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.