By Sarah Young
LONDON (Reuters) - Britain's defence industry is pinning its hopes for long-term growth on a new unmanned aircraft after the government and BAE Systems announced on Wednesday that their Taranis project had surpassed expectations in trials last year.
Taranis is a 185 million pound program that was unveiled in 2010 and is jointly funded by the government, BAE and other engineering partners including Rolls-Royce and QinetiQ.
Though Britain claims to be the second-largest exporter of defence equipment and services behind the United States, with the sector employing 100,000 people in the UK, the outlook for the industry is tough amid shrinking government budgets and rising competition.
Investors have been worrying about BAE's growth prospects since December, when the United Arab Emirates pulled out of talks to buy 60 Typhoon jets, dealing a blow to the company and the British government, which had pushed hard to land the $9.8 billion deal.
Taranis, however, represents a new generation of combat aircraft that could help to underpin business beyond the current fighter jet offerings, such as the F-35 and Eurofighter Typhoon, and into the 2030s.
"It is an extension of our life," Chris Boardman, managing director of BAE Systems' military air and information business, told Reuters on the sidelines of an event on Wednesday.
"We produce combat systems. We're part of the F-35, we're part of the Typhoon programme, so it is the next phase. We need to be at the cutting edge of the next combat system and that's what Taranis will allow us into."
About the length of a bus but difficult to detect, Taranis is controlled from the ground by a human operator and can be used for surveillance as well as carrying out strikes. Test flights took place in Australia last August.
The partners say that Taranis, named after the Celtic god of thunder, is the most advanced aircraft ever built by British engineers.
"It will help safeguard British interests well into the future and it will help British industry retain its competitive edge," Philip Dunne, Britain's Minister for defence equipment, support and technology, said on Wednesday.
In 2012 Britain and France agreed to work together on unmanned aircraft and the pair announced plans for a 120 million pound two-year study into the technology at a summit last month.
"It wouldn't be surprising if, in due course, there are opportunities for other countries to get involved. Initially, this is an Anglo-French project," Dunne said.
EU leaders pledged in December to launch projects to develop a European drone between 2020 and 2025.
(Editing by David Goodman)