BAE warns of impact of flood damage at US electronics base

The British manufacturer said it was assessing the implications of serious flood damage at its Johnson City, New York electronics base following severe weather along the US east coast.

Elsewhere, BAE warned there was “significant uncertainty” over the level of future defence spending in the US as politicians mull over options for slashing the country’s huge budget deficit.

“Some near-term disruption to trading is anticipated as the United States’ administration again operates federal budgets under a Continuing Resolution,” BAE said.

BAE – which saw overall trading in the three months to October 11 meet expectations – last month signalled the end of production at its factory in Brough, Yorkshire, which currently employs 1,300 workers, and announced further cutbacks at sites across Britain. The group, which has sites across the UK including Filton, in Bristol, Leicester, Newcastle, Portsmouth, and Yeovil, said the flood damage in the US may see some sales deferred to 2012 but should not materially impact full year earnings.

Despite US budget cuts, BAE said it had won a £286m contract to participate in a 24-month technology development phase of the US Army’s ground combat vehicle programme. Looking ahead, the group said it was working on a proposal for the replacement of the US Air Force’s T-38 jet.

Andrew Gollan, an analyst at Investec, said: “Unsurprisingly the rhetoric is cautionary with respect to the outlook for defence spending.”

US Defence Secretary Leon Panetta had said on Tuesday that the Pentagon would have to cut outlays on personnel, benefits and equipment as it makes difficult choices required to reduce security spending by $450bn (£288bn) over the next decade.

Shares were broadly flat following the update yester- day.