BAE Fears Brexit `Domino Effect' With Scottish Shipyards at Risk

  • Carr says anti-EU vote could put naval manufacturing in doubt
  • Short-term impact of exit would be much more limited

BAE Systems Plc Chairman Roger Carr said he fears a British decision to leave the European Union could trigger a “domino effect” that splits the U.K. and leads to the shutdown of its Scottish shipyards.

The Scottish nationalists who run the semi-autonomous government in Edinburgh have said remaining in the EU is a red line and they would reignite their campaign for independence in the event of a U.K.-wide vote to leave against Scotland’s will. The British government has said naval yards would be moved south should Scotland break away.

Carr, one of Britain’s most prominent pro-EU campaigners before the June 23 referendum, said that the risks for BAE from an EU exit are focused mostly on the naval issue and the potential impact on the wider economy. The more immediate hit would be much more limited, he said in response to questions Wednesday at BAE’s annual shareholder meeting.

“The impact on BAE would be small, in the short term at least, because we sell relatively little to continental Europe,” Carr said at the gathering in Farnborough, west of London. “But we have important partnerships there, and from a company point of view EU membership underpins relations with foreign security services.”

Private or Public?

Carr faced criticism over his public pronouncements in favor of the EU, with one questioner suggesting the former Centrica Plc chairman was guilty of conflating his own views with those of London-based BAE, Europe’s biggest defense company.

“I do make the point all the time that this is my personal view,” he said. “We must all make our own judgment as to whether leaving would be good or bad for the country. My judgment is that departure would put the economy at risk by creating uncertainty and that leaving a market that’s our largest export market is a bad decision. But from a company point of view being in Europe is also a good thing.”

Chief Executive Officer Ian King told shareholders that while economic and geopolitical conditions are volatile, BAE has begun 2016 with “good momentum.” He reiterated a goal of annual underlying earnings per share of about 5 to 10 percent higher than last year for the maker of Eurofighter warplanes and Astute submarines.

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