BAE Systems has revealed that more than 1,000 of its staff are sitting idle because of the partial shutdown in US government services.
Wrangling over raising America’s debt ceiling has caused the 10-day closure of parts of the US administration, freezing work in the many government departments including defence, as well as shutting museums and parks.
The defence giant said while the financial impact from the shutdown has not yet been “material”, the impasse will increasingly hurt its US business if it drags on.
BAE said about 1,200 US intelligence, security and support staff, who are typically embedded in government operations, were told not to report for work from October 1.
BAE paid their wages up until last Friday, but a spokeswoman said it “cannot continue that with no end date in sight”. They have not been redeployed.
The group has around 30,000 US staff who work on programmes ranging from cyber security to armoured vehicles.
The shutdown crisis hinges on Republican resistance to President Barack Obama’s landmark healthcare reforms.
The US is edging closer to a possible debt default as the prospect of the White House and Congress agreeing a deal to extend the administration’s borrowing limit by October 17 looks ever more doubtful.
The defence company has already been hit by stalled spending in the US, but said a share buyback drive should help deliver double-digit earnings growth this year, adding its outlook remains unchanged.
However, the group said profits will suffer this year if price negotiations over a Saudi Arabian order for fighter jets drag beyond 2013.
While BAE continues to expect a “satisfactory completion” this year to the long-delayed Salam talks, it said failure to agree higher prices with the Kingdom of Saudi Arabia for a historic contract for 72 Eurofighter Typhoon jets would hit earnings per share by 6-7p this year.
Meanwhile, BAE said it continues talks with the UK’s Ministry of Defence to ”balance naval surface shipbuilding capacity with future warship demand”.
It added international market activity remains “vibrant”, as it chases orders including a deal to supply Typhoons to the United Arab Emirates. It has booked £5bn of orders from outside its core UK and US markets so far this year.
BAE has bought back £134 million shares from a planned £1bn share repurchase programme, but said completing this relies on successful Salam negotiations.