BAE SYSTEMSA Corporate Profile By Corporate Watch UK
Completed June 2002
BAE SYSTEMS uses many avenues to lobby governments and increase its sales. Its main advantage lies, however, in its sheer size and its ability to use its importance to the British defence industry to its advantage.Monopoly over the defence industry
As has already been explained, BAE SYSTEMS owns most of the surviving shipbuilding capacity in Britain (see Products). As such it has the ability to use its massive holdings to influence government procurement policy, and to ensure the best deal for itself, rather than the taxpayer. Despite its international aspirations, BAE uses its status as a British company to further influence the Ministry of Defence; as the Defence Review put it, ‘deals with the MoD tend to come wrapped in the Union flag’. Threats over job cuts and relocation are skilfully used to ensure that BAE lands the lions share of all MoD contracts. For instance, the MoD attempted in 1999 to break the monopoly enjoyed by Royal Ordinance (a BAE subsidiary) over fuel supply by purchasing propellant from a South African source. BAE reacted quickly, closing a propellant plant near Glasgow and threatening to shut down Royal Ordinance altogether. As a result, RO now has a guaranteed ten-year contract from the Ministry of Defence.
This behaviour has not gone unnoticed by other interested parties, with the chairman of Vosper calling BAE’s behaviour ‘outrageous’, and an article in the Spectator commenting on the ‘all-too comfortable relationship between a public-sector customer and one giant UK provider.’ Perhaps the recent dismissal of John Weston from his position as CEO of BAE SYSTEMS indicates that BAE is worried about this criticism; Weston had been widely criticised for ‘bullying’ the MoD, and it was a badly-kept secret that Geoff Hoon, the Minister for Defence, and Weston were not working well together. However, it seems unlikely that BAE will give up all of the advantages that their near-monopoly position gives them, simply because at the moment the MoD is in no position to go elsewhere for their supplies, given that it is government policy to ‘buy British’ wherever possible. At the time of writing, nearly 85% of the MoD’s procurement went through British companies, and most of that purchasing involved BAE SYSTEMS, in one way or another.
In fact, far from reining in an out-of-control company, the British government goes out of its way to promote and protect the British defence industry. In BAE SYSTEMS’ case, that effort goes right to the top, with Sir Richard Evans (Chairman of BAE) being described as ‘one of the few businessmen who can see Blair on request.' This relationship between the company and the government is not something that is hidden, in fact in April 2001, Dr Lewis Moonie (Under-Secretary for Defence) informed the House of Commons that: ‘MoD has given full support to BAE SYSTEMS’ bid to supply Hawk jets to India…the Secretary of State for Defence and the Minister for Defence Procurement have met with BAE SYSTEMS and the Indian Government to discuss the Hawk proposal.’ According to the Guardian, The British government subsequently mounted an intensive campaign to sell 60 Hawk jets worth £1bn to India, in spite of the tremendous tensions in the Kashmir area. BAE SYSTEMS has already sold Jaguar combat aircraft to India in licensing deals the MoD refuses to disclose (see section on Corporate Crimes). In other words, the Government has not only a policy of permitting, but also of supporting, promoting and even covering up arms deals. BAE boasts of commanding the loyalty of over 200 MPs, even describing them as “its” MPs.Financial backing from the Government ECGD
As well as the advantages that BAE gains from its size and links to government, the company also benefits from measures designed to make foreign investment more secure for British businesses. The ECGD (Export Credit Guarantee Department) underwrites many of BAE’s export contracts, meaning that the taxpayer takes the risk of the transaction, rather than the company. Essentially, the ECGD is there to enable companies such as BAE to enter into high-risk and dubious sales without the risk of large losses. It has been estimated that, in this way, the ECGD subsidises British arms exports to the tune of £227 million annually. DESO Another government organisation that makes life easier for the arms industry is DESO (Defence Export Services Organisation). Most Government support to the arms industry is co-ordinated by DESO which has over 300 staff and provides a range of services to the arms industry and potential customers. These include technical and logistical support, advice on negotiation, offset and financing arrangements, assistance to industry in regional marketing, market research funding for exhibitions and facilitation for military support to sales. DESOs marketing and most military support