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BAE-led consortium wins £250m UK combat aircraft contract

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A group led by BAE Systems has won a £250m contract from the Ministry of Defence to progress the development of the UK’s next generation of combat aircraft.

The contract, for the concept and assessment phase of the jet, marks a critical step to the launch of the Tempest programme, seen as the centrepiece of Britain’s combat air strategy.

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Success of the programme is viewed as crucial if Britain is to secure the future of its £6bn-a-year combat air sector and its 18,000 jobs, as production of the Eurofighter Typhoon, an Anglo-French-Italian-German enterprise, winds down.

BAE is working with Rolls-Royce and MBDA as well as the UK arm of Italy’s Leonardo on the Tempest programme. The concept and assessment phase will allow the partners to shape the final design and capability requirements of Tempest.

Announcing the contract during a visit to BAE’s Warton site in Lancashire, Ben Wallace, defence secretary, said it marked a “momentous step in the next phase of our future combat air system”.

“Boosting our already world-leading air industry, the contract will sustain thousands of jobs across the UK and will ensure that the UK remains at the top table when it comes to combat air,” Wallace added.

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News of the contract award came as BAE announced it was launching a share buyback programme of up to £500m and increasing its interim dividend by 5 per cent after a strong performance in the first half of the year.

Britain’s largest defence group also raised its guidance for the full year, saying that it expected underlying earnings per share to grow by 3 per cent to 5 per cent over last year’s results.

BAE said group sales in the first half of the year rose by 6 per cent on a constant currency basis to £10bn. Underlying earnings before interest and tax rose by 27 per cent to £1.03bn. It will pay an interim dividend of 9.9p a share.

Charles Woodburn, BAE chief executive, said the performance “underlines our confidence in the full-year guidance for top line growth, margin expansion and three-year cash targets”.

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