Defence cuts to hit BAE growth

21st Oct 2010 07:13

Defence giant BAE expects to see a reduction in growth in 2010 due to the Strategic Defence and Security Review (SDSR) that was announced on Tuesday, it said today.The company said that, while it can help the government to achieve efficiency targets, it expects the SDSR to have a 'modest impact' on its UK business, resulting in a reduction in earnings of about 1p a share.Its air division will be impacted by the earlier than planned retirement of the Harrier Fleet from the Royal Air Force, BAE said, adding that the decision not to take the Nimrod MRA4 aircraft into service may result in some reduced production activity and elimination of longer term support opportunity.The government announced on Tuesday that eighty Harrier jump jets, which made a name for themselves in the successful Falklands war in 1982, are to be scrapped, leaving Britain unable to launch fighter jets at sea until 2019. The Nimrod reconnaissance aircraft programme has also been cancelled. BAE welcomed the restated commitment to continue building both Queen Elizabeth Class Carriers and said changes to the nature of operation and equipment associated with the second ship are not likely to be material. It also welcomed the commitment to the procurement of seven Astute Class submarines.In its land business, BAE Systems continues to support the British Army's heavy and medium armoured vehicle fleet and the announced changes are not material to the group, it said.The UK is not the only country where fiscal tightening is causing headaches for BAE. The company said its 2010 outlook is dependent on commercial discussions over Trinidad and Tobago's cancellation of its offshore patrol vessel programme. The US defence market continues to generate business opportunities despite budgetary pressures, BAE said.