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Gaza and Ukraine wars behind record profits at British arms firm BAE Systems

The company's CEO said instability was driving military spending, as it recorded pre-tax profits of $3.4bn
A model of the Tempest fighter jet that will be produced by BAE Systems and its partners (AFP)

British arms manufacturer BAE Systems has posted record profits for the year 2023, the firm announced in its latest annual earnings report, published on Wednesday.

BAE reported pre-tax profits of £2.7bn ($3.4bn) on sales of £25.3bn for the year ending December 2023.

The results come amid a big jump in the firm's share price since the start of the war in Ukraine, with shares breaching the £1,200 threshold in February. They stood at around £600 when Russia launched its invasion in February 2022.

Charles Woodburn, BAE's chief executive, cited rising instability across the world as a reason for increased defence spending.

"In a year where we saw rising instability across Europe, the Middle East and other parts of the world, it really brings into focus the vital role we play in protecting national security," he said in a statement released on Wednesday.

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BAE's products include fighter jets, drones, submarines, military computer systems and ammunition.

While the conflict in Ukraine has been the biggest driver for defence spending in recent decades, the war on Gaza is also fuelling fears of a wider global conflict.

Rising military spending

The war started on 7 October 2023 when Hamas-led Palestinian fighters attacked Israeli military bases and civilian communities, killing at least 1,140 people.

Retaliatory Israeli attacks have killed close to 30,000 Palestinians, the vast majority of whom are women and children. BAE makes parts for some weapons used in the attacks, including the F35 jet.

Pro-Palestine protesters have targeted BAE Systems' factories for the alleged use of its weaponry by Israel, including at several sites across the UK in December.

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BAE's rivals, including US firm Lockheed Martin, have also posted strong profits in 2023, close to $7bn.

The threat of the wars in Ukraine and Gaza expanding to include western states is driving an increase in military spending in the West.

In Ukraine, the Russian army still holds most of the country's eastern territory, despite tens of billions of dollars being ploughed into helping Kyiv repel the invasion.

In the Middle East, Israel's war on Gaza risks expanding to Lebanon and beyond, as regional armed groups allied to Israel's rival, Iran, launch low-intensity attacks against Israel or its allies.

In Lebanon, the armed movement Hezbollah regularly attacks Israeli positions on the southern border, while Israel frequently retaliates with air strikes.

In Yemen, the Houthi movement is involved in a maritime conflict with western powers, including the US and UK, as it targets ships in the Red Sea believed to be carrying cargo to Israel.

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