Axe looms over BAE shipyards

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BAE’S most senior executive in the UK has said one of Britain’s major shipyards is likely to close, with a decision expected before Christmas.

Nigel Whitehead, the UK chief executive of BAE , told The Sunday Telegraph the defence giant expected “a reduction in footprint”, with the future of shipbuilding at Portsmouth and its two bases in Glasgow, at Govan and Scotstoun, in the spotlight.

“Part of that might actually be the cessation of manufacturing at one of the sites,” he said.

The interview is the strongest signal yet from BAE’s senior management that it will end shipbuilding at one yard, and the first time it has put a timeframe on the decision.

“We will be making decisions this year, so we have a number of weeks in which to do that,” Mr Whitehead said, adding that BAE was working closely with the Ministry of Defence.

The decision will depend on future workload in the shipbuilding industry, with a gap in the British programme expec­ted once the two Queen Elizabeth class aircraft carriers are completed but before the Type 26 Global Combat Ship programme begins.

Industry insiders believe Portsmouth to be most at risk, with an estimated loss of up to 1,500 jobs. The Navy’s base at Portsmouth, where BAE also does repairs, is not at risk.

One industry source said: “The inside information is that Portsmouth has struggled with some of its work and part of that is because a lot of the staff are temporary, so if you’re going to consolidate you’re probably going to concentrate where you’ve got a permanent workforce on the Clyde.”

Mike Hancock, the Liberal Democrat MP for Portsmouth South, said closure would be an “absolute disaster” for the city but he was not hopeful for the shipyard’s survival.

“I don’t think we’ve got much chance unless some work comes in,” he said.

Ian Waddell, national officer for aerospace and shipbuil­ding at Unite, said: “From our point of view we’d rather just have a decision and get on with it. There’s clearly a workload gap and even then it’s not clear if there’s enough work to sustain the three yards.”

Penny Mordaunt, the Conservative MP for Portsmouth North, said she would be writing to the Prime Minister, the Chancellor and the Defence Secretary this week to urge them to explore options for the future of UK shipbuilding.

An MoD spokesman said: “We continue to work closely with BAE Systems (LSE: BA.L - news) , who are exploring how best to sustain their shipbuilding capability to deliver the Type 45 destroyers, Queen Elizabeth class carriers, and the Type 26 global combat ships for the Royal Navy. How they achieve this is ultimately a matter for the company.”

The move comes as industry sources said there were fears that the MoD is on course for a £1bn under-spend on its £34.4bn budget for 2012-13, with some of the money due to be returned to the Treasury.

But the MoD’s spokesman said it was usual for spending to vary throughout the year.

“Unlike in the past, when the MoD routinely overspent, we are now taking a prudent approach to budgeting, with appropriate contingency so that we can plan for the unexpected and order further equipment when we know we can afford it.

“We are only just over half way through the financial year and expect to announce future in-year procurements. We do not anticipate handing any money back to the Treasury,” she said.

BAE’s Mr Whitehead was bullish about the company’s ability to win future contracts for the Typhoon fighter jet, and its relationship with European joint venture partner EADS (Euronext: EAD.NX - news) .