Increased defence spending set to boost BAE Systems

BAE Systems says it is “well placed” to benefit from higher defence spending in Europe and other key markets.

The air division of the defence giant, which employs 10,000 Lancashire workers, reported 2021 as a year of increased sales, order intake and profit.

And in a first quarter trading update, the business said: “Our geographic diversity positions us strongly as many of the countries in which we operate have announced or are making plans to increase spending to counter the elevated and evolving threat environment on multiple fronts.”

It added: “In Europe, the significant step up in German defence expenditure is important for long-term defence funding.

“We see other nations increasing or likely to increase their defence budgets to address the threat environment and for NATO countries to move to, and even beyond, their two per cent of GDP commitments.

“We remain well placed through our positions on Eurofighter Typhoon, our shareholding in MBDA, our BAE Systems Hägglunds and Bofors businesses based in Sweden, through US Foreign Military Sales and we are pursuing a number of significant opportunities in the region.”

Europe is not the only key market where defence spending is rising. The statement added: “Our portfolio is well positioned to benefit from increased defence spending in Asia Pacific through our Australia business, which is already set to grow significantly due to our contracted positions and through export opportunities from our UK, US and Australian business to the region.”

Charles Woodburn, BAE Systems chief executive, said: “Trading in the first quarter has been in line with expectations with strong order intake and good operational performance being maintained.

“Looking forward, our diverse portfolio, together with our focus on programme execution, cash generation and efficiencies, are helping us to navigate the challenging operating environment in the near term, while positioning us well for sustained top line and margin growth in the coming years, alongside accelerating our ESG agenda.”

Full year sales increased from £20.9bn in 2020 to £21.3bn in 2021. This resulted in an increase in earnings before tax and interest from £2bn to £2.2bn. Meanwhile, the group’s order intake also increased from £21bn to £21.5bn.