BAE Systems fears further defence budget cuts

Posted on 3 Aug 2012

Sales shrank by 10% at jet and tank maker BAE Systems for the first six months of 2012, falling from £9.22bn to £8.33bn on the back of defence spending cuts.

However, the company did manage to cut costs in its manufacturing processes to improve its profit margins and boosted the amount of orders it obtained from overseas.

Defence firm BAE Systems will start consultations today over plans to cut 620 jobs across the UK by the end of 2013. It is set to close a site in Newcastle that employs 360 people to manufacture Terrier armoured vehicles.

Non US and UK order intake increased to £4.3bn from £1.6bn in 2011, aided by the signing of an training aircraft project with Saudi Arabia worth £1.6bn.

BAE Systems stated that further reductions to the US defence budget remains likely.

It hopes to rebalance this by capturing further opportunities within India and Oman for its aircraft and submarine manufacturing. UK and US sales fell by £800m in this division.

Growing cybersecurity threats led to growth in that arm of company, with sales rising by £63m during the first six months of 2012 compared to the corresponding period the previous year.