by John Moore

Like the rest of the military-industrial complex, BAE Systems is doing well out of the Ukraine war. In 2022 it made profits of £2.5 billion and racked up new orders worth £37 billion. This is on top of existing orders worth £20 billion. In his foreword to the company’s 2022 annual report, CEO Charles Woodburn celebrated a 12.5% rise in profits, while noting the “tragic” fact that a war had brought them about. (1)

UKRAINE BONANZA

Ukraine is providing an effective showcase for BAE weapons, which make up the bulk of British arms sent to Ukraine, and it is this successful battle-testing that is giving a huge boost to sales, according to one BAE executive. (2) Products include the Challenger 2 tank and the longstanding M777 howitzer, saved from being phased out by its strong performance on the frontlines. One BAE factory, at Radway Green, South Cheshire, alone can produce 1 million items of munitions (bullets, shells, bombs) a day and BAE is having to take on more skilled workers both in Cheshire and at other BAE sites in Tyne and Wear and South Wales to fulfil the latest MoD order worth £280 million.

BAE is doing so well it’s opening an office in Ukraine to prepare for building a new arms factory there, in competition with its German rival Rheinmetall, which is similarly expanding to produce Leopard tanks in Ukraine. Both firms will benefit from the much cheaper Ukrainian labour – wages there are a tenth of those in Germany and the UK.

Across Europe, arms companies such as BAE, Rheinmetall and France’s Thales are confident of buoyant results over the next few years. No wonder, when the McKinsey consultancy estimates European military spending will reach £400 billion by 2026, a 53% increase on 2022 levels. Such a huge escalation in arms budgets is reminiscent of the periods before World Wars 1 and 2.

STATE SUBSIDISES BAE PROFITS 

BAE’s strategic importance in underpinning British power gives it immense financial privileges. A recent report by the progressive Common Wealth thinktank reveals that BAE pays only 14.35% of its own Research & Development (R&D) costs. The rest comes out of government subsidies. “Arms companies are officially private companies, but they are supported by the state in a way no other sector is,” says Sussex University professor Anna Stavrianakis. As Julian Lewis, the chairman of the Commons Defence Select Committee, says BAE is “not a normal business”. (3) The special status of BAE was pointed out by the late Robin Cook MP (Labour foreign secretary, 1997-2001) who recalled: “I came to learn that the chairman of BAE appeared to have the key to the garden door to No 10.”

BAE paid out nearly £1billion in dividends in 2022, a large chunk of it to BlackRock and Capital Group, the two biggest asset management firms in the world, which together control 25% of BAE. BAE provides these investors with consistently high returns guaranteed by the British government. As the welfare state is dismantled in Britain, ‘corporate welfare’ is doing well.

THE REVOLVING DOOR 

Given the symbiotic relationship between BAE and the British state, a well-oiled revolving door between the two is necessary. Sir Sherard Cowper-Coles, former UK ambassador to Saudi Arabia, was appointed onto BAE’s board as its international business director a few years after he had played a key role in Tony Blair’s dropping of the Serious Fraud Office’s investigation into the corrupt BAE - Saudi al-Yamamah arms deal in 2006. Similarly, former Air Chief Marshal Sir Glenn Torpy was given a role as senior adviser to BAE in 2009 after his retirement from the RAF. Sir Philip May, the husband of former prime minister Theresa May, has long been a senior executive of Capital Group, a major shareholder in BAE. Lord Glendonbrooke, Lord Sassoon, Lord Lupton, Lord Gadhia and Viscount Eccles, among other peers, each own at least £50,000 worth of shares in BAE. It’s hard to disentangle BAE from the British state and political machine.

UNIVERSITIES AND THINK TANKS

Alongside direct political influence, BAE also buys ideological sway, as do other UK arms manufacturers such as Rolls Royce, QinetiQ and Babcock. Major British think tanks that specialise in military analysis and international affairs, and cited as authoritative independent sources in the news media, are funded by BAE. For example, BAE is the Royal United Services Institute’s second biggest donor; while the ‘left’ New Statesman is paid by BAE for running advertorials on the journal’s website and is sponsored by BAE for its annual Politics Live event, which debates “national security strategy”.

BAE is also infecting the next generation of engineers and scientists, having penetrated the higher education sector to the tune of over £1 billion. University College London and the universities of, Cambridge, Glasgow, Birmingham, Southampton and Cranfield (the RAF officer training school now a university) are all part of BAE’s 2017 “strategic university partnership programme”. A recent piece of research reveals that only 11 universities, out of all the universities contacted by the Byline Times Intelligence Team, confirmed that they had received no funding from British arms companies (18/8/21).

SPECIAL RELATIONSHIP WITH THE US 

The central role BAE plays in shaping Britain’s global alignment is especially clear in terms of Britain’s relations with the USA. Among foreign companies, BAE enjoys an exclusive place within the US defence sector. BAE’s American subsidiary, BAE Systems Inc., is the sixth biggest supplier to the US defense department. BAE sells more to the US state than to the British state – 43% of its sales went to the US in 2019.

