UK’s Sub-Based Nuclear Deterrent Under Threat as US Puts Squeeze on London to Sell Defence Co

British and US officials have long touted the “special” political, economic, and defence relationship between the two nations, with the UK often characterised as the US’ “closest ally in Europe”, or “America’s aircraft carrier”. But beneath lie centuries-old rivalries, antagonisms, and animosities which occasionally bubble up to the surface.

Washington is reportedly threatening to limit defence cooperation with the UK if Business Secretary Kwasi Kwarteng attempts to block the 2.6 billion pound ($3.2 billion US) sale of Ultra Electronics Holdings, a major British defence electronics company, to Advent International, a US-based private equity firm.

US intelligence sources, speaking to The Telegraph, accused Kwarteng of “jeopardizing future partnerships” between the US and Britain over a national security probe by the Competition and Markets Authority (CMA) he ordered on Ultra’s sale.

Kwarteng launched the investigation and froze the Boston-based hedge fund’s buyout of Ultra last August, following reports that a number of British defence sector companies had already been sold or were in the process of being taken over by US competitors who proceeded to hollow them out, sell off assets, and lay off employees. “The UK is open for business, however foreign investment must not threaten our national security”, the minister wrote in a tweet announcing the probe.

Ultra specialises in the manufacture of sonar, radar, and advanced communications equipment, including technologies crucial for the operation of Britain’s Trident missile-armed Vanguard-class submarine-based nuclear deterrent.

A senior US congressional intelligence source told The Telegraph that “at a time when allies like the US and the UK are looking to deepen defence cooperation, we need to remove obstacles, not create them”.

“Congress has already taken action to ease some of the restrictions on British defence companies operating in the US. But instead of adopting a similar approach, it seems the British government is determined to impose unnecessary obstacles that make it harder for American defence firms to operate in the UK”, the source complained.

Kwarteng was given a preliminary report on Ultra’s sale earlier this year, with talks proceeding with Advent International on a compromise agreement in April. It is in the secretary’s power to order a “Phase 2” review of the acquisition, which may ultimately result in the deal being blocked for good.

A senior US official indicated that the British government was treating American companies in a manner that was “not fair”, and stressed that unlike the UK, “we make no distinction between a British investor in an American company on national security grounds”.

The Boris Johnson government introduced new rules in January granting the state more powers to intervene in foreign takeovers of British firms, including the authority to block such acquisitions if they are deemed to threaten national security. Government officials and media assured that the rules were designed to stop “hostile powers” like China. However, US officials have privately complained that the powers could be applied against American companies as well.

In October, Kwarteng ordered the CMA to also probe the acquisition of defence company Meggitt by US rival Parker Hannifin for $8.7 billion. The British company manufactures a range of components for Typhoon jets, including wheels and brakes, and has contracts to provide small-arms training for troops.

Media revelations of the behind-the-scenes business wrangling comes at a time when London and Washington are trying to promote an image of a united front of defence and intelligence cooperation against rival powers like Russia, China, and Iran.

Last year, Australia, the UK, and the US signed a trilateral security agreement known as AUKUS – gypping France out of a $65 billion submarine deal with Canberra, and promising to provide the Land Down Under with technological assistance to build advanced nuclear-powered attack subs. China, Russia, and North Korea slammed the security agreement, which also provides potential basing rights for UK and US warships in Australia, warning that it may spark a regional arms race.