SDXAY Sodexo (PK)

The U.K. government Tuesday announced the results of a strategic defense and security review, initiated earlier this year to cut spending to address a gaping budget deficit. It cut or changed several major defense projects as the Conservative-Liberal Democrat coalition made rebalancing public finances a priority.

The following is a summary of the major U.K. defense projects affected and the main companies involved in each project.

The U.K. government will continue with plans to build two new aircraft carriers, although the first carrier will be delayed by several years and the second will be held in extended readiness, or mothballed to save money.

Main companies affected: BAE Systems PLC (BA.LN) and France's Thales SA (HO.FR) are building the new carriers.

The Harrier aircraft will be retired from service in the Royal Air Force, but the Tornado fleet will be maintained as it is better able to serve continuing operations in Afghanistan.

Main companies affected: BAE Systems maintains the Harrier and Tornado fleets and the loss of the Harrier will have an impact. However, the impact would have been worse if the larger Tornado fleet had been scrapped.

Orders for nine Nimrod MRA4 reconnaissance aircraft, due to start entering service as a replacement for the Nimrod MR2 from this year, will be scrapped.

Main companies affected: The aircraft are built by BAE Systems, and Rolls-Royce Group PLC (RR.LN) was to provide the new engines for the MRA4, as it does for the predecessor aircraft.

The U.K.'s order for the Joint Strike Fighter has been cut to about 40 aircraft from about 140, although there still is an option to buy more later, according to people familiar with the matter. The delay of the new carriers means the U.K. can also order some carrier versions of the JSF, which are cheaper.

Main companies affected: Lockheed Martin Corp. (LMT) builds the JSF. Northrop Grumman Corp. (NOC) and BAE Systems are partners. Rolls-Royce and United Technologies Corp.'s (UTX) Pratt & Whitney are the engine partners.

The Royal Navy will go ahead with building seven Astute class submarines, a program that had been in doubt.

Main companies affected: BAE Systems is building the new submarines.

The building of a new defense training base has been scrapped because the project is unaffordable and can't be completed on time. The U.K. government will instead look at other proposals for rationalizing U.K. defense training.

Main companies affected: QinetiQ Group PLC (QQ.LN) and French company Sodexo SA (SW.FR) jointly led the consortium that was preferred bidder for the first part of the training review program. QinetiQ said it has incurred costs of GBP37 million on the project and would now write these off as an exceptional item.

-By Steve McGrath, Dow Jones Newswires; 44-20-7842-9284; steve.mcgrath@dowjones.com

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