British taxpayer liable ‘for billions’ over Qatar fighter deal

Leaked Treasury document reveals fears UK could be left guaranteeing the deal for 24 Typhoons

The first payment for the Typhoons had been expected in July, however this deadline passed as Qatar was still seeking a $4 billion loan to make the first payment. EPA/SAC ED WRIGHT RAF / BRITISH MINISShow more

The British government could find itself on the hook to the tune of "billions of pounds" should the sale of 24 Typhoon jets to Qatar falls through and Doha defaults on the agreement, a leaked document for Britain's Treasury has warned.

A deal was struck in December last year for Qatar to buy the supersonic jets during a visit to Doha by Defence Secretary Gavin Williamson. The deal was worth £6 billion (Dh28.34bn). It was the largest purchase of the plane for more than 10 years.

But the Treasury memorandum leaked by an official standing in Downing St said the British taxpayer could end up having to cover much of the cost of the deal if Qatari efforts to raise money to pay for the fighters from the international capital markets came to nothing.

The first payment had been expected in July, but this deadline passed as Qatar said it was still seeking a $4bn (Dh14.69bn) financing arrangement to make the first payment. BAE officials told The National on Tuesday that the company had no update to provide on the statement to the London Stock Exchange that the first payment was expected to be made before September 30th.

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The deal, which includes a package of weapons, pilot training and maintenance, involves UK Export Finance (UKEF), the government’s credit agency, guaranteeing the costs to protect arms manufacturer BAE Systems from taking on too much financial responsibility. The document shows that Qatar not only wanted Britain to finance the bulk of the cost of the deal, it also wanted to use British guarantees to reduce interest payments on transaction. Officials have demanded that Liam Fox, the Secretary for International Trade provides a finding that the extraordinary provisions have been undertaken in the national interest.

The warplanes will be built at the defence company's plant in Lancashire and will secure thousands of jobs at the company and along the supply chain.

The leaked document shows concern at the possibility of a default as well as the financial engineering required by the demands.

“The transaction amounts to an unprecedented level of support from UKEF to one buyer, skewing the UKEF portfolio by concentration about 25% of their portfolio risk in one transaction,” it said.

The National reported in July that the deal had hit initial snags before the visit to London by the Emir of Qatar, when the first delay was announced.

"Initially, the payment was expected around now but [has now been pushed] back to the third quarter on financial records, perhaps late August, so the deal can go through," a source with knowledge of the contract told The National. "We don't know why they need to do this [get the loan], it is their internal process that we are not party to, but we are still confident of payment and expect the deal to go through."

BAE Systems employs about 5,000 people in the UK to build the fighter jets, mainly at Warton in Lancashire. The Eurofighter Typhoon projects supports about 40,000 jobs in the UK and deliveries were expected in 2022.

BAE chief executive Charles Woodburn said the deal signalled a long-term relationship with Qatar and its armed forces. The Eurofighter Typhoon entered service with the RAF in 2007 to replace the ageing Tornado fleet.