Germans scupper BAE and EADS merger

Plans to create a European aerospace and defence giant are in tatters after German opposition scuppered the £28 billion deal.

The proposed merger of BAE Systems and EADS would have created a company with combined sales of £60 billion and more than 220,000 staff, with around 52,000 in the UK alone.

But after days of political wrangling, the two companies were forced to ditch the bid, giving rise to fears over job security at BAE, which operates from 50 UK locations.

BAE chief executive Ian King said the company was "obviously disappointed" but insisted it was "financially robust" and remained confident about its future.

Unions, defence analysts and Labour politicians all raised concerns, saying that the merger would have created a stronger company and guaranteed jobs in the long term.

David Reeths, director of consulting at defence analyst IHS Jane's, said: "This will mean that job guarantees that would have been part of the deal will not be made.

"While the UK Government was seen to have supported the merger, the Government may face demands for more direct industry support to secure BAE's future."

The tie-up would have improved BAE's exposure to commercial markets - as EADS is an Airbus aircraft manufacturer - in a climate when public defence spending is declining.

BAE, which operates in UK locations from Glasgow to Portsmouth, reported a 14% fall in sales last year as military spending in the US and UK was cut.

The Unite union urged the UK Government to strengthen its "golden share" in BAE by taking an active stake in the company to safeguard British jobs and boost manufacturing. The union, which represents more than 30,000 skilled workers across the two companies, had been pressing for guarantees over jobs if the merger had gone ahead.