The UK Government will take back control of the Atomic Weapons Establishment (AWE) following a written ministerial statement by the Secretary of State for Defence Ben Wallace.
Under the move, management of AWE – which designs, manufactures and supports the UK’s nuclear weapons – will return to the Ministry of Defence (MOD) after over two decades of privatised management.
AWE is currently run by a triumvirate of Lockheed Martin, Serco and Jacob’s Engineering, with Lockheed holding a majority stake in the management consortium.
Serco received notification of the decision from the MOD to take back ownership of the organisation last Friday evening. The MOD anticipates it will take back control of the organisation by the end of June 2021.
AWE management was privatised in 1993, under this AWE entered into a ‘Government-owned Contractor operated arrangement’. In 1999, AWE Management Ltd (AWE ML) won a contract to manage the organisation.
Lockheed Martin owns 51% of AWE ML, with Serco and Jacob’s Engineering owning 24.5% each.
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The MOD is taking control of the organisation back in-house to ‘simplify and further strengthen the relationship’ between the MOD and AWE.
In the statement confirming the decision, Wallace wrote: “Under the revised arrangements, AWE plc will become an arms-length body wholly owned by the MOD. It will continue to be managed by a world-leading team and a new Board will be appointed by the MOD.
“The new business model will see AWE plc continue to draw on private sector specialist support to strengthen capability as well as playing a key role in managing capital projects and contracts. This approach is recognised as best practice in other major complex programmes.”
The decision follows the triggering of a ‘successor arrangements clause’ in the contract in July 2019, which enabled the government to ‘consider alternative viable management options’ ahead of the contract’s end.
Wallace’s statement added: “Although the existing arrangements have brought stability to the organisation the MOD has concluded that AWE will revert to a direct government ownership model.”
Following the announcement, Serco’s share price fell by 12%. In a statement, the company said: “Serco is proud to have been involved with AWE for the last 20 years, and will work with the other shareholders and the Ministry of Defence to ensure a smooth transition to the new arrangements.”