BAE Systems Reports Record Orders as European Defence Spending Surges
Weapons Manufacturer Expects Sales to Exceed £30bn Next Year Amid Rising Military Investments
Britain's largest defence contractor, BAE Systems, has announced record orders as European nations ramp up military spending in response to ongoing geopolitical tensions, particularly the Ukraine conflict.
A key player in the FTSE 100, BAE Systems reported annual pre-tax profits exceeding £3bn for the first time in 2024. The company anticipates sales will surpass £30bn next year, reflecting the surge in demand for military equipment and munitions.
The global arms industry has experienced a significant boost over the past three years following Russia’s invasion of Ukraine. This trend is expected to continue, particularly as European nations and the UK reassess their defence strategies in light of former US President Donald Trump’s indications that the United States may scale back its support. The US had been Ukraine’s primary military backer, but Trump recently blamed Ukraine for the war and held discussions with Russia without involving Ukraine, the EU, or the UK.
BAE Systems CEO Charles Woodburn acknowledged the uncertainty surrounding European defence spending but remained confident about future growth. “Given the current circumstances, it’s clear that spending will be higher than it is today,” he said.
The company has amassed a record order backlog of £77.8bn. Its stock price rose 1% on Wednesday morning to £13.50, continuing an upward trend. The shares reached an all-time high of £14 last summer and have more than doubled in value since the start of the Ukraine war, elevating BAE Systems' market valuation to over £40bn.
Woodburn emphasized that even if a peace agreement is reached, Ukraine will need to replenish its arsenal, including replacing worn-out artillery barrels. “They will look to companies like us for these supplies,” he noted.
To meet growing demand, BAE Systems is set to begin production of 155mm artillery rounds on newly established production lines by mid-2024. This expansion follows an order from the UK government in June 2023, after significant munitions were supplied to Ukraine. The new facilities and forges will increase total production capacity eightfold.
Regarding the potential supply of Typhoon fighter jets to Ukraine, Woodburn acknowledged that such a move was “feasible.” Reports suggest that the UK is considering this option as part of efforts to support a future peace settlement.
Looking ahead, BAE Systems remains integral to the Global Combat Air Programme (GCAP), a joint initiative between the UK, Japan, and Italy to develop a next-generation fighter jet. However, Europe is also witnessing parallel developments, with France, Germany, and Spain working on a competing project, the Future Combat Air System (FCAS).
Woodburn expressed support for greater collaboration in European fighter jet manufacturing, echoing sentiments from Airbus CEO Guillaume Faury, who has advocated for closer cooperation between the two programs. “For unmanned assets, there are clear opportunities. A lot depends on our governments’ willingness to work together,” Woodburn stated. While restructuring GCAP’s core team may become more challenging as it progresses, he suggested that additional countries could still join within the next few years.
As defence spending continues to rise, BAE Systems remains well-positioned to play a crucial role in equipping European forces for the future.
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