Revival on BAE's radar as countries look to their defences

Obama has unveiled plans to boost the Pentagon's funding by 8 per cent

The defence giant BAE Systems has forecast a recovery in US military spending after revealing that sales fell across the group last year.

BAE has been hit by cuts in government defence budgets since the financial crisis but its shares have risen by around 10 per cent this year on hopes the situation could change.

President Obama unveiled plans to boost the Pentagon’s funding by 8 per cent in his latest budget proposals this month, with conflicts in areas like the Middle East intensifying. But analysts expect the final increase to be lower.

“Defence spending remains a high priority in a number of international markets,” said BAE’s chief executive, Ian King. “We believe that US budgets are now relatively stable, with some early indications of a modest improvement in 2016.”

BAE’s sales were down more than 8 per cent to £16.6bn last year and its earnings fell to £1.7bn, compared with £1.9bn in 2013.

Mr King called for “clarity on defence spending” after the next general election in the UK. He also said the company expected to grow its cyber-security division this year, having bought the US-based SilverSky for £144m last year.

Howard Wheeldon, a defence analyst, said last night: “While no one is about to suggest that the future will not be challenging for all those companies that engage in defence, it is at last starting to look brighter.

“BAE Systems has not been standing still, and year after year it has been making itself more competitive and efficient. That process is, of course, to be considered an ongoing one.”