A SQUEEZE on military spending has hit BAE Systems after it reported a 10 per cent drop in half-year revenues.

The group, which has sites at Samlesbury and Warton, has suffered from cut-backs in transatlantic markets and delays to orders for Eurofighters to Saudi Arabia.

This contributed to a fall in sales to £8.3billion in the six months to June 30, down from £9.2million for the same period last year. Pre-tax profits also dipped from £691million to £655million in the same reporting periods.

However, the group said its order book grew by £900million to £40billion, driven by a £4.3billion increase in demand from outside the UK and the United States.

BAE said the outlook for defence spending in the UK had stabilised, with the group working on new aircraft carriers for the Government and plans for the next generation of nuclear-armed submarines. It hopes a contract to supply Saudi with a further 48 Typhoon jets will be finalised in the second-half of the year.

Earlier this year, it signed a £1.6 billion deal to supply the Saudis with Hawk jets, which helped save jobs at its factory in Brough, which had been earmarked for closure.

Other orders outside the UK and the US included a £500 million deal to supply armoured combat vehicles to Norway.

Chief executive Ian King said: “BAE Systems is operating in a challenging environment. The group continues to demonstrate sustained earnings performance and is successfully winning new business.”