BAE Systems to rescue struggling companies

BAE Systems is poised to rescue suppliers and other aerospace companies that are struggling because of the crisis in the aviation industry. 

Chief executive Charles Woodburn has said the defence giant is open to buying firms to ‘strengthen its portfolio’, even though coronavirus is squeezing its own finances. 

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The collapse in air travel has hammered many of the UK’s aerospace groups. 

Rescue: Chief executive Charles Woodburn has said the defence giant is open to buying firms to ‘strengthen its portfolio’

Demand is not expected to pick up soon and the collapse is sending shockwaves through firms in their supply chain, who often also make defence parts or technology. 

The crisis risks putting them out of business, creating a major headache for BAE, Britain’s largest defence company. Woodburn, who has been its head since 2017, said: ‘We are very mindful of our supply chain. On the defence and aerospace side, there is overlap and many defence suppliers also supply into civil aerospace. They are facing some tough times. 

‘We will see what the opportunities are. We are always keen to strengthen our portfolio.’ 

BAE said acquisitions were not the only option, and it was considering other ways to support suppliers. Last month it handed out £100m of early funding to five companies working on the Navy’s next warship, the Type 2 frigate, which BAE is building. 

Around 120,000 people are directly employed in the UK’s aerospace sector, which generates £34billion in exports a year. There are fears that important British companies could be picked off by foreign bidders – particularly the Chinese. But Prime Minister Boris Johnson has pledged to introduce rules to limit Chinese investment. 

Woodburn said: ‘I am sure the Government will be very thoughtful on this.’ 

Takeovers under his leadership include the purchase of Prismatic, which is developing solar-powered drones. And it recently completed the £1.7billion takeover of two US firms. 

Last week BAE, which has seen its share price fall by 13 per cent in 2020, said it would reinstate its full-year dividend and also committed to a half-year payout. The pandemic will make a small dent in profits, which fell by 11 per cent to £689m in the first six months of the year. 

Despite the slump in demand from commercial plane makers, Government defence spending has held up well.