Oral Answers to Questions

Julian Brazier Excerpts

Monday 22nd October 2012 Commons Chamber

[Mr Hammond]

I am not quite sure what the hon. Gentleman means by saying that I did not take account of shareholding issues. The Government made it clear that we understood the reasons why the companies were attracted to a possible merger and that we were willing to listen to the arguments for it, subject to setting out clear red lines about the UK’s national interest with regard to national security, our technology base and protecting jobs. It subsequently became clear that the UK’s red lines could not be satisfied while simultaneously satisfying those of the French and German Governments. It also became clear—I think that this is the point of the hon. Gentleman’s question—that not all the shareholders on either side of the transaction were satisfied that it made sense.

[Mr Julian Brazier (Canterbury) (Con)]

I strongly support my right hon. Friend’s red lines, but I put it to him that the palpable failure of BAE’s business model—which, basically, focused only on defence—and the shortcomings in its current management should not be allowed to drive us into an unsatisfactory situation, and that, such is the value of the assets that it controls, we may in the long run have to take a less than entirely hands-off approach to the company.

[Mr Hammond]

As my hon. Friend would expect, the Ministry of Defence has a close working relationship with BAE Systems as our largest supplier. The company has a substantial order book, a profitable business and strong cash flow, and it will continue to operate as an independent British business. Clearly, it will face challenges as its principal customers shrink their budgets, and it will need to adapt its business model for the future.