Barriers to a £30bn merger between BAE Systems and EADS appeared to multiply as MPs launched an inquiry into proposals and Boeing branded state support of Airbus as “pernicious”.
British defence giant BAE and Airbus owner EADS will have to jump through considerable political hoops if a deal has to be agreed, with approval from the British, French, German and US governments required.
Britain’s cross-party Defence Committee underlined the potentially protracted nature of the deal as it announced it would examine the likely impact of a merger on British defence.
“BAE Systems and EADS operate highly capable and sensitive defence businesses in many countries including the UK, the USA, France, Germany, Spain, Sweden, South Africa, India, Saudi Arabia and Australia,” the committee said.
“The merger of two such large defence contractors would have a significant and strategic impact on their relationships with UK, US and European governments. It could also radically alter the defence industrial base in these countries.”
The Committee said it would take oral evidence from witnesses during October and November and questioning will be focused on the protection of British interests. The companies have a deadline of October 10 to make a formal proposal for a deal, but are expected to seek an extension because of the complex nature of negotiations.
The British government has so far appeared broadly supportive of a deal and on Monday Business Secretary Vince Cable seemed to echo that view.
Speaking at a fringe meeting at the Liberal Democrats party conference in Brighton, he said he could not comment specifically on the merger but stressed: “I don’t worry about foreign ownership.”
Mr Cable dismissed what he described as “emotion about foreign takeovers” and pointed out that EADS already employs people in the UK. Defence ministers from Britain, France and Germany are expected to hold a tripartite discussion on the matter in Cyprus next week.
The companies are likely to face more opposition from the French Government, which controls more than 20pc of EADS and has signalled it would want to remain a stakeholder in a new entity.
The US government will also have a major say in the deal. It is one of BAE’s biggest customers, and the key attraction of a deal for EADS, which has failed to crack the US market. BAE will not proceed with a deal if it cannot gain US backing.
The tensions between the US and Europe in aerospace and defence were laid bare on Monday as America’s Boeing said Airbus and its state backers had “thumbed their noses” at the World Trade Organization by failing to comply with its rulings on subsidies.
Boeing claims that Airbus is subject to unfair commercial advantage by receiving “billions of taxpayer euros and pounds” from European governments.
“The illegal subsidies to Airbus, most importantly the pernicious, market distorting practice of launch aid, must stop,” Boeing said.