October 1, 2014 / 8:32 AM / 5 years ago

Babcock, BAE Systems win $5.2 billion UK naval contracts

LONDON (Reuters) - Babcock International and BAE Systems have won contracts worth a total of 3.2 billion pounds ($5.2 billion) to maintain British warships, submarines and naval bases for the next five years.

A BAE Systems sign is seen at the entrance to the naval dockyards in Portsmouth, southern England November 6, 2013. REUTERS/Stefan Wermuth

The agreements secured 7,500 jobs across Britain and represented the second biggest defense contract placed by the government since it took power in 2010, the Ministry of Defence (MOD) said in a statement on Wednesday.

Babcock signed a 2.6 billion pound support services contract to continue running the Clyde and Devonport naval bases until 2020. BAE, Europe’s largest defense firm, was awarded a 600 million pound deal to run the Portsmouth base until 2019.

Britain has cut defense spending by around 8 percent over the last four years as part of a plan by the Conservative-led government to reduce a record budget deficit. Any new contracts have come under scrutiny following several over-budget plans and project management failures.

“This huge investment in our naval bases will directly sustain more than 7,500 jobs and skills across the UK and ensure that the Royal Navy’s fleet of 56 warships and submarines are in the best possible condition and available for operations,” British Defence Secretary Michael Fallon said.

BAE Systems said that the new contract would extend the services it had already been providing for the last 12 years, and help prepare Portsmouth for the arrival of a new aircraft carrier, expected in 2017.

Britain’s MOD faced criticism in 2012 over a costly government u-turn on the type of fighter jet to be flown from the aircraft carriers. The 6.2 billion pound project is 2.6 billion pounds over its original budget and for some time questions were asked about whether the second ship would actually be used.

The MOD said that the contracts signed on Wednesday represented “excellent value for money” and secured savings of over 350 million pounds for the taxpayer.

Britain, the world’s fourth biggest military spender, last month awarded its biggest contract since at least 2010 when it placed a 3.5 billion pound order with General Dynamics for new armored fighting vehicles.

(1 US dollar = 0.6173 British pound)

Reporting by Sarah Young; editing by Keith Weir

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