BAE Systems wins £3.95bn contract to build next generation nuclear submarines

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BAE Systems, Britain’s biggest defence contractor, has won a £3.95bn contract to build a new generation of attack submarines as the UK moves ahead with the trilateral Aukus security pact.

The US, Australia and Britain in March unveiled details of the Aukus plan to provide Australia with nuclear-powered attack submarines from the early 2030s to counter China’s ambitions in the Indo-Pacific.

BAE said the funding would cover development work until 2028, allowing it to start the detailed design phase of the programme and start to buy long-lead items. 

Charles Woodburn, chief executive of BAE, said the funding “reinforces the government’s support to our UK submarine enterprise and allows us to mature the design, and invest in critical skills and infrastructure”.

“These hunter-killer Aukus submarines will empower the Royal Navy to maintain our strategic advantage under the sea, enabling us to compete with emerging navies anywhere in the world as our world becomes more unpredictable and dangerous,” said Grant Shapps, defence minister, at the start of the Conservative party conference in Manchester on Sunday. 

The submarines will be based on a British design for the next generation of attack boats that will replace the current Astute class. Australia and the UK will both operate the so-called SSN-Aukus. Manufacture of the boats will start towards the end of the decade, with the first SSN-Aukus boat due to be delivered in the late 2030s.

Aukus is seen by ministers as a key part in the government’s “levelling up” agenda to narrow regional economic differences. Cabinet minister Michael Gove name-checked Barrow-in-Furness, the Cumbrian town where BAE Systems builds the submarines for the Royal Navy, in a speech in July, promising to make it a new “powerhouse of the North”. 

“By backing British businesses to develop them, we’re taking the long term decisions we need to boost our defence industry and to grow our economy,” said Shapps. 

The agreement promises decades-long work at BAE’s yard at Barrow. BAE said on Sunday that the contract award would also fund significant infrastructure investment at Barrow, investment in its supply chain and the recruitment of more than 5,000 people. 

The money will help to preserve submarine shipbuilding in the UK led by BAE and Rolls-Royce, which builds the reactors that power the Navy’s submarines. Rolls-Royce in June announced plans to double the size of its Raynesway site in Derby as a result of the Aukus deal. 

Babcock International, which maintains and supports all of the UK’s submarines, said on Sunday that it had signed a five-year contract with the MoD to provide input into the detailed design of SSN-Aukus. 

David Lockwood, Babcock CEO, said the “importance of applying our extensive knowledge and longstanding experience is being recognised through this contract award”.