m project will produce a single technology demonstrator aircraft, able to autonomously fly an entire mission including delivery of smart weapons. Taranis is expected to take to the air in 2009, and will be used by the RAF to decide on its "future force mix" - that is to work out what proportion of the future airforce will have human crews, among other things.

BAE also showed off its smaller Herti drone, and a robot all-terrain vehicle, plus software designed to let fleets of aerial droids work together against their enemies.

The company also issued a strong set of preliminary results for 2007, showing pre-tax profits of £1.47bn on revenues of almost £16bn - up from £1.2bn/£14bn in 2006. More growth is foretold for 2008; but even so, BAE and other UK arms-biz operators are worried about the future.

Speaking to the Today programme yesterday, Turner suggested that UK politicians need to prioritise defence in the same way that America does, or he and his industry colleagues would find themselves unable to properly equip British forces.

His comments echoed those from the Society of British Aerospace Companies (SBAC), the UK's arms-industry group, whose boss Ian Godden said earlier this week:

“We are very concened that the Government is about to make short term decisions to balance their books with insufficent regard for the industrial consequences... there are many, varied, threats that still face the UK... The high value jobs, scientific benefits and revenue that the defence industry contributes to the UK will also be eroded if defence is not given sufficient priority.”

The Defence Management Board met yesterday in Whitehall and they had some tough decisions to make. The UK's defence budget, even with planned increases and topped up from Treasury contingency funds because of Iraq and Afghanistan, is insufficient to meet the expected bills in coming years. In particular, many large equipment programmes are underway, and these have effectively blown the budget.

Worse yet, it is now strongly rumoured that the planned, gradual increases in defence spending over the next few years may not materialise - perhaps unsurprising given the present economic hiccups and the Treasury's recent, reluctant foray into the banking sector.

Traditional MoD expedients for saving money - for instance, shutting down combat units and using less fuel - have been used to the limit and beyond in the last few years. The arms execs fear that this time it may be their cash which gets cut into, with kit projects delayed or reduced in numbers.

In fact, it wouldn't be difficult at all to cut the MoD purchasing bill while actually buying more and better kit. Nearly every kind of weaponry made in Britain could be imported much more cheaply and quickly, usually from America - indeed the UK already does this in several areas (most obviously ICBMs, large jets and smart bombs).

But imports are politically unacceptable if a UK or European manufacturing base exists or can be created at vast expense. (Examples of such creation include the ongoing Taranis and Watchkeeper killbot programmes, and the almost-completed 18-year effort to lash together a European turboprop transport maker.)

All the signs are that the Brown government will manage to achieve the worst of all worlds. The MoD's shopping-list of pricey, often unnecessary British-made gear will stay intact, but all the programmes will be delayed, slowed down and cut in numbers - making them even more expensive in the long run, but saving cash in any given year.

This will save just enough money for the MoD not to go bust. No cash will thus be found to seriously improve junior servicemen's pay, and there will certainly be no scope for hiring more of them. The helicopters and big air transports so desperately needed right now will be bought only in ones and twos - or not at all - as most of the money will be going on billion-pound missile destroyers, airliner-sized subhunting planes and similar costly, irrelevant rubbish.

As a result our combat troops will continue to be needlessly endangered, frustrated and heavily overworked; they will continue to resign in droves, and more and more will need to be recruited from overseas.

But it's presumably OK not to have British-made troops as long as they have British-made weapons - after all, being a soldier isn't a "high-value job" in Mr Godden's terms. Anyway, they can all be replaced by lovely capital-intensive robots soon enough, no doubt. ®

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