THE Government last night admitted it was powerless to stop Britain's top defence company moving abroad.

There had been speculation that BAE Systems could move its base overseas because of falling profits in the UK.

Defence Procurement Minister Lord Bach told MPs there could be no guarantee the BAE would stay in Britain as it was a private company and the Government could not force it to stay.

He conceded relations between the Government and BAE had been strained, although he said they were not as bad as they had been portrayed.

He told the company's 40,000 British workers the Government would fight to keep their jobs and BAE in this country.

Lord Bach was giving evidence to the House of Commons' defence committee, which is carrying out an inquiry into procurement policy.

He said: "I have to always remember our interests, as the Ministry of Defence, are to make sure our Armed Forces are equipped properly and taxpayers' interests are looked after properly. Theirs is to their shareholders."

Asked if he thought the company would stay in Britain, Lord Bach said: "I cannot guarantee that. It is my belief it will continue to play an important and leading role in manufacturing and support of British defence equipment, but BAE and other companies are absolutely entitled to trade elsewhere."