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Time running out for BAE Typhoon sale to Qatar

Time is running out for BAE Systems to confirm a long-awaited deal to sell Typhoon fighters to Qatar.
Gavin Williamson, the Defence Secretary, and his Qatari counterpart ­unveiled the ?5bn contract for 24 of the jets, together with a package of support and training, in December.
However, the final terms are yet to be confirmed and the sale has already been pushed back once.
BAE originally said the sale was “subject to financing conditions and ­receipt of first payment, expected no later than mid-2018”.
A contract update in June pushed this back, saying payment was “anticipated” in the third quarter of the year.
The delays have raised eyebrows in the City, with some asking if the deal has run into trouble.
Time running out for BAE Typhoon sale to Qatar

Defence Secretary Gavin Williamson and Minister of State for Defense of Qatar Khalid bin Mohammad Al Attiyah sign an agreement on the sale of Typhoon

Credit:
Anadolu Agency
Should BAE fail to nail down the final terms by the end of the quarter – Sept 30 – it could have to issue a regulatory statement explaining the delay.
Industry sources say negotiations are continuing in earnest and BAE is understood to be hopeful of an ­announcement soon. The size and complexity of the sale – amended to ­include nine Hawk trainer jets – is ­understood to be slowing progress.
There is also thought to be pressure to ensure the deal meets complex regulatory requirements. A leaked Treasury document earlier this month revealed that UK Export Finance, the government’s credit guarantee agency, had been asked to underwrite the deal.
In the paper, understood to have been written soon after the deal was announced, UKEF initially advised against financing it. The credit-­guarantee agency said although the risk of Qatar defaulting was “very low, if it were to happen it would require several billions of Exchequer funding”.
Time running out for BAE Typhoon sale to Qatar

The production line building Typhoons at BAE's Lancashire base had been due to close in 2022 before the Qatar deal

Credit:
Reuters
The document also revealed that UKEF had asked for “ministerial direction from the Secretary of State for the Department of International Trade to proceed on national-interest grounds”.
Signing the deal would likely lift BAE’s shares, removing a lingering overhang. At the interim results in ­August, analysts questioned why the company did not raise guidance, ­despite provisional contract wins on Typhoon and a warship deal with ­Australia.
The Qatar Typhoon sale will bolster Britain’s combat aircraft industry. The Government is promoting Britain as a world-class player in the field, with the aim of boosting foreign sales of military aircraft – by far the UK’s biggest defence export, making up 87pc of last year’s ?9bn total
Last year BAE slowed the Typhoon production line and cut hundreds of jobs as orders failed to materialise. Prior to the Qatar deal the line at the Lancashire site was to shut down after 2022.
At the Farnborough air show in June Mr Williamson unveiled “Project Tempest”, a ?2bn plan to develop the UK’s next-generation fighter. BAE is working on Tempest with the Government, Rolls-Royce, MBDA and Leonardo. A steady flow of work for Qatar would help preserve skills in the industry needed for Tempest.
BAE declined to comment.
 
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