Outlook: Van Miert's radar locks on to BAe

LONDON AND Brussels look like they are on a war footing again, this time over the British Aerospace-Marconi merger. Even though the deal is an all-British affair involving two defence companies, the European Competition Commissioner, Karel Van Miert, has locked onto the target.

Mr Van Miert is a zealous regulator whose no-fly zone seems to get bigger by the day. He has therefore decided that the competition aspects of the deal merit examination in Brussels. In Westminster and Whitehall, meanwhile, the hackles are rising. Defence mergers are supposed to be one of the few areas where Brussels surrenders its powers of investigation to national competition authorities.

In the case of BAe and Marconi, the British government is in a delicate position. Whatever gloss Alistair Campbell may chose to put on it, it is clear that Tony Blair would have preferred to see pan-European consolidation taking place rather than the national champion Sir Dick Evans and Lord Simpson came up with. BAe and Marconi will not, therefore, automatically get an easy ride from regulators here.

But it would be understandable if the UK government weren't a little suspicious of the motives of the European Commission in wishing to examine the deal. The way Brussels colluded in the stitch up which allowed Electricite de France to take over London Electricity showed the Commission at its worst. Brussels cleared the deal in advance and then ignored the legitimate grounds cited by the UK authorities for wanting regulatory authority back.

This time Brussels has alighted on the trivial civil competition concerns raised by the BAe-Marconi merger to justify its interference.

Behind the scenes, it would not be surprising to discover that the big guns of Germany and France have been laying down a blanket of artillery in the direction of Brussels. The BAe-Marconi deal leaves both Daimler Benz Aerospace and Thomson CSF in the cold which is not something the politicians in Bonn or Paris like very much. Even though they may not be able to stop the deal, they can make life uncomfortable for BAe and Marconi.

But the logic says the final arbiter should be London which will probably clear the deal after a little huffing and puffing. The MoD may not like the idea of there being less competition for its custom. But at least it has the Americans to keep BAe-Marconi on its toes. Unlike its continental counterparts, Britain has not always fallen for defence contractors who wrap themselves in the national flag.

The Treasury might like it even less if BAe or Marconi jumped into bed with the Europeans since every defence procurement battle would become a foregone conclusion.