Europe's largest defence contractor, BAE Systems, has issued a significant warning that the ongoing record-breaking shutdown of the US government could potentially delay funding and payments for its contracts if the political impasse continues.
Potential Impact on Contract Funding
The UK's biggest defence manufacturer confirmed that while its extensive US operations have not yet suffered any "material" effects from the six-week shutdown, the situation could change before the end of the year. The company stated, "If the shutdown persists, delays to contract funding and timing of payments before year-end are possible."
BAE Systems, which operates major plants across the UK including a munitions factory in Washington, expressed cautious optimism about recent developments in Congress. The firm noted it was "encouraged by the momentum in Congress to end the US government shutdown, especially the positive actions of this week."
Economic Fallout and Political Progress
The protracted shutdown, now the longest in US history, has already inflicted substantial damage on the American economy. Official estimates reveal approximately 1.25 million federal employees have missed at least one or two salary payments, while thousands of flights have been cancelled and government contract awards have significantly slowed.
According to the Congressional Budget Office, the six-week closure is expected to reduce US economic growth in the fourth quarter by roughly 1.5 percentage points, effectively halving growth from the previous quarter. Although reopening is projected to boost first-quarter growth next year by 2.2 percentage points, forecasts suggest approximately $11 billion (£8.4 billion) in American economic activity will be permanently lost.
There are positive signs the shutdown may be nearing its conclusion, with the US Senate approving a spending bill that could bring closure. The matter now moves to the House of Representatives, where the lower chamber of Congress is anticipated to vote on the funding measure this week.
BAE's Strong Market Position and Future Outlook
Despite the potential disruption, BAE Systems maintains a formidable position in the United States, its largest geographical market. Last year, sales in the US soared by 17% to £12.5 billion, underlining the market's crucial importance to the defence giant.
The company, which manufactures advanced weaponry including missiles, artillery systems, tanks, aircraft, and warships, revealed it had secured more than £27 billion worth of orders so far in 2025, with the second half performing in line with expectations.
Looking ahead, BAE confirmed it remains on track with July's enhanced full-year guidance, positioned to grow sales by between 8% and 10% and underlying earnings by between 9% and 11%. The company also highlighted Norway's recent announcement regarding its intention to purchase Type 26 anti-submarine frigates, which is anticipated to generate a substantial order after 2025.
In a further positive development, BAE noted that in the US, "the president recently voiced support for the trilateral Aukus programme and momentum has continued to build around the architecture of the Golden Dome air and missile defence initiative, to which our technologies and capabilities are well aligned." The Aukus represents a multi-billion dollar submarine agreement between longstanding allies Australia, the UK, and the US.
