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MILPLEX
UK's High Military Spending Attracts Stakeholders In Land Defence Market

In future, the number of ground formations in the U.K. army is expected to nosedive.
by Staff Writers
London, UK (SPX) Mar 10, 2011
The United Kingdom has clinched the fourth spot on the list of the top military spenders with an expenditure of $58.30 billion in 2009, which translates to 3.8 per cent of the global share. As a North Atlantic Treaty Organisation (NATO) member, the United Kingdom is expected to channel at least 2 per cent of its gross domestic product towards defence, making it a viable market for stakeholders in the land defence market.

New analysis from Frost and Sullivan, Revenue Opportunities and Stakeholder Mapping in the United Kingdom Land Defence Market, finds that the U.K. land defence market generated $834 million in 2010 and is expected to reach $1.50 billion in 2017.

The UK's crucial role in the major global conflicts in Iraq and Afghanistan has exposed the gap between its cold war era capabilities and its readiness to counter contemporary threats.

The UK land defence domain witnessed significant procurements as result of urgent operations requirements (UOR). While the Government has acknowledged the need to modernize fleets and has expressed interest in ramping up its arsenal, the current economic situation and budget deficits have delayed most of the planned modernisation programs.

"As a conscious measure to avoid the drawbacks of downsizing, the armed forces are being equipped with advanced equipment," says Frost and Sullivan Research Analyst Mahendran Arjunraja.

"The increasing involvement in high-intensity operations and lessons learned from the recent conflicts would push the country to deploy advanced and more efficient equipment."

Furthermore, the Government has commissioned a Strategic Defence and Security Review (SDSR), 12 years after the last one, to determine the future capabilities and size of the country's land defence forces. While military downsizing is apparent in all domains of the defence forces, the army is expected to be the least affected due to the current operational commitments, while the navy and air force will keenly feel the impact of the SDSR.

The gradual shift from UOR to planned modernisation programs in the land defence domain is expected to boost the market from 2013. Hence, defence companies catering to UOR at present should slowly start gravitating towards the upcoming modernization programs and identify possible market opportunities.

In future, the number of ground formations in the U.K. army is expected to nosedive. This will invariably have significant repercussions on the procurement volumes. In such a scenario, the domestic defence companies will not be able to benefit from economies of scale, unless they supplement their order book with foreign sales or innovate in-house. Defence companies must ensure low-cost offerings since absolute cost of equipment will be one of the primary purchase factors.

"Absolute cost, sustainability and life time support are the future procurement priorities of the Ministry of Defence (MoD)," notes Mahendran Arjunraja. "Capabilities such as autonomous systems, sensors, cyber and space are likely to be the focus of future investments."



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