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This news is particularly disappointing, coming only two weeks after British prime minister David Cameron personally lobbied for the deal when he was in Dubai. Smaller contracts with Bahrain, Oman and Qatar have been more successful. However, the markets will probably be most unhappy with today’s news because BAE had said it was ’very likely‘ to get the contracts, which would have been worth around $6 billion to the company.
The Middle East has historically been a prosperous region for defence firms. But this unfortunate news, along with the slow progress being made in negotiations with Saudi Arabia over the cost of previous sales, has dented the perception of BAE in the markets. By mid-morning the shares were down 20p, some 4.75%, and the company was the biggest faller in the FTSE. The bad news has also prompted a number of institutions to downgrade the firm and lower their price targets.
Traders should be cautious, as BAE appears to be having a run of bad luck and will need a flow of good contract news in 2014 to turn sentiment around.