The chief executive of BAE Systems yesterday gave a blunt warning that the UK's defence budget would not be able to support all the major re-equipment plans in the pipeline.

Mike Turner also took a swipe at one of the government's pet procurement policies, the Private Finance Initiative (PFI) and said the UK had to be better at achieving technology transfer, particularly when it concluded deals with the US.


In a wide-ranging speech at the show, Turner noted several major projects that would require funding over the next decade. These included the Typhoon and Joint Strike Fighter for the UK Royal Air Force; the new-generation aircraft carriers and Type 45 destroyers for the Royal Navy; and the Future Rapid Effects System armoured vehicle for the Army. "The fundamental problem is that the defence budget is under-funded," he said.

This was particularly so when taking into consideration the government's desire to "do the right thing" across the world.

Turner was scathing about the PFI, a form of contractorisation. Under this, the UK government reduces its capital expenditure by bringing in contractors to handle major projects, such as the Future Strategic Tanker Aircraft (FSTA), which is due to see RAF air-to-air refuelling being passed to a private consortium on a £13 billion ($21 billion) 27-year contract. BAE Systems is a member of one of the two consortia bidding for the FSTA.

The benefits for the government are that such projects move heavy items of expenditure off the public balance sheet. In return, the contractors are paid fees over the terms of the contract.

"PFIs don't work," says Turner. "All you're doing is mortgaging the future. You're just putting off today expenditure to pay tomorrow." Asked whether the government should in that case re-think the FSTA project, he replied: "That's one for the MoD."

Asked about the recent raft of rumours of mergers or link-ups with Thales, Lockheed Martin and Boeing and General Dynamics, he commented that "Any merger talk is just speculation."


He added that the US's increasing technological lead made it necessary for BAE Systems to talk on a regular basis to the US prime contractors.

Moreover, in any future joint ventures with US companies, the UK had to be prepared to argue for technology transfers. "On the JSF, we had a bit of a slow start on that; we must do better in future."

Source: Flight Daily News