BAE Systems poised to cut jobs at three UK shipyards

iNVEZZ.com, Wednesday, November 6: BAE Systems Plc

(LON:BA) is about to cut more than 1,000 jobs across three of its four UK shipyards – at Govan and Scotstoun, on the Clyde in Scotland, and at Portsmouth, the BBC reported yesterday.
BBC political editor Nick Robinson has learned that an announcement by BAE Systems is expected on Thursday morning, to be followed later in the day by a Commons statement from Defence Secretary Philip Hammond.

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The government and Britain’s largest defence contractor are preparing to announce a restructuring of the shipyards, with the job cuts expected to result from a reduction in work for the Royal Navy following the completion of two aircraft carriers and reflecting a huge increase in the costs of that project.

The news of the likely cuts at the Govan and Scotstoun shipyards in Glasgow is a major blow for the west of Scotland and comes inside the final 12 months before the Scottish independence referendum.
Ministers of the Crown have warned that independence would trigger the loss of defence contracts and jobs in Scotland. In its coverage of the news The Telegraph quoted Scotland’s Finance Minster John Swinney as saying he was seeking “urgent clarity” on the future of Govan and Scotstoun, which rely on UK defence contracts.

A ‘well-placed source’ has told the BBC that the UK government was “acutely conscious of the politics of the Clyde” ahead of the Scottish referendum. The UK government is reportedly planning to announce that it will need to spend an additional £800 million on the two Queen Elizabeth-class aircraft carriers, taking the total costs to over £6 billion or double the initial estimate.

Beyond the carriers, the first of which will enter sea trials in 2017, there are no new orders on the books of either of the two shipyards. Job cuts may not be made immediately though, because additional work on the ships is planned until 2015. BAE has a workforce of 3,200 at its Glasgow shipyards and 1,200 in Portsmouth.
A BAE spokeswoman has said that the company continued “to work closely with the Ministry of Defence to explore all possible options to determine how best to sustain the capability to deliver complex warships in the UK in the future”. Shadow Defence Minister Vernon Coaker is urging the government to clarify the future for the UK’s shipyards.
The Guardian noted that the potential job cuts would come after BAE Systems had experienced the biggest surge in UK shipbuilding since the Second World War, led by the £5.4 billion carrier programme and with BAE allocating the work across Portsmouth, Govan and Scotstoun. The next BAE project for the Royal Navy, the Type 26 combat ship, is not big enough to sustain all three shipyards, the newspaper observed. The defence contractor has yet to say which yard will get the job.
**Analysts on BAE Systems**
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Analysts at JPMorgan Chase decreased their price target for BAE Systems shares from 390p to 380p in a research report issued last Friday, with an underweight rating on the stock.
Citigroup analysts raised their price target on BAE Systems from 360p to 460p in a research note to investors on October 21st. Citi now has a neutral rating on the stock.
And in a note on 10 October, analysts at Bank of America kept their ‘underperform’ rating on the contractor, with a 412p price target on the stock.
BAE Systems currently has a consensus rating of ‘hold’ and target price of 412.67p.
**As of 8:29 UTC buy BAE Systems shares at 455.50p**
**As of 8:29 UTC sell BAE Systems shares at 455.00p**
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