BRITAIN’s top defence executives are to press the government to mend fences with Saudi Arabia or risk seriously harming British industry.

The Defence Industries Council, chaired by Rolls-Royce chief executive Sir John Rose, is to voice its concerns this week in a letter to Des Browne, the defence secretary.

The group’s intervention comes after a week of mounting speculation that Saudi Arabia could ditch a £6 billion contract to buy Eurofighter Typhoon combat aircraft because of anger at a Serious Fraud Office (SFO) investigation into arms deals between the two countries.

Although the Typhoon deal is a government-to-government arrangement, the main beneficiary would be BAE Systems, the prime contractor for the Typhoon and on the earlier Al-Yamamah deals with the Saudis.

Some BAE executives believe the new Saudi contracts could eventually be worth £40 billion over 20 years.

The Saudis are understood to have suspended negotiations on the Typhoon deal while the row is resolved. The SFO recently stepped up its investigation by attempting to obtain details of Swiss bank accounts allegedly held by members of Saudi Arabia’s ruling royal family.

The council’s letter is unlikely to make any detailed reference to the Eurofighter contract, but is expected to draw the minister’s attention to the reliance of Britain’s defence exports industry on the Gulf.

British companies earn about £5 billion a year from defence exports, about half of which comes from countries around the Gulf — and half of that from Saudi Arabia.

Most of Britain’s big defence groups have some exposure to the Arab kingdom.

Rolls-Royce, for example, makes the engines for the Typhoon, while Smiths Aerospace contributes some of its key systems. VT Group, the shipbuilding and support-services company, hopes to land up to £1 billion of orders from Saudi Arabia.

The council was set up to provide a top-level forum for strategic issues affecting the defence industry. As well as Rose, its members include Mike Turner, chief executive of BAE Systems, Gordon Page, chairman of Cobham, Paul Lester, chief executive of VT, and Alex Dorrian, chief executive of Thales UK.

BAE declined to comment on the row last week, other than to say it was co-operating with the SFO inquiry. But sources close to the company said the Saudis were “furious”. “It has gone beyond sabre-rattling — this is sabres being brandished,” said one source, going on to suggest there was a case for Lord Goldsmith, the attorney-general, to intervene to protect Britain’s national interest.

Defence industry sources suggested the Saudis could even buy a rival combat aircraft, France’s Rafale.

Others think the crisis has been overstated to exert pressure on the government to stop the SFO inquiry. “I don’t think we are at a point of complete breakdown, but it is true to say that things will definitely be delayed,” said one defence analyst.

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