The Atomic Weapons Establishment (AWE) is responsible for the design, manufacture and support of nuclear warheads for the United Kingdom.
According to its website, AWE is tasked to help the United Kingdom maintain a credible and effective minimum nuclear deterrent:
- To maintain the warheads for the Trident nuclear deterrent safely and reliably in service.
- To maintain a capability to design a new weapon, should it ever be required.
- To complete the dismantling and disposal of redundant warheads replaced by Trident.
- To develop the skills, technologies and techniques that could underpin future arms limitation treaties.
Outsourcing giant Serco, the firm that formerly held the management contract, reassured investors that the removal of the contract was unlikely to hit future profits. According to a statement from the firm:
“Serco announces that it was informed by the Ministry of Defence on Friday night that AWE plc, the entity controlling the Atomic Weapons Establishment, will transfer back under the direct control and management of the Ministry of Defence as from 30th June 2021. Since 2000, AWE has been managed by AWE Management Limited, in which Serco holds a minority interest of 24.5%.The other shareholders are Lockheed Martin (51%) and Jacobs (24.5%). Serco is proud to have been involved with AWE for the last 20 years, and will work with the other shareholders and the Ministry of Defence to ensure a smooth transition to the new arrangements.
We expect that AWE will make a contribution to both Serco’s Group Underlying Trading Profit and Profit After Tax of around £17m in 2020. Whilst our budgeting process is yet to be completed and the pandemic makes forecasting extremely difficult, assuming a smooth transition of AWE at the end of June 2021, we would expect both Group Underlying Trading Profit and Profit after Tax in 2021 to remain broadly in line with current consensus and at similar levels to our expectations for 2020, representing growth of around 35% over 2019.”
The Ministry of Defence have also issued a statement on the renationalisation, it reads as follows:
“In 1993 the Ministry of Defence (MOD) entered into a Government owned Contractor operated arrangement with Hunting-BRAE whereby Hunting-BRAE operated the Atomic Weapons Establishment (AWE) on behalf of the Government. In 1999, following a competitive tender, a new 25-year contract was awarded to AWE Management Ltd (AWE ML).
On the 1 July 2019 the MOD triggered the Successor Arrangements clause with AWE ML to consider alternative viable management options ahead of the current contract expiration. Following an in-depth review, the MOD concluded that AWE plc will become an Arms-Length Body, wholly owned by the MOD. The change in model will remove the current commercial arrangements, enhancing the MOD’s agility in the future management of the UK’s nuclear deterrent, whilst also delivering on core MOD objectives and value for money to the taxpayer.
The decision was taken in order to simplify and further strengthen the relationship between the MOD and AWE plc, enhancing the MOD’s ability to invest in the development of the workforce, technology and infrastructure, and therefore in the future of AWE plc. The MOD recognises the achievements of everyone involved with AWE and thank AWE ML and its shareholders for their support in stewarding the organisation through crucial phases of delivery and planning.”
The contract had initially been expected to run for 25 years.
Wow. I did not see that coming. Brilliant stuff. After decades of outsourcing and privatising everything that moves in MoD, from support services at bases to DERA/DRA to the Royal Dockyards to the RMAS, something is back “in house”
Pretty please, can we have the RARE’s back too please, and all the other R&D sold off so privateers can profit.
I think the MOD is realising that in many cases privatisation actually increases costs and long term risks as private companies keep healthy private margins but do not reinvest the amount of money they should be. The government enjoys cutting those huge public sector pension liabilities, unions and high absence rates, but when services are privatised the fees being charged still managed to dwarf all of that.
The hand of DC? Leaving aside all the doom merchants comments of what he wants to do with the military, even the Guardian supports his stated intentions that MoD procurement is a mess that needs reform. Could this be a part of that?
I’d like to see more detail of this. Billions have already been spent on modernising both Aldermaston and Burghfield, so it is not as if there will be no investment now they are renationalised.
Yes, interesting stuff and it could be that Cummings has a hand in it. A lot of ‘high heidyins’ who are coming up to leaving the Forces will be raging if their future earnings are to be curtailed by this stuff being kept more in house.
I wouldn’t bet on it having anything to do with Cummings, since the whole NHS track and trace has been outsourced at his direction rather than managed by the NHS and gone badly wrong. Not to mention the ferry company with no ferries, the satellite company that builds the wrong type, etc etc.
Reading between the lines of the announcement Serco are saying the account was loss making, so they may well have encouraged the termination of the contract.
Oh Steve…. you’ve brought me right back down to earth again. You could be right that this is something that Serco were more than happy to do although the way I read the ‘blurb’ was that it was still making them money.
Its a start though and while I think some infrastructure is fair game for business to play its part, this is one area that isn’t for me. I’ll tag prisons onto the that too. It just seems fundamentally wrong for private enterprise to be involved with some of things they’ve been allowed to.
