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SFO kicks BAE corruption charges upstairs

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Peston: "BAE is a significant part of the UK economy". About 0.003 of it, in fact.

DESO is gone now, replaced by a tentacle of the new biznovation ministry called the Defence and Security Organisation. It is now run by a former oil exec, and no longer has its offices inside MoD headquarters (which used to be a source of some pain to MoD procurement officials trying to plan their bargaining strategy against Brit arms firms - apparently they would often find armsbiz people from DESO innocently wandering in and out of their offices, earwigging their meetings etc).

But DSO still "works closely with the MoD" - in other words its people still have passes to MoD Main Building. Noticeably its boss ranks among the management team of UK Trade and Investment: no other business sector is represented at this level. There are those who'd say that actually little has changed with DESO's passing, and that in fact the tail still wags the dog.

That said, when Prime Minister Brown shut DESO down it did make BAE extremely angry. It could be that in future corruption cases, the government will no longer be the defendant, and it seems clear that Brown is willing to face up to BAE to some degree.

But the cases the SFO would now like to take to court date very much from the DESO era - and from the era of the present Labour government too, when Gordon Brown was in the Cabinet.

Furthermore, BAE Systems wields enormous political clout in Britain. Most people have failed to fully realise the extent to which it has either shut down or moved offshore, with fully 70 per cent of its employees overseas nowadays. Noted biz correspondents still foolishly assert that the firm is "the biggest manufacturer in the UK and a significant part of the British economy".

No matter that this is wildly at variance with the facts, as a swift glance at the Forbes list of the 40 biggest UK companies reveals. GlaxoSmithKline, Unilever, AstraZeneca and Diageo all have big manufacturing operations in Blighty; all have a much more valid claim to being the UK's biggest manufacturer than BAE, well down in the bottom half of the list.

BAE is certainly not a "significant part of the British economy", either: even company reps only claim that 50 per cent of the firm's global turnover takes place in the UK - almost certainly an exaggeration given that barely 30 per cent of its people are here - and that stacks up at a measly US$9bn, approximately three thousandths of the UK economy. Just to drive in the final nail, the vast majority of what business BAE does do in the UK involves supplying otherwise-unsaleable equipment to the British government at enormously inflated prices - scarcely an economic activity with any real benefits for the nation. To paraphrase Margaret Thatcher's pungent description of the old nationalised coal industry, much of BAE's vaunted manufacturing base here in the UK is in effect a (highly inefficient) system of indoor relief.

Unfortunately this reality isn't widely acknowledged, and the awkward fact remains that if Gordon Brown authorises the SFO's case he will in effect be prosecuting his own party's recent past record - to a large degree, prosecuting himself.

BAE issued a statement today, saying:

If the Director of the SFO obtains the consent that he seeks from the Attorney General and proceedings are commenced, the Company will deal with any issues raised in those proceedings at the appropriate time and, if necessary, in court.

It's all too likely that this case will get precisely as far as the Saudi one did: into the door of No. 10 Downing Street and not a step further. ®

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