Bae Systems Accelerates Factory Investment Across U.s. And Europe To Turn Record Defence Backlog Into Higher Production

Senior executives set out the investment drive during BAE Systems’ first-half 2026 earnings call. Chief Financial Officer Brad Greve said the company was prioritising internal investment, with higher capital expenditure and research and development spending being used to accelerate organic growth.

“Our priority is investing internally, you’re seeing higher CapEx, you’re seeing higher R&D,” Greve said. He said management saw better returns from accelerating growth tied to BAE Systems’ £84 billion backlog than from pursuing acquisitions at current market valuations.

Chief Executive Charles Woodburn said the programme was not limited to adding physical capacity. BAE Systems has also invested in digital tools, greater production automation and improvements to site infrastructure.

“We’ve invested in digital tools, increased production automation, and improved site infrastructure to strengthen how we operate and deliver for our customers,” Woodburn said. Those measures form part of the company’s wider effort to improve how it manufactures and delivers equipment.

The U.S. business is one of the main areas of investment. Tom Arseneault, President and CEO of BAE Systems Inc., said more than $4 billion had been invested in its workforce and facilities since 2020, adding 2 million square feet of capacity while supporting research and development and workforce growth of about 14%.

That spending is continuing. BAE Systems expects capital expenditure in its U.S. operations to rise 40% year on year, driven largely by an acceleration in munitions production.

The company has also approved another $250 million for capital projects in its Electronic Systems business. The investment will support production ramps on THAAD, AMRAAM and Tomahawk.

In Europe, MBDA plans to invest €5 billion between 2026 and 2030. Woodburn said the programme would modernise manufacturing sites, substantially expand production capacity, strengthen the supply chain and support the development of next-generation products and technologies.

The investment comes against a sharp increase in MBDA’s order book. The missile business secured €6.5 billion of new orders in the first six months of 2026, taking its backlog to €48 billion, or almost eight times annual revenue, according to Woodburn.

Greve said the €5 billion programme would cover far more than additional factory space. Spending will extend across sites and buildings, infrastructure, machining capacity, tooling, test equipment and the digitalisation of internal systems.

“Obviously, the EUR 48 billion backlog that MBDA has, it requires a lot of investment to deliver,” Greve said. He said the aim was to give the business the industrial capability needed to work through that backlog as quickly as possible.

BAE Systems is also adding capacity in Sweden. Arseneault said investments at Hägglunds were significantly expanding production capacity and manufacturing capability, with management expecting a 400% increase in production.

At Bofors, production rates have already risen three- to fourfold across several product areas. Arseneault said the business was acquiring new facilities and expanding production lines amid strong demand for artillery and munitions.

BAE Systems has also acquired a Swedish supplier of precision mechanics and component machining products and is integrating the business into Bofors. Arseneault said the acquisition would strengthen the supply chain and support increased deliveries of core systems.

At group level, capital expenditure reached £400 million in the first half of 2026. Greve said the spending reflected continued investment to support growth and efficiency, with management continuing to put internal expansion at the centre of BAE Systems’ capital-allocation strategy.