BAE Systems announces rationalisation of naval business, 1,775 layoffs

6th Nov 2013 12:40

- Type 26 capacity to centre on Glasgow- Proposal to build three Offshore patrol Vessels- BAE Systems to lay-off 1,775 personnel through 2016 - MoD to bear cost of restructuring Defence specialist BAE Systems is to rationalise its UK naval ship business, shifting its manufacturing base towards Glasgow, in a bid to preserve the necessary know-how, expertise and capabilities.The restructuring announced on Wednesday morning replaces an earlier framework agreement with the Ministry of Defence, under which BAE was committed to increasing the efficiency of its shipbuilding in exchange for government commitments to fund the rationalisation and sustainment of capability in the sector. More specifically, the new agreement amends the terms of the contract governing the construction of the Royal Navy's Queen Elizabeth class aircraft carriers, introducing - amongst other things - greater performance incentives. As well, a proposal has been made for the manufacture of three Offshore Patrol Vessels. That would help to sustain key shipbuilding skills once the peak of activity associated with the latest aircraft carrier, Type 45 destroyer and two export contracts is past. Lastly, BAE Systems will restructure its Naval Shipbuilding business with a view to sustaining the long-term capability to deliver complex warships.With that aim in mind Glasgow has been chosen as the most effective location for the manufacture of the future Type 26 ships, alongside additional investments in facilities to create a world-class capability.Shipbuilding operations at Portsmouth will cease in the second half of 2014, with some of the remaining workload related to the carrier programme being re-assigned to Glasgow.As a result, consultations will commence on a total employee reduction of 1,775, including 940 in Portsmouth in 2014 and 835 across Filton, Glasgow and Rosyth, progressively through to 2016.The cost of the restructuring will be borne by the Ministry of Defence.As of 12:35 shares of BAE Systems were higher by 0.68% at 456.4p. AB