BAE Systems secures UK order to boost output of battlefield munitions

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BAE Systems has secured new orders from the UK to boost production of munitions as western governments seek to alleviate a global shortage that is hampering Ukraine’s fight against Russia.

The £280mn agreement, which could increase in value to more than £400mn, will enable Britain’s biggest defence contractor to raise its production capacity of key 155mm artillery shells eight-fold. 

The 155mm ammunition is the standard for most Nato howitzers — long-range artillery launchers — including America’s M777 and France’s Caesar, both of which have been sent to Ukraine. The sheer scale of demand for ammunition and explosives from Ukrainian armed forces has depleted western government stockpiles and turned into a test of Europe’s industrial production capacity.

Defence executives have repeatedly warned that they need firm contracts from governments in order to be able to invest the significant sums needed to expand production facilities. Supply chain constraints coming out of the Covid pandemic have also delayed ramp-up plans.

Charles Woodburn, BAE chief executive, said the investment would enable the company to “significantly ramp up production and sustain vital sovereign capability to deliver cutting-edge munitions, whilst creating and sustaining highly-skilled jobs across the UK”.

The announcement comes as Nato allies are expected to agree a blueprint for multinational co-operation on procurement when they meet in Vilnius, the Lithuanian capital, this week. The so-called “Defence Production Action Plan” is also expected to urge countries to streamline standards to ensure interoperability between different nations’ weapons systems. 

Rishi Sunak, Britain’s prime minister, will use his visit to the summit on Tuesday to call on Nato members to spend a minimum of 2 per cent of their GDP on defence, an aspiration that was set out nearly two decades ago but which only nine out of 30 members achieved last year. 

He will call on the target to be considered a “floor not a ceiling”, which he will argue is crucial for defending against Putin in Russia.

Sunak will also highlight the UK’s role in supporting Ukraine. The prime minister announced £5bn of extra funding for UK defence earlier this year, to be used in part to replenish ammunition stockpiles. 

The new contract, which has been under discussion for months, builds on an existing £2.4bn 15-year partnering agreement between BAE and the Ministry of Defence which took effect in January this year. It will also enable BAE to ramp up output of other munitions.

BAE said the orders, which could increase to more than £400mn over time, would create more than 200 new jobs at its sites in the north of England and South Wales. The company said it was already investing in an additional 155mm machining line in Washington, Tyne & Wear, as well as a new explosive filling facility at Glascoed in South Wales.