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The West faces years-long battle to rearm, warns BAE Systems

BAE
BAE says it had amassed a record £70bn backlog of orders by the end of last year - Stringer/Reuters

Western countries face a years-long battle to rebuild their defence industries as they scramble to rearm in the face of Russian aggression, the boss of BAE Systems has said.

Charles Woodburn warned that ramping up production of munitions, guns and vehicles “takes time”, after post-Cold War cuts to European defence spending forced companies to scale back their capacity.

BAE on Wednesday said it had amassed a record £70bn backlog of orders by the end of last year, as global tensions spurred demand for weapons and military equipment.

In Europe, governments have been urging arms manufacturers to increase production of ammunition as fast as possible, so they can continue to support Ukrainian forces against Russia while also replenishing their own diminished stockpiles.

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But that effort has so far taken longer than hoped, with the European Union currently on course to deliver only half of the one million 155 millimetre artillery shells it had promised Kyiv by March.

Asked whether manufacturers were able to meet demand, Mr Woodburn said: “What we [manufacturers] are all doing is adding capacity and we’ve said since the beginning of the conflict in Ukraine that you can add capacity just by adding people and getting more out of your existing footprint - that might give you, at best, maybe double your output out of a facility.

“But of course, what people are looking for now is multiples of that, particularly on munitions, and that then requires investments around machinery, footprint, foundries, and all of that takes time to put into place.

“With the best one in the world, it’s a year and a half or two years by the time you’ve built that. We’re working as rapidly as possible, but it does take a bit of time.”

For its part, BAE has ramped up production of Nato-standard 155mm shells at its factory in Washington, Sunderland, following new orders from the Ministry of Defence.

The site’s output has already been doubled with extra shifts but BAE is ultimately aiming to increase the figure eight-fold through investment in new factory lines.

Mr Woodburn added that defence companies needed “a clear picture of requirements” over the long-term from western governments, amid questions over future levels of support for Ukraine.

American lawmakers are still grappling with whether to send a fresh aid package to Kyiv, while in Europe there are concerns that a Donald Trump victory in the US presidential election could leave the continent supporting Ukraine on its own.

It came as BAE said it won contracts worth £38bn in 2023, including deals related to the next generation of the UK’s nuclear deterrent submarines, the AUKUS defence pact and combat vehicles being bought by central and eastern European countries.

The company is benefitting from a fresh push by Nato members to re-arm amid the second anniversary of Russia’s attack on Ukraine, as well as concerns about Chinese aggression towards Taiwan.

More recently, European capitals have also been shaken by comments from the former US president - and likely Republican presidential candidate – Mr Trump, who warned that America may no longer come to the aid of countries that failed to meet Nato’s 2pc target for defence spending.

Against this backdrop, Mr Woodburn said the company was receiving a steady drumbeat of orders come in as governments in Europe, Asia and the Americas hunkered down.

He said: “Many of the big programmes that have been driving our growth are not Ukraine-related.

“But what we have seen, as a result of the elevated threat environment globally, is that governments are moving defence up their spending priorities.”

For example, he pointed to orders BAE and its subsidiaries have received from Poland for upgrades to the country’s air defence systems, a £1.8bn order from the Czech Republic for about 250 CV90 infantry fighting vehicles and a £322m contract to build around 230 BvS10s all-terrain vehicles for Germany.

Meanwhile, the UK could potentially benefit from the resumption of production of the M777 Howitzer, a gun being heavily used by Ukraine’s military, following a £14m deal struck with the US aimed at helping Kyiv with repairs.

On Wednesday, BAE posted sales of £25.3bn for last year, up from £23.3bn, and free cashflow of £2.6bn compared to £2bn previously, both of which were slightly better than analysts had predicted.

On the back of the strong orders, BAE hiked its full-year dividend from 27 pence per share to 30 pence - taking the payout to £909m.