BAE wins Aus­tralian frigate con­tract

The Daily Telegraph - Business - - Front Page - By Alan Tovey and James Roth­well

BAE Sys­tems has won a £20bn con­tract to build frigates that will form the back­bone of the Aus­tralian navy, beat­ing off ri­val pro­pos­als from Ital­ian and Span­ish com­pa­nies for the big­gest naval de­fence deal of the past decade.

The con­tract win will see BAE sup­ply nine ves­sels based on the Type 26 frigate de­sign cur­rently un­der con­struc­tion for the Royal Navy.

Prime Min­is­ter Theresa May called the agree­ment an ex­am­ple of trade deals the UK can se­cure – es­pe­cially with Com­mon­wealth na­tions – as the coun­try pre­pares for Brexit. “We have al­ways been clear that as we leave the EU we have an op­por­tu­nity to build on our close re­la­tion­ships with al­lies like Aus­tralia,” she said.

“This deal is a per­fect il­lus­tra­tion that the Gov­ern­ment is do­ing ex­actly that … and it will also ce­ment our strate­gic part­ner­ship with one of our old­est and clos­est friends for decades to come.”

Her com­ments came as Can­berra’s new high com­mis­sioner to the UK said yes­ter­day that both coun­tries aimed to sign a free-trade deal “quite soon af­ter Brexit”, which will “an­nounce the ar­rival of the UK as a mod­ern major global trad­ing na­tion in its own right”.

Ge­orge Bran­dis, a for­mer Aus­tralian at­tor­ney gen­eral turned diplo­mat, said that Bri­tain and Aus­tralia must join forces af­ter Brexit to bat­tle a ris­ing tide of pro­tec­tion­ism in Amer­ica and “rigid state cap­i­tal­ism” in China.

“The ben­e­fits of a bi­lat­eral free-trade agree­ment are very real … and though our trade has fallen very sig­nif­i­cantly since the UK joined the EU, our trade links re­main sig­nif­i­cant.”

He added: “Now, more than ever, open lib­eral economies need to make the case for free trade and help to show the global rules of the road.” The A$35bn (£20bn) agree­ment is one of two key in­ter­na­tional con­tracts up for grabs that BAE man­age­ment see as must win deals. The other is an even big­ger deal to build up to 15 war­ships for the Cana­dian mil­i­tary that could be worth as much as £32bn.

Ships for the Aus­tralian navy will be built by state-owned ASC Ship­build­ing in Os­borne, South Aus­tralia.

ASC will be­come a sub­sidiary of BAE dur­ing the con­struc­tion process, al­though Aus­tralia will re­tain a “golden share” in the busi­ness and re­sume com­plete own­er­ship when the pro­gramme is com­plete. Work on the new ships – which will be called the Hunter class – will cre­ate more than 4,000 jobs in Aus­tralia but is un­likely to boost BAE’s em­ploy­ment num­bers in the UK.

How­ever, com­pa­nies in BAE’s sup­ply chain al­ready mak­ing com­po­nents for the Bri­tish Type 26s could get a boost, as Aus­tralia seeks ef­fi­cien­cies for its ships by or­der­ing parts from them.

At a re­cent in­vestor day, BAE said the Aus­tralian con­tract – known as SEA 5000 – was worth about A$20bn to it over the next 10 to 15 years.

How­ever, with support and mu­ni­tions, the to­tal value could be much higher. The deal also means the UK and Aus­tralia will be able to work to­gether more eas­ily on multi-na­tional oper­a­tions in­volv­ing the frigates.

The Type 26 is the most ad­vanced ship of its kind in the world, spe­cial­is­ing in anti-sub­ma­rine war­fare.

As China strength­ens as a mar­itime power in the Pa­cific, Aus­tralia is keen to beef up its ca­pa­bil­i­ties to de­feat Bei­jing’s in­creas­ingly so­phis­ti­cated fleet.

The in­de­pen­dent de­fence an­a­lyst Howard Wheel­don de­scribed Aus­tralia’s de­ci­sion as a “mas­sive vote of con­fi­dence in BAE and the ca­pa­bil­i­ties of the Type 26”.

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