Report: Budget cuts make the UK defence market less attractive for foreign OEMs


Consistent cuts in defence spending by the UK government make the defence market less attractive for foreign original equipment manufacturers (OEM), according to a report by Strategic Defence Intelligence (SDI).

Titled 'Future of the UK Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2021', the report states that the UK defence ministry has been reducing budget allocations to the defence sector in the last five years, with an aim to reduce the nation's overall expenditure.

The UK already buys the majority of its defence products from either domestic suppliers or companies based in the European Union (EU), leaving limited business opportunities for foreign OEMs.

Furthermore, with new developments foreseen in the domestic defence manufacturing industry, the nation is expected to witness lesser imports, which will mean further hindrances to the entry of foreign OEMs.

"The report also forecasts a positive growth in defence budgets over the next five years, contrary to a negative compound annual growth (CAGR) of 2.42% during 2012 to 2016."

However, the SDI report notes that foreign OEMs can still benefit from taking one of four routes to enter the UK defence industry, which include international joint weapons programmes, subsidiaries, joint ventures, and acquisition of domestic companies.

The areas that offer potential opportunities for foreign OEMs aspiring to enter UK include multi-role aircraft, ballistic submarines, IT networking, facilities management, and maintenance, repair and overhaul (MRO) of multi-mission helicopters.

The report also forecasts a positive growth in defence budgets over the next five years, contrary to a negative compound annual growth (CAGR) of 2.42% during 2012 to 2016.

Planned modernisation programmes, coupled with recent terror threats and insurgencies such as Russia's military intervention in Ukraine, will propel the growth in military budgets up by a CAGR of 3.09% during the forecast period, says SDI.