BAE merger with EADS must defend British interests, Hammond warns A Eurofighter Typhoon under construction at BAE's military jet factory in Warton, Lancashire. BAE Systems must prove that a $48bn (£30bn) merger with EADS defends British interests and jobs before receiving the go-ahead from the government, the defence secretary has warned. Speaking in Afghanistan, Philip Hammond indicated the state would uphold its rights under a "golden share" in Britain's largest defence contractor and demand assurances that teaming up with the owner of Airbus will benefit the national economy and not compromise security. "The British government will have to be satisfied that this is in the UK's national interest, because we have a special share in BAE systems," he said. We will want to be reassured not just about the security implications but about the implications for the future allocation of work to the UK. It's not just military work but Airbus work. Hammond's comments echoed those of trade unions and MPs, who have asked BAE Systems and EADS to ringfence about 52,000 British manufacturing and engineering jobs from any redundancy schemes after announcing plans to create an industrial powerhouse. In Britain it would range from construction of the British nuclear submarine fleet in Barrow-in-Furness to the building of Airbus A380 wings in Broughton, north Wales, and aircraft carriers in Portsmouth. Sources close to the deal stressed that the logic of the transaction is not driven by redundancy-funded cost savings, but the threat of job losses has emerged as a point of contention as well as the political implications of a deal that cannot proceed without the blessing of governments including those of the UK, France and Germany. Despite the concerns on security and jobs, Hammond indicated that the government supports the merger, with both companies working to a deadline of 10 October to thrash out a deal. "We are not luddites," said the defence secretary. We recognise that BAE Systems has big challenges in a marketplace where most of the customers are reducing defence budgets. So sticking our heads in the sand and saying we would rather things just carry on as they were is not necessarily a very realistic response. We have to engage with the realities that the company faces and one of those realities is that our budget is smaller, the US, French, German, everyone's budget will be smaller and the company has to respond to that. Tony Burke, assistant general secretary of the Unite trade union, which represents 20,000 of BAE's 35,000 UK employees, said he was appalled by the lack of consultation with the workforce before the merger announcement. He said unions would use Brussels legislation to press for a full study of the social and economic implications of the deal. Asked about reassurances from sources close to the transaction that it would be positive for UK jobs and was "not about redundancies," Burke said: "We have heard that one before. I have dealt with mergers going back many years and, based on those experiences, we will have to take that with a pinch of salt. BAE has already shed thousands of jobs following the government's strategic defence review. The Prospect union, which has 700 members in BAE's shipbuilding and munitions units, said it was concerned that EADS and its Airbus civil aerospace arm would dominate the enlarged group while allowing specific areas of BAE's manufacturing base to atrophy. "It suggests that they might pull out of or divest themselves of other parts of the business," said Steve Jary, Prospect's national secretary. Sources close to the deal said unions should support the combination. This is about big, long-term, hi-tech industry. This is actually growing the future of advanced manufacturing in the UK," said one source. Without giving direct assurances on jobs, both firms have stressed the complementary nature of their businesses, with BAE focusing on defence and EADS on civil aerospace. Nonetheless, MPs added to the calls for reassurances on BAE, the UK's largest manufacturing employer. Mark Menzies, Tory MP for the Fylde constituency in Lancashire, base for BAE's military jet operations, which employs thousands, said: "In the event of this merger going ahead, I want to ensure that the military air division of the company retains its headquarters in Warton." Lagardère, a significant shareholder in EADS, said on Thursday that it would examine closely any tie-up before accepting a deal. The French media and aerospace group owns a 7.5% stake in EADS, with the French state bringing total Gallic ownership to 22.35%. Lagardère said: "The Lagardère group intends to ensure that all consequences associated with the proposed EADS NV-BAE Systems plc merger are taken into consideration in determining the terms and conditions of the proposed transaction before it consents to the deal." The Lagardère holding in EADS is part of a pact designed to maintain the balance between the company's French and German shareholders. The German carmaker Daimler holds 22.35% but is in the process of selling part of its holding to a state-backed bank. Edmund Salvesen, an analyst at Brewin Dolphin, said the reaction of the US government should be the companies' main concern. The Pentagon is BAE's biggest customer and buys the company's Bradley armoured vehicles, with BAE also involved in the construction of the F-35 joint strike fighter, a US government-led project. Whatever arrangements there are, these will need to address US sensitivities about technology transfer, which has become a major concern over the years, especially regarding the transfer of intellectual property.