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UK defence market second only to the US on a global scale

Industry Sector

Defence

Published

18 September 2012

Author

Mike King

Type of News

Market

Rated as one of the largest in the world, the UK defence market has been forecast to register a negative compound annual growth rate (CAGR) of -2.04% over the next five years, decreasing from a value of US$61.91 billion in 2012, to be worth US$52.21 billion by 2017.

The UK defence industry represents 10% of UK manufacturing, is number one in Europe and second only to the US globally, employing over 300,000 people and generating over £35 billion per year to the UK economy.

Peace keeping operations and terrorism are the primary drivers of defence spending. The UK is engaged in a significant number of peace keeping operations in Afghanistan, Iraq, Sudan and Cyprus.

The level of terrorist activity of extremist groups in the UK increased considerably following the September 2001 terrorist attacks on the US and the international military operations against the Taliban and Al Qaeda in Afghanistan.

The UK government has announced a reduction in defence expenditure over the next five years in order to control the country's increasing fiscal deficit. Such reductions will lead to a decline in procurements and are expected to have a negative impact on domestic defence companies.

Each year defence exports provide on average £5bn to the UK economy and it is the largest overseas supplier of defence equipment to the United States. The demand from overseas for British-made equipment - from fast jets to helicopters and electronic systems to personal kit for individual troops - is high because of its quality and provenance.

Through 2007-2011, UK defence imports demonstrated significant growth, despite recording a sharp decline in 2009 due to the global financial crisis and the subsequent reduction in total government expenditure.

Over the last five years, defence imports grew significantly mainly due to the higher costs of capital additions and equipment support for military operations in Afghanistan and Iraq.

For more information on the UK defence market, see the latest research: UK Defence Market Report

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