UNIONS and politicians reacted cautiously to news that BAE Systems is in merger talks with Airbus makers EADS which could create the world’s biggest aerospace and defence manufacturers.

BAE shares soared 11per cent after the announcement, which could result in a combine to compete with world civil aircraft giant Boeing.

BAE said a tie-up with European Aeronautic, Defence & Space (EADS) would form a ‘world-class’ firm in its sector, with combined sales of £60bn and around 220,000 staff. The merged group would employ around 48,000 in the UK alone.

A BAE spokesperson said: “BAE Systems and EADS have a long history of collaboration and are currently partners in a number of important projects, including the Eurofighter and MBDA joint ventures.”

The company said it was too early to confirm whether there would be any job losses, but stressed there was very little overlap between the two business activities.

Samlesbury union rep Phil Entwistle said he was informed about the talks in an email from chief executive Ian King yesterday.

He said: “The idea is to create one big world leader in defence and security. Up until the merger is finalised, we don’t know if it will have any effect on us. Anything else is just speculation.”

Chorley MP Lindsay Hoyle said: “I first heard about these talks a year ago and when we put it to the company they flat out denied they were taking place.

“Company directors at BAE have demanded a lot of loyalty from its Lancashire workers in recent times and I hope that loyalty is repaid when the real details of this merger are released.

“If this merger does not mean greater job security, and more jobs in Lancashire and the North West, then it is my view that it should not take place.”

Blackburn MP Jack Straw said: “Whether this is a good move for BAE depends entirely on the conditions of the merger, and what these conditions mean for jobs in Britain.

“BAE sold its 20per cent stake in EADS Airbus in 2006 which was a major mistake by senior management, as this gave them a way into the civil airline market.

“I have visited EADS headquarters in France and, to be brutally honest, this merger is only a good idea if the new company’s headquarters are in Britain and benefit the people of the North West.”

BAE said the proposed deal would be a merger, but would see BAE shareholders own 40per cent of the combined group, and EADS shareholders own 60per cent.

Under takeover rules, both firms have until 5pm on October 10 to announce a deal, or walk away.

Earlier this year BAE reported a 10per cent drop in half-year revenues after cut-backs in transatlantic markets and delays to orders for Euro-fighters to Saudi Arabia.