Thales warns it must win big MoD contract

Thales, the French defence and electronics group which took over Racal two years ago, warned yesterday that it would have to reconsider its position in the UK if it failed to win any of the large defence procurement contracts scheduled to be awarded in the next nine months.

Since the £1.8bn acquisition of Racal – a move strongly supported by the Government on the grounds that it created a second force in the UK defence market – Thales has failed to win a single major contract from the Ministry of Defence.

Thales is now bidding on five big procurement contracts worth a total of £7bn and due to be handed out between now and next spring. The contracts include a £2.5bn order for two new aircraft carriers, a £650m order to equip British Army soldiers with state-of-the-art communications kit and a £2bn order for a fleet of refuelling tanker aircraft.

Alex Dorrian, the UK head of Thales, said: "I would expect us to win our fair share of these contracts. If we lost them all we would have to review our strategy for the UK."

Thales has already axed 450 jobs and closed one UK factory after its failure to be selected by the MoD for the £1.7bn Bowman battlefield communications contract.

Failure to secure a big contract in the near future will put a further cloud over its remaining UK workforce. Thales employs 12,000 UK staff, including those who work in its aerospace and civil electronics divisions, while the UK accounts for 25 per cent of its worldwide turnover.

The aircraft carrier contract is a straight fight between Thales and BAE Systems. If it wins the order, Thales plans to build the two 270 metre vessels in five separate "superblocks" and then assemble them as one in a single yard, probably Harland & Wolff in Belfast. BAE is due to announce details of its bid today.