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BAE Backs Portsmouth Suppliers as Shipbuilding Under Review

BAE Systems Plc (BA/), Europe’s largest defense company, is taking part in a U.K. government effort to strengthen suppliers at the historic Portsmouth, England, naval base at a time when shipbuilding there is in doubt.

The company will help allocate grant money under a 3.2 billion-pound ($5 billion) government effort to bolster small and medium-sized businesses, Derren Chamberlain, head of BAE’s maritime supply chain, said in an interview. Some funds are dedicated for suppliers at Portsmouth, he said.

BAE, which consolidated the U.K.’s warship building capacity in 2009, lacks work to sustain its three surface shipyards located in Portsmouth, 70 miles southwest of London, and Scotstoun and Govan in Scotland. After completion of two Queen Elizabeth-class aircraft carriers, due to start coming into service in 2018, activity will dip before building of Type 26 Global Combat Ships commences. The company and the defense ministry are in talks on whether to shut one site.

“For maritime services there will be a significant footprint here,” Chamberlain said. “It is absolutely worthwhile for the small and medium-sized enterprises to apply for this funding.”

Carrier Support

Should full-scale shipbuilding cease at Portsmouth, BAE would retain services and technical operations at the naval base involved in activities such as support of the new Queen Elizabeth-class aircraft carriers, Chamberlain said.

Each supplier will have to provide 80 percent of their own capital to get 20 percent of government backing, with a maximum allocation of 300,000 pounds out of a total funding pool of 4.7 million pounds, Chamberlain said. The first applications are due this month, and initial funds will be provided in October.

Companies can seek support for various initiatives, including efforts to improve quality or comply with onerous U.S. arms-transfer rules. Day-to-day overhead costs are not eligible, Chamberlain said.

BAE personnel and government representatives will evaluate funding applications. Chamberlain said the judgment will not focus on lowering BAE’s costs. “This is about the future,” he said “We get a stronger, fit-for-purpose supply chain.”

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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