BAE Systems tops list as world's largest arms maker with sales of $32.4bn

The British defence contractor has trumped US firms such as Lockheed Martin and Boeing to top global arms sales after selling $32.4 billion worth of weapons, including attack submarines, aircraft carriers and fighter jets in 2008.

The Stockholm International Peace Research Institute said the war in Afghanistan had boosted the company's fortunes through a massive order from the United States Army for 578 mine-resistant vehicles for use in both Iraq and Afghanistan.

"The company is based in the UK, but does more than half of its business in the USA," said Susan Jackson, an arms industry expert with SIPRI. "BAE really shows the increasing internationalisation of the arms industry and the attractiveness of the US market."

The defence think tank said BAE has become the first non-US company to top the list in sales of global arms. The previous number one was the Boeing Company, followed by Lockheed Martin; however, neither company has as high a percentage of earnings from sales of arms as BAE. In 2008, 95 per cent of BAE's total sales were from arms, compared to 70 per cent for Lockheed Martin and 48 per cent from Boeing.

BAE Systems was formed in 1999 when British Aerospace merged with Marconi Electronic Systems, the defence and naval shipbuilding company, to form Europe – and now the world's – largest defence contractor.

Based in Farnborough, the company has a total global workforce of 107,000 and builds the most advanced weapon systems in the world. BAE Systems is currently constructing the Type 45 Destroyer, the most advanced ship in the world, at Govan shipyards, which employs the majority of the 4,200 BAE staff in Scotland. Other major naval contracts include the Astute class nuclear submarine and the Queen Elizabeth class aircraft carrier.

As well as handling major contracts for the British government, the company manufactures military hardware for a range of other nations such as America, Australia, Germany, Italy and Spain. The company's most controversial client is Saudi Arabia, who has paid BAE and its predecessor company 43bn over the last 20 years for a string of Tornado aircraft.

However, the company has been accused of operating a 60 million slush fund for Saudi businessmen, and an investigation by the Serious Fraud Office was called off after the Attorney General decided it would adversely affect the nation's relationship with Saudi Arabia, who had threatened to withhold intelligence of Islamic terrorism.

Meanwhile, air defence systems maker Almaz-Antei was the first Russian company to enter the top 20, with arms sales of $4.3bn in 2008, the report said. "The continued upswing in many Russian arms-producing companies is the combined effect of longer term increases in exports and the more recent increases in domestic arms procurement," Ms Jackson said. SIPRI said the world's top 100 arms vendors had total sales of $385bn in 2008, up nearly $40bn from the previous year.

Last night, a spokeswoman for BAE Systems said she could not comment on the report. However, it is understood that the defence industry does not recognise the accuracy of the report and instead goes by the Defence News league table which currently lists BAE Systems as second behind Lockheed Martin. It has been suggested that the difference in position is on account of the strength of the pound in 2008 as BAE report their earnings in pounds, in comparison to the American companies who report in dollars.

Kaye Stearman, press officer for the Campaign Against the Arms Trade, said: "We believe their activity is inherently unethical and we are not surprised that BAE has become number one because they have been aggressively buying up American companies. I think this is pretty shocking; we should not regard this as a triumph for British industry."