As BAE boss prepares to bow out, he issues stark plea

Legend: Sir Roger Carr leaves BAE with an order book of £53 billion and growing

Sir Roger Carr is a FTSE 100 chairman straight out of central casting, the epitome of a senior industrialist. He has led a string of boards, including Centrica, the owner of British Gas, pubs group Mitchells & Butlers, Chubb and Thames Water, as well as serving as president of employers’ organisation the CBI, deputy chairman of the Court of the Bank of England and chairman of the BBC Trust.

But he first came into the wider public consciousness just over a decade ago when, as chairman of Cadbury, he was on the receiving end of a takeover bid from US food giant Kraft.

The £11.8 billion deal touched a national nerve and led to reforms in the takeover rules.

Millions of people who would normally have no interest in the City were outraged at the idea that the Creme Eggs and Wispa bars – which, like Proustian madeleines, are the essence of nostalgia for a British childhood – were being sold off to the Americans.

Carr went on to become chairman of flagship defence company BAE Systems, one of the most important board seats in Britain. He has held the post since 2014 and will leave later this year.

He took over at a traumatic point for BAE in the aftermath of a failed £28billion merger with European civil aerospace giant Airbus.

The proposed deal, which would have meant the UK business being subsumed in a Franco-German behemoth, was highly controversial at the time.

Now, it is unthinkable. In a post-Brexit, post- Ukraine geopolitical landscape, it seems bizarre that the sale of a business so vital to our national security and defence was ever even contemplated. Carr believes that with war raging in Europe, BAE has never been more relevant to Britain.

‘We have the most dangerous world we have lived in for the majority of our lives. Complacency is dangerous. You can’t wish for peace, you have to protect yourself,’ Carr says. ‘BAE is so important for that, as well as the prosperity and economic security of this country.’

Shares have almost doubled since he took over, suggesting arguments made at the time of the failed merger that the company did not have an independent future were wide of the mark.

Just as there has been a rethink on takeover rules, Carr would like to see a fresh approach to the stance of ESG – environmental, social and governance – investors towards BAE and other defence companies.

BAE is currently blackballed by some ‘ethical’ investors but, he argues, Ukraine highlights their positive role in safeguarding democracies and standing up to tyrants. ‘It is essential to ensure we distinguish between highly-regulated, ethically-led and government-backed defence contractors from the very freewheeling arms dealers,’ he says.

‘These are two very different things. If you confuse them, and therefore damage the perception of the defence contractor, you undermine the country.’

Now 76, Carr started out in the 1980s as one of a trio of young corporate raiders at Williams Holdings, along with Brian McGowan and Sir Nigel Rudd. But it was his role at Cadbury, where he was a key player in one of the most hard-fought bids the City has ever seen, that thrust him to prominence.

Despite the resistance, the deal went through. Kraft duly slashed hundreds of jobs it had promised to preserve and moved the corporate tax residence to Switzerland.

Reflecting on it now, Carr says it was ‘very much head versus heart’ for him, adding that shareholders ‘made a very material gain.’ Subsequently, he campaigned for curbs in takeover bids for hedge funds, which had built up a near-30 per cent stake in Cadbury.

He supports the new National Security and Investment Act, brought in last year to protect strategically important companies against unwanted bids.

But, as well as chairing BAE, he is a senior adviser to US private equity firm KKR. That could strike some observers as contradictory since there has been a string of recent US private equity takeovers of British defence firms.

DOES he think those deals have been harmful to the national interest? ‘You cannot use one brush to paint all the pictures,’ he says, citing the example of KKR taking a large stake in German defence supplier Hensoldt, which it sold earlier this year. ‘KKR ran it impeccably with the full support of the German government,’ he says.

‘I’m sure there are examples that did less well and will have less happy endings.

‘You do have to be thoughtful. In today’s world you have to put a very strong ring around defence knowledge to stop it leaking into the wrong hands. This is why BAE still has a golden share [enabling the Government to block an undesirable takeover].’

He plans to continue his role with KKR after retiring from BAE, and will carry on as chairman of the trustees of English National Ballet, a role he has held since 2018.

‘The whole concept of battleships and ballet shoes seems an odd mix, but for me it has been very enjoyable,’ he says, adding that he relished working with ENB’s former artistic director and renowned ballerina Tamara Rojo.

Successor: Cressida Hogg will become the first woman to chair BAE

One of his aims, he says, is to dispel the elitist aura of ballet and take it to new audiences. ‘Our ticket prices are very affordable compared with football. It is ballet for all, we want to reach out to parts of the community that traditionally we would not have done.’ In that vein, he argues that BAE is important not only for defence, but also for levelling up.

The company employs around 37,000 people in the North West of England. It is a major provider of apprenticeships and last year recruited a quarter from ‘the most disadvantaged parts of the communities in which we operate’.

He wants to see the main political parties reach consensus on a long-term industrial strategy, which is probably a forlorn hope.

‘At BAE we plan over decades and we are putting down a legacy for those that follow us.

‘That is what has to happen in a political-industrial linkage, so we are not living in a fantasy world but there is a fundamental belief in the principles on which economic prosperity is built,’ he says.

The latest reported figures show the order book at BAE, including for submarines, frigates and aircraft, stands at around £53 billion and growing. The company is the main industrial partner in a recently announced alliance between the UK, Italy and Japan for a new fighter jet.

In the new Global Combat Air Programme, the Tempest project will be merged with Japan’s F-X to develop a new combat aircraft by 2035. As well as being important for the defence of the realm, it will have a major economic impact. Analysis by accountancy firm PwC found it would support 21,000 new jobs and add £26 billion to the economy by 2050.

‘Tempest is huge. It will create jobs of the highest quality for decades to come and skills that will be the envy of the world, in the North West of England.’

Carr makes no bones that he would stay on at BAE for longer, were it not against boardroom governance that says chairmen should vacate after nine years.

But, he says, he is handing over to a ‘very, very able successor’.

In a revolutionary move for a once unrepentantly macho company, that will be Cressida Hogg, the first woman ever to chair the aerospace giant.

Unusually for a man of his generation, Carr is a longstanding advocate of women in business.

Watching the career of his daughter Caroline, who is a partner at private equity firm Permira, has raised his awareness of potential barriers faced by women. ‘If you have a daughter who is highly able and motivated, it makes you very aware that not all women are given the opportunities,’ he says.

Several academic studies have shown male bosses with daughters have more understanding for women in the workplace, a finding that infuriates some observers who say they should all espouse equality, regardless of their paternal status.

Carr says appointing a female chair should not be ‘noteworthy’ or unusual’. ‘It should be just part of normal business.

‘The company today is so much more diverse, not just at board level but throughout the organisation. There is a drive for more and more young women to take positions of responsibility.

‘When I hand over to a woman, that mission will continue.’