BAE Systems said yesterday that it expects to cut more jobs this year as sales of military equipment dip, but the company's workforce on the Clyde appears to be safe – at least for now.
The defence contractor said in a trading update: “The group continues to anticipate a reduction in sales in 2011 as the volume adjustment in Land & Armaments is expected to complete and as the changes arising from the Strategic Defence and Security Review (SDSR) reduce activity in the UK businesses. The continuing actions to lower cost and improve efficiency are expected to benefit return on sales and mitigate the impact of that lower activity.”
But a spokesman for the company in Glasgow said: “This is not a reference to us”, referring to the company’s shipbuilding programme on the Clyde.
BAE Systems’ surface ships unit employs approximately 3700 people at its Govan and Scotstoun yards in the Glasgow area.
It is building sections of the giant aircraft carrier HMS Queen Elizabeth and Type 45 destroyers. Thales UK and Babcock are the other contractors involved in the carrier contract – the biggest shipbuilding project ever carried out for the Royal Navy.
The sections of the carriers are being constructed on the Clyde before they are taken to Rosyth and assembled in dry dock.
BAE Systems, Europe’s biggest defence firm, said in February that it expected full-year revenues to be dented by weakness at its unit which makes artillery and armoured combat vehicles, and accounts for around a quarter of group profits.
The company, which is involved in the production of F-35 fighter aircraft and Astute class submarines, has cut around 15,000 employees in the last two years in a bid to lower costs.
The Conservative-led Coalition Government last year cut the defence budget by about 8% to help reduce its budget deficit – hitting arms makers such as BAE, which makes around a fifth of its revenues in the UK.
Defence firms with exposure to the United States – where roughly half of BAE’s sales come from – have also been hit by a slowdown in US defence spending in recent months.
The US, which has the world’s largest defence budget, recently reached agreement on a financing bill for 2011 after having operated on a continuing resolution that funded the military at 2010 levels – about $20 billion less than its Defence Department requested for 2011 – since October.
BAE, however, said in its latest statement that the delayed approval of the American budget would be unlikely to have a material impact on its annual results.
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