HC Deb 22 February 1999 vol 326 cc13-5
9. Mr. Gerald Howarth (Aldershot)

If he will make a statement on his policy concerning defence industry consolidation in Europe. [70499]

The Secretary of State for Defence (Mr. George Robertson)

The Government are committed to encouraging and facilitating the restructuring of the European defence industry so that it is globally competitive and can help to strengthen European defence. It is not for Government to prescribe the course that that restructuring will take or the structures to emerge. Those are primarily for industry to decide, based on its own commercial judgment.

Mr. Howarth

Given that the enlarged British Aerospace-GEC Marconi will constitute the third largest defence company in the world, and also given that any trans-border mergers between British companies and continental companies will inevitably limit our freedom of movement, I am sure that the House will welcome the Secretary of State's assertion today that that is primarily a matter for the companies themselves. As the Government are clearly standing back from the issue, can the right hon. Gentleman tell the House what the Government's reaction would be were the enlarged British Aerospace to seek to merge with DASA or with Thomson?

Mr. Robertson

First, I shall make clear the legal position. The proposed merger of British Aerospace and Marconi will be subject to regulatory approval, and it is therefore not appropriate for me to comment on that at this stage. The views of the Ministry of Defence on the military aspects of the merger will be given in confidence to the regulatory authorities at the appropriate time.

The hon. Gentleman spoke about subsequent moves that might take place in European defence. As I said, that is a matter for the industry at a European level to decide. The Governments of the seven countries involved in the initiative have made it clear that we will do what we can as Governments to make sure that such rationalisation throughout the industry can take place. The European problem is that our industries lack the scale to be globally competitive. Rationalisation is therefore not a luxury, but a necessity: either we rationalise, or we will have no jobs left in this valuable and important industry.

Dr. Doug Naysmith (Bristol, North-West)

Will recent consolidation have any effect on the Department's future large aircraft project—a subject of great interest to my constituents in Bristol at both British Aerospace and Rolls-Royce?

Mr. Robertson

The ability of the European industry to undertake such projects effectively and on the basis of value for money depends largely on their remaining competitive and staying ahead of the game. The Government are still committed to the future large aircraft project. We look forward to receiving the details that will inform the decisions that will be taken. The size and nature of the overall industry and our ability to stay alive in the global marketplace will depend on a rationalisation which I believe to be important and, in many respects, urgent.

Mr. Michael Colvin (Romsey)

Thank you, Madam Speaker, for a second chance to ask a question.

The Secretary of State will no doubt welcome the establishment of the organisation for joint armament co-operation—known as OCCAR—involving Britain, Germany, France and Italy. However, bearing in mind that we must not create a fortress Europe in the defence industries, what will happen if OCCAR, being a programme-based organisation, happens to have in its programme a project in which the Americans have an interest? Will the Americans be able to join OCCAR?

Mr. Robertson

I have received no indication of the Americans wanting to join OCCAR, whose purpose was co-operation among the European signatories. I was one of those signatories, and I believe that the organisation has great potential for the future. There is no intention to create a fortress Europe in the rationalisation or in the creation of OCCAR. However, we must recognise that a great European defence industry that employs so many people in so many countries, which in many instances is at the leading edge of technology and has made such a huge contribution to all our economies, will not be able to compete with the American giants in its present form. There will be choice in the international marketplace and there will be jobs in an industry that makes such a huge contribution, but things will have to change.