In a formal statement this morning, the French Government described Australia’s decision to sign a new landmark security pact with the United States and United Kingdom as “regrettable” and “contrary to the letter and spirit of cooperation that prevailed between Australia and France”.

The deal is at the expense of the contracted and long-awaited $90 billion fleet of 12 submarines, which were to be built in Adelaide by French company Naval Group.

In a statement, Naval Group confirmed Australia had decided not to continue with the next phase of the submarine program, describing the move as a “major disappointment”.

“For the past five years, the Naval Group teams in France and Australia, and those of our partners, have fully mobilised,” the company said.

“They gave the best of themselves and Naval Group honoured all of its commitments.

“The analysis of the consequences of this Australian sovereign decision will be conducted with the Commonwealth of Australia in the coming days.”

Relations between the Federal Government and Naval Group had recently been strained by a bitter contract dispute over the next phase of work.

The dispute led to a funding freeze that meant Naval Group had to put on hold sending people to France for on-the-job training.

Following this morning’s announcement, the French Government issued a statement saying the new pact Australia signed with the United States and United Kingdom “only reinforces the need to raise the issue of European strategic autonomy”.

“The American choice which pushes aside a European ally and partner like France from a structured partnership with Australia, at a time when we are facing unprecedented challenges in the Indo-Pacific region… marks an absence of consistency that France can only observe and regret,” the country’s foreign affairs and armed forces ministers said.

But Prime Minister Scott Morrison this morning said France “remains an incredibly important partner in the Pacific”, which shared the same values as Australia.

“There is few if any country around the world which understands the importance of the Pacific and has been committed to the Pacific as France,” he said.

“I look forward and I hope to see us continue once we move past what is obviously a very difficult and disappointing decision for France.

“I understand that, I respect it, but as a prime minister I must make decisions that are in Australia’s national security interests.”

The scrapping of the Naval Group contract calls into question South Australia’s diplomatic and economic ties with France, following a concerted push by the former and current governments to leverage the deal to encourage French investment and migration to the state.

In May last year, the State Government wrote in a submission to the Federal Government that the Naval Group contract had “catalysed a significant increase in trade and investment dialogue between South Australian and French organisations”.

It wrote that in the 12 months to February 2020, South Australia’s exports to France included $120 million in “confidential” items and $3.5 million in copper cathode.

In June, the State Government announced the establishment of a $1.8 million trade office in Paris, which Trade and Investment Minister Stephen Patterson said would build on the “strong bilateral relationship” between South Australia and France.

The State Government has also supported the continuation of bilingual French-English education at Highgate School and Unley High School, where students have the choice to study either the Australian or French curriculums in a bid to encourage more French families to settle in South Australia.

Meantime, the private sector has also seen a surge of French investment, with French companies including Technicolour and Keolis Downer setting up offices in South Australia.

Honorary French Consul in Adelaide Sue Crafter told InDaily that news of the Federal Government’s decision to scrap the Naval Group deal came as a “shock”, but South Australia had “quite a large number of French companies based here that shouldn’t be impacted”.

“Because of the submarine project we have had a huge number of delegations from France – both government and business – looking at South Australia as a place to invest and so the attributes of South Australia are now better known and understood,” she said.

“We do now have the French schools as well as a whole range of soft infrastructure to support new arrivals from France and I think those things will remain.

“I think South Australia is seen as a good place to invest but also a safe place to live and I would imagine that the benefits of those attributes are now known and appreciated and hopefully we’ll continue to attract both French people and companies to consider Adelaide as a place to live.”

Crafter said she was unsure if or when French citizens working for Naval Group in Adelaide, or Australians working in France, would be required to return to their home countries.

Morrison said he “acknowledged the uncertainty that (the) announcement will generate” for current Naval Group employees – 350 of whom work in SA. 

He said the Federal Government wanted to keep those employees in Australia working for other defence projects.