BAE growth hit after defence budget cuts

City A.M. Reporter
Defence group BAE Systems said changes from the armed forces review would hit growth this year and reduce earnings per share next year.

"Changes from the Strategic Defence and Security Review (SDSR) are expected to result in some reduction in growth for 2010," BAE said in a statement.

The company said that a reduction in its financial planning assumptions resulted in a one pence reduction in earnings per share, per annum.

The government on Tuesday said it would delay renewing its nuclear deterrent and cut back its army, navy and air force as part of the harshest spending cuts for a generation, aimed at reducing a record budget deficit.

The armed forces review, the first since 1998, unveiled a military with fewer people, fewer ships, fewer aircraft, fewer nuclear warheads and a smaller budget.

Britain said the BAE-made Harrier aircraft would be retired from service but that the Tornado fleet, which BAE also makes, would be maintained.

Orders for nine of BAE's Nimrod MRA4 reconnaissance aircraft, due to start entering service this year, were also scrapped, while an order for Joint Strike Fighter jets – on which BAE is a partner – will be cut.

However, the Royal Navy said BAE could go ahead with an order to build seven Astute class submarines.

BAE, Europe's largest arms contractor, also said its outlook for 2010 remains subject to talks on the cancellation of an offshore patrol vessel programme by Trinidad and Tobago.

"Whilst the financial consequences (of the Trinidad and Tobago deal) cannot be definitively assessed at this time ... the group estimates a charge of up to £150m, before tax, may be required in its 2010 accounts," BAE said.