A group of British deputies tasked with scrutinising defence policy announced on Monday an inquiry into the possible merger of BAE Systems with EADS.

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The Defence Committee, made up of MPs from across British political parties, said the inquiry spanning October and November would examine the impact of a tie-up on British defence, "including the protection of sovereign capabilities."

It comes as Berlin said that Germany and France were in "intensive" talks with each other, European aerospace giant EADS and British arms maker BAE Systems regarding the possible €35 billion ($45 billion) deal.

The proposed deal has raised major concern in Britain on fears that it would put a key strategic company in foreign control.

It has also sparked worries over Britain's political relationship with the United States, from where BAE wins almost half of its business.

"The (British) Defence Committee is today announcing its inquiry into the possible merger of BAE Systems with EADS," a statement said on Monday.

"The merger of two such large defence contractors would have a significant and strategic impact on their relationships with UK, US and European governments.

"It could also radically alter the defence industrial base in these countries. The inquiry will examine the likely impact of such a merger on UK defence including the protection of sovereign capabilities and the nature of the defence industrial base," the statement added.

BAE Systems and the European Aeronautic Defence and Space Company (EADS) revealed this month that they were in talks to form a global aerospace and defence leader that would compete more effectively against US rival Boeing.

Crucially, however, the proposed transaction would give BAE 40% of the proposed enlarged group and EADS the majority 60% stake.

Under the plan being discussed, the newly merged group will issue special golden shares to each of the French, German and British governments, to replace their current ownership structures.

Britain has a special share in BAE but does not get involved in the day-to-day running of the business.