Shipyard owner BAE's merger plan scrapped

The proposed merger of BAE Systems, which operates shipyards in Govan and Scotstoun, and EADS would have created a company with combined sales of £60 billion and more than 220,000 staff, with around 52,000 in the UK.

BAE Systems has more than 3000 employees in Scotland.

After days of political wrangling, the two companies were forced to ditch the bid, giving rise to fears over job security at BAE, which operates from 50 UK locations.

BAE chief executive Ian King said the company was "disappointed" but said it was "financially robust".

Unions, defence analysts and Labour politicians all raised concerns, saying that the merger would have created a stronger company and guaranteed jobs in the long term.

David Reeths, director of consulting at defence analyst IHS Jane's, said: "This will mean that job guarantees that would have been part of the deal will not be made. While the UK Government was seen to have supported the merger, the Government may face demands for more direct support to secure BAE's future."

The tie-up would have improved BAE's exposure to commercial markets when defence spending is declining.

BAE reported a 14% fall in sales last year as military spending in the US and UK was cut.

Unite urged the UK Government to strengthen its "golden share" in BAE by taking an active stake in the company to safeguard jobs and boost manufacturing. The union had been pressing for guarantees over jobs if the merger had gone ahead.

National officer Ian Waddell said: "A merger, with a jobs guarantee, would have created a strong new company that could have protected the UK's long-term interests."

Germany is understood to have dealt the final blow to the deal amid reports that German Chancellor Angela Merkel opposed the merger.

France has a direct stake in EADS, while German influence is held through a 22% stake owned by car maker and industrial group Daimler.

Ms Merkel and her government are thought to have insisted on a 9% stake.