Large Question Mark Poised over UK’s Tranche 3 Eurofighter
Eurofighter nations waiting for tranche three go-ahead, while UK calculates cancellation option
07:08 GMT, May 13, 2009 defpro.com | Three Eurofighter nations -- Germany, Spain and Italy-- remain committed to buy their 3A “half share” in the final Tranche 3 order for the Eurofighter Typhoon programme and await a final British decision while London is weighing its options to pull out. Based on a preliminary agreement reached in March, the four nations agreed to split Tranch 3, as originally planned in two sub-tranches, and to place an order for the first 3A sub-tranche, including 112 fighters, worth nearly €8 billion. However, the Treasury and the Ministry of Defence are reportedly squabbling over the estimated €1.6 billion (£1.45 billion) cost of the 16 aircraft in the 3A semi-tranche that would be funded by the British taxpayer (the 3A contract is to include 40 aircraft for the UK, but 24 of these would be transferred to Saudi Arabia). It so happens that the Treasury maintains a veto of sorts for any procurement surpassing £400 million and this has effectively blocked the entire programme.
With interested parties in the UK and other partner nations now waiting for some sort of a signal from London, the pertinent question is whether the Treasury actually intends (or has no other options than, make your choice) to effectively torpedo a programme of immense significance in both operational and political terms – which would point at the British economy being in far worse conditions than optimistically assumed by some commentators – or rather the whole is but a form of a political gesticulation. For the costs of pulling out could be actually higher than acquiring the aircraft and paying for them.
Under the terms of the original “umbrella contract”, the UK has a commitment to purchase 88 Typhoons in Tranche 3, now to be split among 40 aircraft in Tranche 3A and the rest in a future 3B. The MoU between the four countries specifies that if a country withdraws unilaterally from the programme or reduces its order, it must compensate the other partners for the resulting higher costs they are facing. Indications are now beginning to circulate to the effect that a failure to sign for 3A would cost the UK € 2.2 billion (£2 billion) purely in compensation fees – not to mention the loss of work for employees of the British aerospace industry. The Eurofighter programme is estimated to finance more than 40,000 UK jobs, including at BAE Systems and hundreds of smaller suppliers.
In this context the Society of British Aerospace Companies (SBAC), UK’s aerospace, defence and security trade association, has warned that a decision against Tranche 3 will have far-reaching implications, not only on military capabilities but also on the “loss of some of Britain’s key technological capabilities,” as stated Ian Godden, SBAC Chief Executive on Monday. He further declared that “given the terms of the programme’s international agreements the decision for the Government is between acquiring military capability, retaining skilled people in the UK and jobs on the one hand or spending money to subsidise a ‘brain drain’ to Europe on the other.”
While Germany, Italy and Spain would be compensated for any British unilateral withdrawal, they see continued British participation in the programme as imperative both in political terms and as a continued support for the Typhoon’s technical and commercial progress. For this reason, their leaders are now putting significant pressure on Prime Minister Gordon Brown to intervene in favour of defence. Germany, in particular, will need a go-ahead for Tranche 3A before the end of June so it can authorise payments before national elections in September.