services are provided free to industry. Net operating costs to the MoD are £16m, according to a press briefing by Saferworld. In addition, the Government uses MoD personnel, as well as embassies and defence attaches to promote arms exports. Also, the Government spends lots of money on official visits to promote the sale of defence equipment. Official visits by ministers and high-level delegations such as the Royal Family are frequently used to promote the sale of defence equipment. Another example was mentioned before; The Secretary of State for Defence met with BAE SYSTEMS and held talks with the Indian Government this year to discuss a BAe Hawk jet proposal. According to Saferworld, the Government's efforts to promote arms exports cost the taxpayer £69 million. In short, BAE hardly need to pursue a vigorous lobbying style, as the playing field is tilted heavily in their direction already. Arms companies are heavily subsidised by the state as it is, and BAE’s size means that it can put additional pressure on the MoD to bend to its demands. Tony and Dick
Whilst exploring the world of arms exports, BBC correspondent Will Self confirmed the existence of an intimate relationship between Tony Blair and BAE SYSTEMS chairman Sir Dick Evans. "It's Evans, with his abrasive style and no-nonsense salesmanship, who is widely credited with bringing Our Tone on to the export team. Dick got Blair to write a piece for the BAE SYSTEMS newsletter in the run-up to the 1997 election saying: 'Winning exports is vital to the long-term success of Britain's defence industry.' He also pledged New Labour's support for the industry. Evan's is said to enjoy the PM's ear whenever he wants."
Despite its ability to coerce the UK Government, BAE SYSTEMS also belongs to several lobbying groups. The company is prominent in the TABD (Trans-Atlantic Business Dialogue), which is a trans-continental business lobbying group, which describes itself as ‘a unique business-led process launched by the EU and US in 1995, [which] seeks to reinvigorate our economies by increasing transatlantic trade and investment opportunities through the removal of costly inefficiencies from excessive regulation, duplication and differences in EU and U.S. regulation.’ As anyone conversant with corporate speak will know, what this actually means is that the TABD is dedicated to eliminating all regulation which stops profit-making activity, regardless of its worth or importance; environmental regulations, labour standards and nationally owned public services have all come under attack from the TABD. Tellingly, the CEO of BAE, Mike Turner, is to be one of two co-chairs of the organisation for this year (2002).
BAE SYSTEMS is also a member of the International Chamber of Commerce (ICC). This organisation describes itself as the 'World Business Organisation’, and has similar neo-liberalist aims to the TABD.. The European based research group, Corporate Europe Observatory, has this to say about the ICC: 'The ICC has a long history of vigorously lobbying to weaken international environmental treaties…Examples include the Kyoto Protocol, the Convention on Biodiversity, and the Basel Convention against trade in toxic waste. In all of these UN negotiations, the International Chamber's obstructive lobbying is in direct opposition to the Global Compact [a UN pledge for transnational corporations] principles it has pledged to pursue.’
BAE also belongs to SBAC (Society of British Aerospace Companies), and, as by far the largest member, exercises a lot of power. John Weston, their ex-CEO, is currently President of SBAC. It seems unlikely that control of SBAC is very important to BAE however, given its own direct links to Government and the House of Commons.
The BAE SYSTEMS website provides links to Industry Associations, Government and Defence-related sites. See: www.baesystems.com/relatedlinks/relatedlinks.htm
BAE SYSTEMS is also looking after its future recruitment and ‘public relations’ by moving into the educational sector. BAE SYSTEMS has developed its PR machine far in advance of the traditional careers fair stall and occasional brochure. In 1998 it set up its ‘virtual university’, which awards Certificates in Management, supported by Lancaster and the Open University. BAE keeps expanding its 'virtual university', which is also supported by the Engineering and Physical Sciences Research Council (EPSRC). The EPSRC is the largest of the seven UK Research Councils. It funds research and postgraduate training in universities and other organisations throughout the UK. The UK research councils claim to be autonomous, non-departmental public bodies. However, they are funded from the science budget received from the Office of Science and Technology (part of the Government's Department of Trade and Industry). So basically, the Government is funding research and training conducted for arms manufacturers through the EPSRC.
