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Britain Begins Construction Of New Aircraft Carriers

Despite the budget problems facing Great Britain due to the costs of operations in Afghanistan and the current recession the Labor Government of Gordon Brown continues to move out on some major programs. A few days ago it was to begin construction of the new centralized contractor provided training facility in Wales. Yesterday the first sub-contracts to begin construction of the two new aircraft carriers for the Royal Navy were announced.

These total over $600 million and went to a five different companies across the country. The building of the two ships will be the biggest defense program in England for several years and are critical to the economy of Scotland. Some of the contracts are just not for parts of the ships but also for the infrastructure to support construction including transport of the sections by river to the main assembly point in Rosyth. The two Queen Elizabeth class ships will form the core of the Royal Navy for a good deal of the Twenty-First Century and will operate the F-35 Joint Strike Fighters being developed by Lockheed Martin.

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Defense Business Remains Interanational As Boeing Subs To MB Aerospace

The British company MB Aerospace announced that it had secured a further contract from Boeing to build launch systems for the Harpoon Surface-to-Surface anti-ship missile. This award is a four year extension of an original one year contract. This original contract was for about $10 million in work and the four year extension will add another $30 million.

This contract continues to illustrate the global integration of the defense business. This is especially true for the Western NATO allied countries. Because Harpoon is a system used not just by the U.S. but a variety of their allies and foriegn customers it makes sense to build parts for it in other nations. It may be a way to secure a better price or faster production or it may help sales to a foriegn customer. The overseas customers also provide necessary competition to U.S. sub-contractors.

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English Defense Industry Looking Bleak

It is true that the United States defense budget does dominate the world’s spending on arms and equipment but the U.K. has always had large spending plans as well. Now that the U.K. government of Gordon Brown is facing massive deficits due to social spending and attempts at stimulating their own economy since the global recession began twelve months or so ago defence spending may get a little tight. There has already been discussion of canceling some large programs as well as cutting back on general spending. Like in the U.S. ending these kind of programs will lead to more job losses on top of those already gone in the civilian economy.

That is why stories like this one about the U.S. military buying BAE Systems artillery pieces that will be made in the U.K. will become more common. When you are relying on foriegn sales to keep up jobs for six months at a time it is not a good sign. There are bigger programs at risk for the U.K. such as the Eurofighter or A400M transports. The government is scrambling to maintain the new aircraft carrier contract as the jobs at Scottish shipyards are key to that part of the nation’s economy.

There is no doubt that the U.S. will also see a fall in defense spending as the pressures of debt, health care reform and other priorities will limit the money available from the Obama Administration’s budget.

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New British Aircraft Carriers Have Trickle Down Effect

Even though you can project the Royal Navy at being two carriers and twenty or so escorts the most expensive ship building contract in the UK’s history is having an economic effect. The Engineer Online reports that three major sub contracts were awarded worth over $130 million to support construction of the two new ships. The contracts are for insulation, water management systems and command and control systems. Thales will provide the internal ships communication system as well as an HF long range radio. Ormandy Group will build the system for treating and providing hot and cold water for the ship. Finally Ticon Ltd UK will supply various types of insulation for the ship. These two large warships will continue to generate revenue and jobs for a variety of companies across England.

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Britain to Delay New Aircraft Carriers

As discussed recently the British government did go ahead and delay the two new aircraft carriers two years. Rueters reports thatthe pressures on the budget due to current operations and the world’s financial crisis led to this cost saving measure as well as the other two mentioned. The new vehicle to be made by General Dynamics was postponed. The British and the company had been negotiating over the cost of procuring the technical data rights to the vehicle and failed to reach a satisfactory agreement. The number of Lynx helicopters will also be reduced by eight. The delay in the ships is not supposed to have an affect on VT or BAE‘s contracts. More fallout to come I am sure.

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Conservatives Charge UK Government to Cut Defense Spending

Faced with the costs of operations in Afghanistan and Iraq as well as the world’s economic crisis the UK government plans cuts to defense spending. Bloomberg.com: Europe reports that the Conservative opposition believes that the new aircraft carriers will be delayed and there will be cuts to a new vehicle and Lynx helicopter upgrades. The two large ships were due to begin construction in the near future as the contract had already been awarded to VT and BAE. The new armored vehicle is under development by General Dynamics and less then the currently planned 80 Lynx aircraft will be upgraded. The delay in the aircraft carriers would be a blow to Scotland as that part of the UK is relying on them for a significant number of jobs in the near future.

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Scottish firm expands in the US

The Scottish company, WFS, has won a development deal from GD. See an article here. WFS works on advanced radio waves propagation techniques. Like many Europeon companies they have looked to the US and the expanded defense budgets of the last 7 years to gain work. It also again demonstrates that in the long run it is cheaper and more efficient for US companies to look overseas for existing capabilities, rather than develop them internally.

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Britain signs CV contract

The British Ministry of Defense signed the contract with the VT Group to build the two new aircraft carriers for the Royal Navy. See an article here. Previous reports had the Scottish government worried that Britain might renege on the deal due to differences with the emerging nationalistic mood in Scotland. See a post here. The total contract value is about $7.5 B with as always with these kind of programs the chance to go higher.

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