Shares digital

The contract to build two aircraft carriers will be signed off shortly by the Ministry of Defence after months of haggling with both the Treasury and contractors BAE Systems (BA.), VT Group (VTG) and Babcock International (BAB).

Treasury cuts forced on to the MoD mean a ‘change of spending profile’. This probably means the second carrier will be delivered a year or two late in maybe 2018 to save money. BAE and VT have been in continuous discussions with the MoD to ensure the £3.9 billion programme proceeds but won’t break the MoD budget.

First-year savings of £100 million have been proposed on an elongated programme, but the overall cost of building the carriers will undoubtedly rise as a result of inflation and higher raw material costs. Prime minister Brown is supportive as much of the work will be done at Babcock’s Rosyth shipyard next door to his constituency. VT and Bae will close their deal to merge their respective ship building operations once the MoD has delivered.

Shares Says: Spending cuts on both sides of the Atlantic signal a tougher time for aerospace and defence companies.

HOLD Bae, VT Group, Babcock

by: Timon Day