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World News

UK retakes control of atomic weapons contract from Lockheed Martin, Serco group

LONDON (Reuters) - Britain’s defence ministry will take back direct control of the operations and development of the country’s nuclear weapons from a consortium of Lockheed Martin, Serco and Jacobs Engineering in June 2021, Serco said on Monday.

The three companies have managed the entity called AWE Management, which controls the Atomic Weapons Establishment, since 2000, with Lockheed Martin having 51% and Serco and Jacobs holding 24.5% each.

Serco said it was told by Britain’s Ministry of Defence (MoD) late on Friday that AWE plc would transfer back under the direct control and management of the MoD as from June 30, 2021.

Based in Aldermaston in southern England, AWE maintains the warheads for the Trident nuclear deterrent and is required to retain the capability to design a new weapon, should it ever be required.

Shares in Serco fell 13% in early deals on Monday after the company said it would lose the contract.

The company said AWE was expected to contribute about 17 million pounds ($22 million) to both underlying trading profit and pretax profit in 2020.

It said, however, assuming a smooth handover of the contract next year, it expected profit in 2021 to remain broadly in line with current consensus and at similar levels to our expectations for 2020.

Sky News, which first reported the news, said it was not clear if the companies would receive compensation for the termination of the 25-year contract, which was due to run until 2025.

Analysts at Jefferies said they expected some compensation was likely as the consortium was now meeting its targets after a period of underperformance about five years ago.

The MoD did not immediately respond to a request to comment.

Reporting by Paul Sandle; editing by Sarah Young

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