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EDITIONS
Thursday, 12 December, 2002, 17:42 GMT
Contract delays hit BAE Systems shares
BAE Systems, the UK defence giant, lost nearly a quarter of its stock market value on Thursday.

Its shares closed 21% lower at 104 pence, having slumped to a nine-year low of 93 pence at one point in the day.

The company and the MoD are continuing to discuss the extent to which these two contracts can be modified

BAE Systems
BAE had warned late on Wednesday of cost-overruns and delays to defence contracts worth 4.3bn ($6.8bn).

The UK government has said it will not meet the cost of the delays on contracts to supply three Astute class submarines and 18 Nimrod aircraft to the Ministry of Defence (MoD).

A spokesman for the MoD said: "We are exploring these two contracts and looking at areas where there is scope to vary them in terms of value for money for the taxpayer and in the nation's defence interests."

Holding talks

In a brief statement, issued shortly before the stock market closed on Wednesday, BAE Systems said "additional issues" had arisen with the contracts and it had "become apparent that there are substantial schedule and cost implications".

These are important, established programmes that date back to the mid-1990s

Mark Stoker, International Institute for Strategic Studies
"The company and the MoD are continuing to discuss the extent to which these two contracts can be modified to the mutual benefit of the MoD and BAE Systems."

But it warned that talks would take some months and "no assurances as to the outcome can be given".

BAE shares had already fallen 20% on Wednesday before Thursday's slide.

Key contracts

In July, the government said the first of the three Astute class submarines would not be delivered until late 2006, a year behind schedule.

In February, the MoD had trimmed its order for 21 Nimrod anti-submarine aircraft back to 18.

But defence experts doubted that the contracts would be cancelled.

"These are important, established programmes that date back to the mid-1990s," said Mark Stoker at the International Institute for Strategic Studies.

See also:

28 Nov 02 | England
26 Nov 02 | England
14 Oct 02 | Scotland
12 Sep 02 | Business
11 Sep 02 | Business
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