The US military-industrial complex is gearing up for war. Robert Gates, the US Secretary of Defence, parked his tanks on the industry's lawn when he unveiled the Pentagon's budget for 2010-11 on Monday.

Mr Gates may have secured $667 billion (£453 billion) to run the US's vast military, up 2 per cent on this year's figure, but his decision to cancel a number of high-profile projects has put the defence industry on the offensive.

The word from Capitol Hill is that the industry's lobbyists are swinging into action and any politician that has ever received a cent in campaign contributions can expect a call in the near future asking for the reinstatement of pet projects.

Among Mr Gates' proposed victims is the F22, the world's most advanced fighter jet - with the world's most advanced price tag of $140 million apiece.

Finmeccanica, the Italian company that owns AgustaWestland, is also a loser as the celebrated Presidential Helicopter project has been axed, raising concerns about jobs at its Yeovil plant.

Almost all of the large, global defence companies will be affected by the cuts, but BAE Systems, Europe's biggest defence contractor, fares better than most. It is less exposed to big Pentagon vanity projects than many of its rivals and its share price jumped 6 per cent yesterday.

There will be pressure on defence spending around the world as governments face mounting bills from the recession.

The Ministry of Defence's budget is forecast to be £34 billion this year and £35.3 billion next, which is about 2.4 per cent of GDP compared with more than 4 per cent in America.

But there are rumours that spending could be cut. With troops in two theatres of combat, the Government may see future procurement projects as the only politically acceptable way to reduce the MoD's spending.

The £20 billion Trident replacement may be pushed back a few years, the third tranche of Eurofighter jets needs a go-ahead decision this summer and the £4 billion aircraft carrier project, which has already slipped a couple of years, might be delayed further.

If the Government targets any of these projects, it would be a serious blow to BAE and would force the company to rely even more on the US market.

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