BAE Systems has warned it faces uncertainty in its core US defence market.
In a trading update, released a day after £28m merger talks with its European rival EADS were scrapped, the defence giant said spending cuts and likely “limited trading disruption” at the end of this year was ‘clouding the outlook’.
However, the company, which employs 11,500 workers at Warton and Samlesbury, said overall business was in line with expectations.
BAE and EADS ended their merger talks on Wednesday after it was claimed the interests of French and German government EADS stakeholders could not be reconciled with the company’s objectives.
Chief executive Ian King said BAE was “obviously disappointed” not to reach a deal, but the business remained “strong and financially robust”.
BAE receives around 40% of its revenues from US defence work, but the military budget is being cut, possibly by as much as £375m over the next decade.
There is concern some big military programmes could be scrapped or pushed back due to deficit-reduction cuts and that the federal government is surviving on stopgap funding, called continuing resolution, until Congress agrees a budget.
BAE said: “Uncertainty as to how US federal deficit reduction will be implemented, including possible sequestration measures, continues to cloud the outlook for the US government defence budget.
“Some limited trading disruption is likely in the last quarter of the 2012 calendar year as the US government operates under a continuing resolution from October 1.”
The firm’s decision to enter talks with EADS was partly due to concerns about US revenues.
The company said it expected modest growth in overall underlying earnings per share for 2012, but this assumed a satisfactory conclusion to pricing negotiations with the Saudi Arabia government on the Typhoon Salam programme to supply Eurofighter Typhoon jet fighters.
It is also in talks with Oman to supply aircraft and support.