BAE reveals 'modest' hit from spending cuts

DEFENCE giant BAE Systems today warned growth in 2010 will be weaker than expected following the government's review of defence and security spending.
By The Newsroom
Published 21st Oct 2010, 10:30 BST

The company plans to work with the Ministry of Defence to address the implications of the changes but said it anticipated some modest impact on the performance of its UK business this year. It also announced a reduction in its financial planning assumptions for the following years.

The government's decision to scrap the Harrier and the Nimrod will impact on its military air division, although naval operations have benefited from a commitment to continue with the construction of two aircraft carriers and the go-ahead for an order to build seven Astute class submarines.

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BAE said in a trading statement: "The detail behind the changes will take some time to refine but the group welcomes the removal of a number of uncertainties which have been overhanging the business in recent months."

The company added that the cancellation of an offshore patrol vessel by the government of Trinidad and Tobago was also likely to impact on its performance, resulting in a charge of up to 150m in its accounts.

BAE has been steeling itself for the austerity drive with belt-tightening measures over the last year, including a net headcount reduction of around 7,000 staff and contractors in the year to date.

In the US, where BAE generates much of its business, the company said it continued to see a substantial number of opportunities, despite budgetary pressures leading to a drive for greater efficiencies in procurement.