We know the conservative party is massively against reversing privatisation, and so something must have gone wrong, I highly doubt this was a cost saving exercise.
Serco made an £8m profit on it last year.
Miserable value. Opportunity costs and all that…it seems they are more than happy to get rid of it.
Ferry companies can charter in ships for tasks, they don’t need to own ships. The RAF has no air to air refueling aircraft, it charters the voyagers. MOD chartered 144 ships for OP GRANBY deployment.
Yes, I think the government has tended to conflate the principle that privatising an inefficiently run organisation can force efficiency savings (true) with a broader belief that privatisation is inherently more efficient (false).
Difficult one. Rail is another example that should be re-nationalised but as long as we recognise the investments and improvements that have been made.
Could it be similar for Aldermaston?
I agree with rail, I’m a railwayman myself.
That was a VERY interesting article on the costs associated with renovating part of the Weardale Valley – RE Army Reserve unit comprising mostly Network Rail staff did it for a fraction of the time and cost quoted by… Network Rail.
Hence, I assume there are savings to be made but has being out of direct Ministry control allowed new methods and techniques to be introduced? Difficult one.
The issue is its rose tinted glasses, the rail was badly managed when it was under state control, just like everything else that is managed by the state.
The main reason that the trains are so badly run is that the government takes a huge income from the franchises and in turn sets caps to tickets. That has resulted in decades of under investments that won’t get solved by privatization.
Another Railwayman here. I think Rail will see a massive shake up in the next few years due to the decrease in commuter traffic. This trend will be unlikely to end with the (possible) end of Covid as a lot of people (including myself) have got very comfortable and productive working from home. We have already seen the government change all franchises to ‘Emergency Measures Agreements’ and on the Welsh Valleys Lines Transport for Wales have recently intervened directly to take over services due to predicted losses for the new operator.
Anyway back to Defence….
I’ve a few friends who work on the railway in Scotland and there is a view that the Scottish Government are desperate to nationalise the Railway through the backdoor by awarding the contract to the ‘arms length’ body that is CalMac. Something I’m quite keen on to be honest.
No, rail – i still have my rail models – is geo limited and with time will go to the way of dodo except for cargo up to certain point.
That rail inflexibility also favors strikes and political meddling.
Indeed, that never made any sense. Yes British rail needed to be scrapped but it simply needed replacing with a new body that was free of the waste and mismanagement of BR. Privatising it made no sense as you still had no choice on which company you travelled with. Privatisation works where there is wide and healthy competition not where a company has a monopoly on a particular journey.
Thank goodness.
I always thought the QinetiQ thing was madness too.
I’ll also just throw in my usual rant about the need for a UK (CANZUK?) organization that nurtures and delivers key strategic critical capabilities and resources.
“the need for a UK (CANZUK?) organization”
Concur. We have a joint Qatar / UK Typhoon squadron, and there are talks about AAR in this area too. So why not.
Indeed, This has to be one of the few decisions this Government has made that I actually think is entirely appropriate and sensible! Some things are good to privatise some things are not… Defence is not an area where you want your core strategic assets and services privatised. Lets do the same to the air tanker contract now please…
I hope this not just a one off for reasons not made public. I don’t care much who owns the equipment manufacturers so long as the manufacture is here and under sovereign control. If there is no existing capability, I would be happy to see us set up a new state owned arsenal to build the small arms and cannon that we now have to buy entirely from abroad. Absolutely agree that the privatising/outsourcing model is not right for defence.
So basically the MOD is cutting out the middle man
That’s the way I read it. The MOD will take over the management but not actually call the workers civil servants again.
That is an interesting snippet sooo, not wishing to ahem derail the thread but like Network Rail will AWE be counted on the national books? The Network Rail credit card based on investment againgst the regulatory asset base whammied the Govt with 30-40Bn of debt!
In some ways AWE was always on the national books. The sites are GOCO “Government Owned Contractor Operated” HMG/MoD have always maintained ownership of the infrastructure and their security is provided by MDP.
And the costs of modernisation are I believe part of the whopping 31 billion that the Submarines TLB gets in the DES 10 year plan.
Same applies to the varied ranges run by Qinetiq under the LTPA. They are still MoD owned.
Thank you.
There I think you put your finger on it. There was no way you could have reformed a lot of the highly unionised public sector organisations with very generous civil service pension and other benefits. So to a certain extent privatisation and offshoring have been used to reset things. There is a Thatcherite fallacy that tendering everything produces best value. For some things like tarmacing X meters of road it works perfectly. Or installing Y 1000’s lamp post fittings. That used to be done by the local Council, very inefficiently. For other things understanding the scope/risk is simply too hard.… Read more »