Contract Update

BAE SYSTEMS PLC
11 December 2002


                                 RNS Statement

                   BAE SYSTEMS - Nimrod and Astute contracts
                                             
                                                                     11 Dec 2002

BAE SYSTEMS announces that additional issues have arisen in relation to its
Astute attack submarine and the Nimrod MRA4 aircraft programmes. BAE SYSTEMS has
been reviewing with the UK MoD the outlook for these contracts and it has now
become apparent that there are substantial schedule and cost implications.

The company and the MoD are continuing to discuss the extent to which these two
contracts can be modified to the mutual benefit of the MoD and BAE SYSTEMS.

Discussions with MoD are likely to take some months and no assurances as to the
outcome can be given. However, the company anticipates agreeing with the MoD the
principles to be applied in the envisaged contract modifications in order to be
able to assess any cost implications by the time of the company's 2002
Preliminary results announcement in February 2003.

Issued by:

BAE SYSTEMS plc

London


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