BAE wins Australian frigate contract
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”.