BOSSES at BAE Systems have been urged to cement the defence giant’s position as one of the world’s leading technology players after the collapse of merger talks with a French rival.

Competing government interests have been blamed after a proposed link-up between BAE and continental contractor EADS was abandoned.

Bosses at the two defence companies insisted they were close to sealing a £28billion partnership, which would have affected 12,000 Lancashire staff at BAE’s Samlesbury and Warton plants.

But BAE officials said government shareholders in the respective operations could not reach a resolution, forcing them to scupper the planned alliance.

Now industry leaders and unions hope that with the creation of a new Enterprise Zone – and the support of Whitehall – the major employer can continue to thrive.

Blackburn MP Jack Straw said: “While there were many merits to the proposed merger, on good terms, the BAE board was correct to walk away from this deal. It would have created a company controlled by the French and German governments.”

The former Foreign Secretary also said the British government, as a key shareholder, would block any future advances from US giants such as Lockheed or Boeing.

Mike Damms, chief executive of East Lancashire Chambers of Commerce, said: “BAE is more than an employer at Samlesbury and Warton – it is integral to the culture and business environment in this area.

“It looks like we are now back to where we started so maybe it is time to cherish what we have got and I am sure that the BAE board will be looking to the future now.”

Terry Mellor, north-west area organiser for the GMB Union, added: “This is a decision of fine judgement and the BAE workforce will be relieved that the management did not rush into a situation that could have de-stabilise a very successful company.

“There were too many ‘ifs’ or ‘buts’ and grey areas which if the merger had gone ahead were areas causing serious concern.

“We hope that BAE will now focus on what they do very successfully and look to world markets for opportunities that will provide employment for their highly skilled workforce across the UK.”

Mike Clancy, of engineers and specialists union Prospect, said: “Thousands of skilled jobs have been lost at BAE over the last two years and we fear the loss of thousands more if BAE cannot expand its order book into new markets.”

BAE chief executive Ian King said: “We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders.

“We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world-class and complementary businesses to create a world-leading aerospace, defence and security group.” And EADS boss Tom Enders added: “It is a pity we didn’t succeed but I’m glad we tried.

“I’m sure there will be other challenges we’ll tackle together in the future.”

Shareholders had claimed they were ‘left in the dark’ regarding the deal and one of BAE’s principal investors, Invesco, had expressed reservations earlier this week about what impact the move would have on the firm’s US dealings.

The commercial and legal terms of the merger had apparently been agreed in principle, and potential cost savings identified.

But the blame has been placed at the inability of Downing Street and Paris to ‘reconcile’ their own defence requirements.