THE BOSS of VT Group, Paul Lester, has emerged as the frontrunner to become BAE Systems’ new chief executive, the top job in the British defence industry.

Senior City sources said Lester, 56, was regarded as favourite to replace Mike Turner, who steps down in August. The appointment is one of the most closely watched in business. BAE is not only behind Britain’s key defence projects, but is also one of the largest engineering employers and among the top 30 UK groups by stock-market value.

The new chief executive will face an immediate battle on defence spending cuts, and longer-term strategic decisions on whether BAE retains its presence in Britain, or shifts its centre of operations to America, where it is one of the largest suppliers to the Pentagon.

BAE’s board, led by chairman Dick Olver, has retained the headhunter Egon Zehnder to find Turner’s replacement.

Two internal candidates are understood to be Ian King, chief operating officer, and Walt Havenstein, the head of BAE’s American arm. Sir Kevin Smith, chief of the engineering group GKN, has also been cited as a contender, along with Colin Matthews, head of the BAA airports group.

The City sources say, however, that Lester is the leading contender. A former group managing director of Balfour Beatty, he is regarded as having performed strongly at VT Group formerly known as Vosper Thorneycroft. Shares in the company, which closed last week at 650p, have tripled in value in five years, and outperformed the FTSE All-Share by 61% in the past 12 months.

Lester has overseen a shift away from shipbuilding and into support services and private-finance-initiative deals. VT is a key player in two multi-billion-pound contracts that should close within weeks. The first will provide a new fleet of RAF tanker aircraft and the second will involve the transfer to the private sector of most of the RAF’s flight training.

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