THE proposed merger of BAE Systems with Airbus-owner EADS will create one of the world’s biggest aerospace companies but the deal is fraught with difficulties.

The tie-up appears to make a lot of sense. BAE needs access to the civil aviation market to replace orders lost as a result of defence spending cuts.

EADs covets BAE’s “special relationship” with the Pentagon.

If the deal goes ahead, EADs would own 60 per cent of the new company and BAE the rest.

But EADs is no ordinary company.

Fifteen per cent of it is owned by the French government, 7.5 per cent by regional governments in Germany, 5.4 per cent by Spain and 22.5 per cent by Daimler.

The British Government has a socalled golden share in BAE that allows it to veto deals that are seen to put the public interest at risk.

Adding the UK to the EADs mix will make the new group even more disfunctional.

Many of BAE’s 35,000 UK employees – including hundreds in the North- East – will be fearful that a super merger could put their jobs on the line. Getting rid of staff is easier in the UK than it is in France or Germany.

No doubt both companies will offer short-term job guarantees, but what of the future?

And how will a deal, with BAE as the junior partner, impact on Britain’s ability to compete on the world stage?

We will be giving up our national defence champion.

A mega-merger need not be a bad thing, but this deal requires very careful consideration.