US vice president JD Vance told European leaders they must step up their defence spending - Thomas Kienzle/AFP via Getty Images
Nato faces a “paradigm shift” after JD Vance warned that Europe must pay for its own security, a leading British defence industry boss has warned.
Charles Woodburn, the chief executive of BAE Systems, said the defence industry was ready to ramp up production to deter the threat from Russia, although he said many governments are yet to act on pledges to increase military spending.
Mr Woodburn said: “There’s no question, it feels like quite a profound change and a paradigm shift.
“In terms of how that evolves – in terms of Europe’s thinking, Nato’s response and what the sense is of the new number to be aiming for – I think we’ll learn more in the coming couple of months.
“There’s lots of rhetoric but that has not, as yet, translated into a clear set of budgets that we will be looking for in order to make those plans that we need.”
On Wednesday, BAE said rising geopolitical threats around the globe had led to £34bn of sales last year, taking its backlog of equipment orders to a record £77.8bn.
The FTSE 100 giant, which is Europe’s biggest defence company, makes everything from nuclear-powered submarines to artillery shells and Typhoon fighter jets.
And with tensions running high in Europe, as the US seeks to broker a peace deal between Russia and Ukraine, BAE is predicting at least another £30bn of further sales in 2025.
That will partly be influenced by an ongoing defence review in the UK, with Sir Keir Starmer’s Government preparing to confirm when and how it will get to spending at least 2.5pc of GDP – amid pressure from Donald Trump and others to go much higher.
Asked how quickly BAE would be able to ramp up production if defence spending were increased to higher levels, Mr Woodburn said: “Well, [the spending target] makes a big difference to us and the UK. But we can handle it.
“And frankly, unless we end up in a hot conflict, the best thing to have is a strong deterrent.
“The growth to whatever the number ends up happening over several years and, on the kind of numbers that have been talked about, I’m confident we can meet that challenge.
“If we know what the ultimate goal is, I’m confident that we can deliver the capability.”
Production in certain areas could be scaled up much more quickly, for example when making ammunition and drones.
But Mr Woodburn warned that other, larger equipment will take longer.
Volodymyr Zelensky met BAE boss Charles Woodburn in August 2023. The company’s order book has swelled amid the war
Within Western defence circles, there is concern about the amount of time companies are taking to build ships, submarines and aircraft – with a US Navy report warning that Chinese shipbuilding capacity has grown to more than 600 times that of America.
BAE itself has also suffered delays to production of the UK’s Type 26 frigates in Glasgow, which are running a year late and are expected to cost more than £200m more than originally planned.
Meanwhile, building up enough mass to deter or fight a conflict with Russia or China in future would require greater use of cheaper, faster-to-build unmanned platforms such as drones, Mr Woodburn said.
He added that BAE was now Europe’s biggest drone producer outside of Ukraine, following its recent takeovers of British firms Malloy Aeronautics and Callen-Lenz.
“We are producing a lot of drones now and the ability to scale those up – we have real capability there,” Mr Woodburn said.
“That’s very different to scaling up some of the big platform parts of our business, which, if we ended up in a full-blown conflict – and heaven help, none of us want to be in that position, but if we did – that is a different thing to scale up for.
“But the smaller, the flowing capabilities, the drones, missiles, and so on, absolutely, we can scale up, and have been scaling up pretty rapidly.
“The truth is, all the war gaming that we have done shows that you need a combination [of big platforms and drones]. You can’t do it with just cheap, off-the-shelf capabilities. It’s the combination.”
With some European countries including Germany having purchased extra Typhoon jets to bolster their air forces, he also said BAE stood ready to produce more for the UK should the Ministry of Defence require it.
Typhoons have been produced at BAE’s Warton factory, near Preston, for more than 25 years but Britain’s last order was placed in 2009, with no new aircraft ordered since.
The last jet made for the RAF was delivered in 2019, although work continues on components for other countries in the Eurofighter consortium.
Mr Woodburn said: “Typhoon is a very, very capable platform, as the Royal Air Force will tell you.
“Part of the reason for that is we have produced, as a consortium, 60 aircraft a year.
“We’re currently only producing somewhere in the mid-teens per year. So there is capacity there, and if you need additional capability quickly, the Typhoon is still a very, very capable platform – particularly when you combine it with some of the high-end missiles … which give you beyond-line-of-sight capabilities.”
BAE shares have surged by more than 15pc higher following Mr Vance’s remarks to the Munich Security Conference last week.
The company said it received new orders of £33.7bn in 2024, down from £37.7bn the previous year.