In addition to the 'virtual university', BAE SYSTEMS has partnerships of varying natures with many other universities, cooperating with Sheffield Hallam in the production of curriculum materials, and having research partnerships with Cambridge, Sheffield and Southampton Universities, amongst others. It also sends many of its young engineers back into secondary schools, to extol not only the benefits of an engineering career, but one with BAE SYSTEMS. In addition, the company has sponsored various events and ‘educational’ displays, such as the Mind Zone in the Millennium Dome, further linking its name with scientific and engineering excellence, and avoiding its real business of manufacturing weapons to kill people. Having capital far in excess of any other UK engineering firm (partly because of its size, and partly because of its massive reserves from the Al-Yammamah deal) it offers extremely rewarding packages to the best UK engineering students, ensuring that the arms industry continues to leech off the most promising talents in the sector.
 Defence Review, Summer 1999, cited in Wrigley, C. (2000) BAE SYSTEMS Alternative Report 2000, CAAT
 The Spectator, 9 December 2000, cited in BAE SYSTEMS Alternative Report 2001, CAAT website, pdf version: http://www.caat.org.uk/companies/BAES2001.pdf, html version: http://www.caat.org.uk/companies/BAES2001.html, accessed 29/4/02
 Ingram, P. & Davis, I. (2001) The Subsidy Trap: British Government Financial Support for Arms Exports and the Defence Industry, Oxford Research Group.
 Morgan, O. (2001) A gun at the MoD's head, 18/3/01, The Observer website: http://www.observer.co.uk/business/story/0,6903,458405,00.html, accessed 29/4/02
 Hansard (House of Commons Daily Debates), 04 April 2001, House of Commons website: http://www.parliament.the-stationery-office.co.uk/pa/cm200001/cmhansrd/vo010409/text/10409w02.htm, accessed 10/5/02
 Norton-Taylor, R. (2002) British plane sales to India raise fears of nuclear use, The Guardian website, 23/4/02, http://www.guardian.co.uk/kashmir/Story/0,2763,688932,00.html, accessed 10/5/02
 National Asset: The Westminster Briefing, No. 13, September 1999, cited in Wrigley, C. (2000) BAE SYSTEMS Alternative Report 2000, CAAT
 Ingram, P. & Davis, I. (2001) Executive Summary, The Subsidy Trap: British Government Financial Support for Arm Exports and the Defence Industry, Oxford Research Group/Saferworld. Available on the Oxford Research Group website: http://www.oxfrg.demon.co.uk/1programmes-armstrade-execsummary.htm, accessed 13/5/02
 £69 million cost to taxpayer for Government promoting arms exports, Saferworld Press Briefing, 3 July 2001, Saferworld website: http://www.saferworld.co.uk/brief3jul0169mill.htm , accessed 30/4/02
 Self, W. (2002) Addicted to arms - Tony's secret vice, 26/4/02, The Independent website: http://www.independent.co.uk/story.jsp?story=288959, accessed 30/4/02
 TABD (2002) BAE SYSTEMS and the Boeing company to chair the TABD in 2002, TABD Press Release, TABD website: http://www.tabd.org/chairs2002.html, accessed 10/5/02
 Corporate Europe Observatory (2001) High time for UN to break 'Partnership' with the ICC, (briefing), CEO website: http://www.xs4all.nl/~ceo/un/icc.html, accessed 30/4/02
 EPSRC homepage: http://www.epsrc.ac.uk, accessed 10/5/02