AWE to be renationalised

The government announced on November 2nd that they planned to break their contract with the commercial consortium currently running the Atomic Weapons Establishment (AWE) and run it as an arms-length body. The two AWE sites at Aldermaston and Burghfield are used to research, design and manufacture nuclear warheads for the UK’s Trident missile system. A further site, AWE Blacknest, is used for seismic monitoring to detect nuclear weapons tests.

AWE was privatised in the early 1990s. From 1993 the site was run by Hunting-BRAE until 2000, when the contract was awarded to the current contractors, AWE Management Ltd. (AWE ML). AWE ML is owned by Lockheed Martin, Serco and Jacobs Engineering. Jacobs joined the consortium in 2008, taking the stake previously held by British Nuclear Fuels. In 2016 AWE ML was restructured, following Ministry of Defence (MOD) concerns about the performance of the consortium, with Lockheed Martin taking a 51% stake and the other two companies both owning 24.5%. Prior to 2016 the three owners had an equal share in AWEML.

The government retains ownership of the AWE sites, which are managed through AWE plc., a subsidiary company of AWE ML. AWE ML owns all the ordinary shares in AWE plc, but the MOD have retained a special share in the company which allows them to exercise control over the contract and retain ownership of the sites. Renationalisation will happen through AWE plc becoming an arms-length body wholly owned by the MOD. AWE plc will continue to operate the AWE sites, hold the nuclear site license. It will continue to be regulated by the Office for Nuclear Regulation (ONR). The change of ownership will come into effect on 30th June 2021.

The contract with AWE ML was due to run until 2025. The MOD have not disclosed whether a penalty fee will be paid to the consortium for breaking the contract early. The official announcement of the decision said that renationalisation would enhance “the MOD’s ability to invest in the development of the workforce, technology and infrastructure” at AWE.

In a statement AWE ML said they were “proud of our achievements and the significant progress we have made developing this unique, scientific and engineering national asset” and pledged to ensure a smooth transition.

AWE Aldermaston has been under enhanced regulatory attention from ONR since 2013, a situation that was originally only expected to last for two years. AWE Burghfield has also been under enhanced regulatory attention since 2013, except for a year in 2015 when it was moved to a lower regulatory category.

In March 2019 ONR concluded that AWE had not made sufficient progress for a planned inspection that would have paved the way for the two sites to move back into standard regulatory attention. According to the government’s renationalisation announcement, the process of terminating the contract began in July 2019.

AWE ML have also been widely criticised for mismanagement in their infrastructure upgrades, most notably the MENSA warhead assembly facility which is six years behind schedule and expected to cost £1.8bn, more than twice its original budget.

In November 2018 AWE plead guilty and were fined £1m for an incident where an employee suffered electrical burns. Analysis by NIS found that dividend payments to the three owners of AWE ML between 2000 and 2015 were over £800m. The owners were paid dividends of £81.7m in 2018 and £71.8m in 2019.

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