UK ready to sign up for EurofighterBy Alex Barker, George Parker and Jeremy Lemer in London
Published: May 12 2009 23:30 | Last updated: May 12 2009 23:30
Gordon Brown is set to sign off on the UK’s latest order of Eurofighter Typhoon jets, but is still examining options on how to contain production costs. Following an intervention by Lord Mandelson, business secretary, the British prime minister has ruled out cancelling the order because of the cost to jobs and the UK’s reputation. A final decision on the details of the contract payments and production timetable is expected within days, with key cabinet ministers scheduled to meet Mr Brown on Thursday.
Backing for the programme came as unemployment in the first quarter jumped by the most since 1981, leaving 2.22m people unemployed.
The move will end months of speculation over the future of the four-nation programme. Mr Brown has come under intense pressure from the leaders of Germany, Italy and Spain – the UK’s programme partners – to stop holding up the aircraft’s third production run by making an overdue €1.6bn ($2.2bn, £1.4bn) payment.
The prime minister is anxious to avoid antagonising Angela Merkel, German chancellor, who has become a key ally in Europe.
Berlin wants a decision from the UK this week in order to allow the authorisation of payments before the German elections in September.
Failing to make meet the deadline could cost the UK government £500m ($762m, €559m) in penalties, according to defence insiders, because the order of key manufacturing items would be delayed for months.
Mr Brown is expected to allow the project to continue without significant disruption but he is still considering several options to keep down costs.
These include tweaking the schedule for payments and the timescale of production.
Britain is also attempting to sell parts of the third production run to other countries, including Saudi Arabia, which is tempted to add to its existing order of earlier Eurofighter models. But there are constraints in the contract regarding export sales, meaning Britain would need permission from its partners.
Lord Mandelson warned colleagues on the margins of Tuesday’s cabinet meeting, including Alistair Darling, chancellor, that the contract was not just important for British industry but was a vital reputational issue for the country.
The minister, a former European Union trade commissioner, argued that Britain would be branded an “unreliable partner†by other European countries if it disrupted the prestigious aircraft project.
Under the terms of the contract, the UK is obliged to buy 88 aircraft from the third run.
But production plans have been scaled back and split into two separate batches, leaving Britain with a bill of about €1.6bn for 16 aircraft, once exports are taking into account.
Cancellation of the order would have cost the UK more than £2bn in penalties and broken contingent deals on maintenance and upgrades, leaving Britain facing yet higher bills. It emerged as a serious option, in spite of the initial costs, because of serious budgetary problems at Britain’s Ministry of Defence.
Signing off on the Eurofighter is expected to have knock-on effects on other UK defence equipment programmes, as the MoD seeks to balance this year’s budget.
Source
http://www.ft.com/cms/s/0/5fb84d30-3f2d-11de-ae4f-00144feabdc0.html?nclick_check=1
Back to Index
Move to Top 
