The proposed £28bn merger of defence giants BAE Systems and EADS is off, sources said today.
Unions believed the link-up would have created a strong company to guarantee jobs in the long term.
The merger would have created a defence titan with combined sales of £60bn and more than 220,000 staff, with around 52,000 employees in the UK alone
There had been reports that the French, German and British governments were at loggerheads over the level of state ownership of any combined firm.
EADS chief executive Tom Enders and Ian King, his counterpart at BAE, must decide if enough progress has been made in talks over Government shareholdings to pave the way for a possible deal.
The merger would create a defence titan with combined sales of £60 billion and more than 220,000 staff, with around 52,000 employees in the UK alone.
It would instantly leapfrog America’s Boeing to become the market leader.
France has a direct stake in EADS while German influence is held through a 22% stake owned by car maker and industrial group Daimler. Reports suggest Germany is insisting on taking a 9% stake in the enlarged group to match France’s holding.
But British politicians have voiced concerns over the level of Franco-German ownership when the UK would have no direct stake.
Defence Secretary Philip Hammond warned it was a “red line” issue for the UK that France and Germany reduced their stakes, stressing that the Government was prepared to use its so-called golden share in BAE to veto a deal unless its conditions were met.
BAE employs more than 6,000 workers at its factory in Warton with more staff throughout Lancashire.