While the Pentagon prohibits foreign businesses from access to US military technology, it makes an exception for BAE under the US’s Special Security Arrangements. BAE has also been allowed to merge with US arms makers. In 2000, it acquired Lockheed’s aerospace electronics division for £1.1 billion. Moreover, BAE can bid for US contracts directly from the Pentagon as if it were a US firm. Its unique advantage among foreign companies has helped give BAE a huge lead over its European rivals in terms of global sales, which are more than double those of its nearest European rival, Italy’s Leonardo. BAE is the second biggest foreign donor to US political candidates and clearly its donations to both Democrats and Republicans have done it no harm.

Nevertheless, the US/UK Special Relationship is an unequal one. While BAE gives the British military establishment unparalleled proximity to top level US decision-makers, a firewall still prevents British personnel from gaining access to the most sensitive technological secrets according to former BAE CEO Mike Turner. (Speech to the Washington Economic Club, 10/5/06)

More crucially, Britain’s nuclear weapons are entirely dependent on the US. While Britain’s nuclear submarines are built in Barrow-in-Furness by BAE’s 9,000 local workers, they are designed in the US and regularly return to the US naval base at King’s Bay, Georgia for re-arming and repairs. Trident’s technology is largely American – Britain’s four submarines are carbon copies of the US’s Ohio-class Trident submarines. Britain merely leases its nuclear missiles from the US, and all weapons testing is carried out at Cape Canaveral, Florida. “Trident cuts to the heart of the US-UK Special Relationship, and its contrasting significance for London and Washington”, says commentator Jake Wallis-Simons. (4)

It’s no coincidence that Gina Haspel, the first woman to lead the CIA and overseer of an alleged torture at a ‘black site’ in Thailand, sits on the BAE board.

WORKERS IN THE DEFENCE INDUSTRY

Given the strategic importance of BAE and the defence industry to the British establishment, organised workers are in a potentially strong position. Yet there is little sign of militancy in the industry, let alone calls for diversification into civilian production. In fact, recent decisions and statements from a number of unions point in the other direction, in support of higher arms spending. Perhaps this should be unsurprising, given that BAE is Britain’s biggest manufacturing company and ‘supports’ 132,000 UK jobs, many of them highly skilled. Unite the union estimates that BAE’s Military Air and Information division alone employs 13,000 skilled workers.

While Unite is officially sympathetic to diversification, it supported a GMB-initiated motion at the TUC in October 2022 calling for an increased defence budget – reversing existing TUC policy. Unite assistant general secretary Steve Turner argued that, “The defence of the nation must be linked with the defence of our national economy and the retention of the UK’s ability and freedom to operate independently, whether on land, at sea, in the air or online.” Unite later also welcomed the government’s decision to build the next generation of nuclear submarines at BAE’s Barrow shipyard, using nuclear engines made by Rolls Royce in Derby. The GMB likewise welcomed Labour’s clear promise to back nuclear weapons and the arms industry.

By contrast, the RMT opposed the GMB-Unite composite at the TUC, arguing that a major war would not “support jobs in Barrow or Derby or Bristol” but instead could “destroy the world. (5) With no sign of British workers refusing to handle arms to Ukraine, as dockworkers in Genoa and railworkers in Thessaloniki have done, the (close-run) TUC vote points up the difficulty of promoting more progressive policy in the UK.

DRIVE TO WAR 

Meanwhile, BAE is actively pushing for escalating war. After all, its profits depend on it – 98% of its production is weapons-related. Hence, the $3,630,000 spent on lobbying in 2021, designed to promote BAE’s “solutions for national defence and security requirements”, as its own factsheet admits – “solutions” that certainly don’t include peace. BAE’s lobbying has added to US pressure on the UK government to make the biggest increase in military spending since the Korean War, amounting to £24 billion in 2021. In 2022, Tory defence secretary Ben Wallace announced further increases – rising to £100 billion a year by 2030, which will double the current arms budget. This puts Britain’s military expenditure as the fourth highest in the world – above Russia and France, with only the USA, China and India spending more.

Meanwhile, the AUKUS alliance with Australia and the US is fundamentally premised on BAE’s production of nuclear submarines. So BAE’s drive for profits cannot be separated from government foreign policy. During the Yemen war, David Cameron boasted of his success in selling fighter planes to Saudi Arabia on behalf of BAE. BAE’s interests help define the ‘national interest’.

(1) i newspaper 23/2/23

(2) Wall Street Journal, 9/10/22

(3) Eastern Daily Press, 10/10/17

(4) Politico, 30/4/15

(5) Morning Star, 22/1/23

 

Challenger 2 tanks – photo by Teresa Pickin

Trident nuclear submarine near its base in Faslane – photo by MoD