The Pentagon has cancelled a defence contract that would have secured 11,000 British jobs, after fierce political lobbying by American companies.

Airbus, the European aircraft manufacturer, won a contract to supply the United States Air Force (USAF) with refuelling tankers this year. The wings for all 179 aircraft would have been built in Britain in a deal worth more than £4 billion to the British economy.

Robert Gates, the US Defence Secretary, said yesterday that he was cancelling the contract because it had become too “emotional”.

Defence analysts said that the Pentagon seemed to be succumbing to political pressure to protect American jobs. Boeing, the giant US-based aerospace company, lost the contract to Airbus and is believed to have spent millions of dollars lobbying politicians in Washington to get it recompeted.

Bernie Hamilton, the national officer for the Amicus union, which represents Airbus’s British workers, said: “Politics has overtaken the right thing to do and the British Government needs to reflect on that.”

The $35 billion (£20 billion) tanker contract is the largest defence project in the world and is the USAF’s highest priority. Its existing fleet of Stratotanker refuelling aircraft have an average age of 47 years and urgently need to be replaced.

Northrop Grumman, a US-based defence company, and EADS, which owns Airbus, won the contract with their A330 aircraft and the wings were due to be made at the Broughton factory in North Wales. This work would have provided Broughton with many years of additional work and helped to secure 11,000 jobs at one of Britain’s largest manufacturing sites.

The deal was so important to British industry that both Tony Blair and Gordon Brown have promoted the Airbus aircraft in discussions with the White House.

When Airbus won the tanker contract this year, Boeing protested and the Pentagon was forced to recompete it. This was planned as a six-month process with a decision made before a new president took office.

Now the Pentagon has cancelled the contract and will delay recompeting it until after the presidential election.

The new competition will take place next year, which will give Boeing time to offer a newer, larger aircraft under the contract.

One defence industry insider said yesterday: “Just how many chances does Boeing get to win this contract? They lost it fair and square, but now they get to offer a new plane to see if they can win with that. This competition has become very dirty.”

British defence officials have said that if the Pentagon keeps blocking European companies from large projects, there could be retaliation.

Amicus said yesterday that it would take up the issue with Peter Mandleson, the European Trade Commissioner. Mr Hamilton said: “Is it fair for American companies to compete openly for defence contracts in this country when they are so protectionist in their own?”

Barack Obama, the Democratic presidential candidate, has questioned the decision to give the initial contract to Airbus and analysts believe that a President Obama would ensure that Boeing won the tanker deal.

John McCain, his Republican opponent, has said that he believes the Pentagon should make the best decision for taxpayers. He cancelled an earlier tanker deal for Boeing and subsequently it emerged that the company had offered a job to the Pentagon official who had the job of arranging the terms. The official and a Boeing executive were jailed over the affair.

Harry Nourse, of Bank of America Securities, said: “Given McCain’s history in regard to this programme, one might handicap a slight advantage to Northrop/EADS should he be elected.

“If Obama wins, you could see some implementation of the ‘Buy America’ philosophy, which might favour Boeing.”

Mr Gates said yesterday: “It is my judgment that in the time remaining to us, we can no longer complete a competition that would be viewed as fair and objective in this highly charged environment. The resulting cooling-off period will allow the next administration to review objectively the military requirements and craft a new acquisition strategy.”

Lost opportunity

$35bn Value to Airbus of US Air Force’s refuelling tanker contract

179 Number of aircraft that would have needed wings made in UK

11,000 Number of British jobs that would have been guaranteed by the contract

£4bn Value of the contract to the British economy

Source: Times Database

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