BAE mega merger called least for now

Laura Kuenssberg

Former Business Editor

Defence manufacturer BAE Systems says it has called off discussions on its proposed merger with EADS. Credit: PA Wire

The EADS and BAE mega merger is not going to go ahead, at least for now. In the next few minutes the two companies will confirm that they have been unable to proceed.

There certainly was a rubik's cube of complications - political, security, national, and commerical concerns. In the last 24 hours there has been a lot of talk about how the Germans in particular were being obstructive.

ITV News' Business Editor Laura Kuenssberg reports:

Perhaps given all the competing interests it was always ambitious that the companies thought they could get it done. But at root, the managements of the different companies believed the deal made business sense for one very simple reason.

Defence budgets, particularly in the US are shrinking. BAE's customers therefore have less cash to spend. By contrast, more and more planes are being built. So one clear way for BAE to secure its future and, 35,000 jobs in this country alone, was to get together with a big aviation company, EADS.

Without the deal going ahead no doubt, BAE looks more vulnerable. One defence expert has just told me it does mean that in the medium term more jobs in this country will inevitably go.

It is not impossible that after a six month period the companies could look again at the chance of getting together.

In fact the formation of EADS between Germany and France was painful and took a long time.

But for now the journey to create the world's biggest defence company has come up against a brick wall.