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ALEX BRUMMER: Don't let overseas marauders erode Britain's defences


Rarely does the choice of a non-executive director send share prices higher. The selection of former Cabinet Secretary and Nato representative Lord Sedwill to the board of BAE Systems is a rare exception.

Russia’s unprovoked and villainous war on Ukraine is proving an economic shock every bit as damaging as the Covid pandemic.

It has turned an already perilous rise in inflation into a cost-of-living crisis which is feeding into the national narrative, with the strikes by railwaymen and unrest across the transport and public sectors.

Ukraine fears: BAE's recent trading update notes the pledges of increased defence spending by NATO

Ukraine fears: BAE’s recent trading update notes the pledges of increased defence spending by NATO

However, Britain’s robust defence and aerospace industry stands to benefit from Boris Johnson’s willingness to go the extra mile in assisting Ukraine militarily.

BAE’s recent trading update alluded to this, noting the pledges of increased defence spending by Nato. 

An uncertain world – from the Baltics to the Middle East and Taiwan – helps the UK defence sector.

Sedwill will have spent two years out of government in November when he joins BAE. That should avoid too many complaints of conflict. That won’t stop the critics habitually opposed to the UK defence sector. 

They forget how hugely important it is to Britain’s innovation, R&D, manufacturing and export capability.

In this context, the decision of Business Secretary Kwasi Kwarteng to wave through the sale of Ultra Electronics to private equity ghouls Advent is a betrayal. Ultra’s sonobuoy technology helps Nato track Russian submarine traffic.

Kwarteng needed to look no further than the defenestration of Advent-owned Cobham to know what he is dealing with.

A series of undertakings, designed to protect Ultra’s national security, have been obtained. The UK will retain rights, similar to a golden share, in two secure companies being created from Ultra. T

hat may look reassuring. But it takes no account of the ruinous impact of loading up Ultra with debt (when interest rates are rising) or the uncaring, short-term behaviour displayed by Advent in the past.

The Ultra sell-out is particularly galling in the middle of a European conflict. The opportunities for the UK are enormous, as BAE’s £46billion order book shows.

BAE alone employs 89,000 staff and is the prime contractor on submarines and plays a big part in the making of advanced fighter aircraft, including the Eurofighter Typhoon. Spain has just revealed it is adding a further 20 Typhoons, dominated by UK technology, to its air defences.

At a moment when climbing borrowing costs have cast a cloud over stock markets, BAE and the defence sector are among the exceptions. 

BAE shares are up 28 per cent this year and sensibly it, and the UK’s other world-class defence contractor Rolls-Royce, are protected from overseas takeovers by ‘golden’ shares. 

That has not been the case for the rest of the sector, which is under siege from overseas marauders.

They should be firmly repelled.

Pension rights

As a great admirer of Jim O’Neill and his work on BRICS (bit of a shame about Russia!) and the North, it was a bit disheartening to see this Tory peer describing a 10 per cent rise in the state pension as ‘ludicrous’.

As the Institute for Fiscal Studies has pointed out, the increase in the state pension age to 66 left a quarter of pre-retirees in poverty. 

After waiving the manifesto commitment to the ‘triple lock’ last year, the Tories had a duty to put things right amid the surging cost of living.

Former pensions minister Baroness Altmann notes that even though public sector workers may struggle to achieve an inflation-matching pay increase in 2022, they should be comforted by the fact that their pension schemes will be boosted by annual CPI adjustments.

How would O’Neill manage on £9,500-a-year, which is among the meanest state pensions in the developed world?

Boardroom gluttony

The larger majority of FTSE 100 top executives had the good grace to keep their pay and bonus demands to a minimum during the pandemic. 

The railwaymen’s dispute with Network Rail and the rail operating companies illustrates why they should do so again. 

It is not a good look to see transport bosses filling their boots while seeking to calm the pay demands of colleagues.

In hard times, increases in boardroom pay packages – already far too high – should be aligned with the rest of the workforce.

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