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Defence Industry - UK - November 2018

“As the cost of weapons escalates - with each new military-jet engine costing over $1 billion to develop - even the biggest defence firms are looking at forming alliances. Many will be determined case-by-case depending on the systems involved. Such deals allow companies to gain scale by combining resources with other firms, without financially burdening themselves or becoming dependent on one product.”
– Lewis Cone, B2B Analyst

This report looks at the following areas:

  • Technology aids equipment development but also provides new type of threat with cyber-attacks on the rise
  • Funding gaps are presenting several challenges to the industry

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
      • Executive Summary

          • The market
            • Defence spending falls whilst DEL rises for third consecutive year
              • Figure 1: The UK Defence Departmental Expenditure Limits and Defence Spending, 2013/14-2017/18, (£ Million)
            • Defence DEL forecast to rise to boost future capability but additional funds required to target new threats
              • Figure 2: Forecast UK Planned Defence DEL, 2018/19-2020/21, (£ Billion)
            • Spending falls in North America but rises in Europe, while the US remains largest spender
              • Figure 3: Defence Spending 2017, ($ Billion at current prices and converted at the exchange rate for the given year)
            • Companies and brands
              • What we think
              • Issues and Insights

                • Technology aids equipment development but also provides new type of threat with cyber-attacks on the rise
                  • The facts
                    • The implications
                      • Funding gaps are presenting several challenges to the industry
                        • The facts
                          • The implications
                          • The Market – What You Need to Know

                            • Defence spending falls whilst DEL rises for third consecutive year
                              • Defence DEL forecast to rise to boost future capability, but additional funding will be required to target new threats
                                • Spending falls in North America but rises in Europe
                                • Market Size

                                    • Defence spending falls whilst DEL rises for third consecutive year
                                        • Figure 4: The UK Defence Departmental Expenditure Limits and Defence Spending, 2013/14-2017/18, (£ Million)
                                      • Single-use military equipment forms largest share of capital expenditure
                                        • Figure 5: The UK Defence Departmental Capital Expenditure Limits, 2014/15-2018/19, (£ Million)
                                        • Figure 6: The UK Defence Departmental Cash Resource Expenditure Limits, 2014/15-2018/19, (£ Million)
                                        • Figure 7: The UK Defence Annually Managed Expenditure Limits, 2014/15-2018/19, (£ Million)
                                        • Figure 8: MoD Equipment Expenditure, 2014/15-2018/19, (£ Million)
                                        • Figure 9: MoD Research & Development Expenditure Outturn, 2012/13-2016/17, (£ Million)
                                      • MoD Procurement Contracts
                                          • Figure 10: MoD Major Equipment Projects, as at 31 March 2017, (£ Million)
                                      • Market Forecast

                                          • Defence DEL forecast to rise to boost future capability but additional funding will be required to target new threats
                                            • Figure 11: Forecast UK Defence DEL, 2018/19-2020/21, (£ Billion)
                                            • Figure 12: Forecast UK Planned Defence DEL, 2018/19-2020/21, (£ Billion)
                                          • Defence Equipment Plan
                                              • Figure 13: Post-Main Gate Major Equipment Projects, 2017, (£ Million)
                                            • PFI
                                              • Figure 14: Estimated Payment under MoD PFI Contracts, based on Signed Defence Deals as of March 2017, (£ Million)
                                          • The Impact of the Economy

                                            • GDP growth rebounds in Q2 but challenges remain
                                              • Figure 15: GDP Growth Rate, Q2 2014-Q2 2018, (% change on previous quarter)
                                          • Market Trends

                                            • Spending falls in North America but rises in Europe, while the US remains largest spender
                                                • Figure 16: Defence Spending 2013 and 2017, (% World Share)
                                              • UK remains Europe’s leading defence exporter with first rise in new business in three years
                                                  • Figure 17: Identified Orders of UK Exports of Defence Aircraft and Equipment, 2013-17, (£ Million)
                                                • Armed Forces Equipment and Formations Trends
                                                  • Royal Navy and Royal Auxiliary Vessels
                                                    • Figure 18: Royal Navy and Royal Auxiliary Fleet of the UK Armed Forces, 2016-18, (Number)
                                                  • Aircraft Fleet
                                                    • Figure 19: Fixed-Wing Platforms and Unmanned Aircraft Systems of the UK Armed Forces, 2016-18, (Number)
                                                    • Figure 20: Rotary-Wing Platforms of the UK Armed Forces, 2016-18, (Number)
                                                  • Militarily-useful British-registered vessels
                                                    • Figure 21: Number of militarily-useful British-registered vessels (passenger, tanker and dry cargo), 2013-17, (Number)
                                                    • Figure 22: Number of militarily-useful British-registered vessels (fishing and specialist), 2013-17, (Number)
                                                  • Land Equipment
                                                    • Figure 23: Land Equipment of the UK Armed Forces, 2016-18, (Number)
                                                • Market Drivers

                                                    • The still unknown type of Brexit deal continues to generate uncertainty
                                                      • Global military spending set to reach post-Cold War high
                                                        • Launch of white paper on M&A regulations could affect industry movements
                                                          • Other factors
                                                            • The Defence Industrial Policy
                                                              • The Defence Growth Partnership
                                                                • The Arms Trade Treaty
                                                                • Companies and Brands – What You Need to Know

                                                                  • Lockheed Martin remains the largest defence company in the world
                                                                    • MoD targeting international collaboration to maintain the UK’s global defence status
                                                                    • Industry Structure

                                                                      • Industry development
                                                                        • Lockheed Martin remains the largest defence company in the world
                                                                            • Figure 24: World Top 10 Defence Companies, by Revenue, 2017, ($ Million)
                                                                          • Exports and the UKTI DSO
                                                                            • Single Source Regulations Office
                                                                              • Defence Contracts
                                                                                • Changes in the Structure of the Industry
                                                                                  • Figure 25: Analysis of the Changes in the Structure of the Weapons and Ammunition Industry, 2014-18, (Number of Factories and Businesses)
                                                                                  • Figure 26: Analysis of the Changes in the Structure of the Air, Spacecraft and Related Machinery Industry, 2014-18, (Number of Factories and Businesses)
                                                                                  • Figure 27: Analysis of the Changes in the Structure of the Ship and Floating Structures Industry, 2014-18, (Number of Factories and Businesses)
                                                                                  • Figure 28: Analysis of the Changes in the Manufacture of Military Fighting Vehicles Industry, 2014-18, (Number of Factories and Businesses)
                                                                                • Structure by employment
                                                                                  • Figure 29: Analysis of the Employment Structure of the Weapons and Ammunition Manufacturing Industry, 2017 and 2018, (Number of Employees and Factories)
                                                                                  • Figure 30: Analysis of the Employment Structure of the Air, Spacecraft and Related Machinery Industry, 2017 and 2018, (Number of Employees and Factories)
                                                                                  • Figure 31: Analysis of the Employment Structure of the Shipbuilding and Repair Industry, 2017 and 2018, (Number of Employees and Factories)
                                                                                  • Figure 32: Analysis of the Employment Structure of the Manufacture of Military Fighting Vehicles Industry, 2017 and 2018, (Number of Employees and Factories)
                                                                                • Structure by turnover
                                                                                  • Figure 33: Analysis of the Financial Structure of the Weapons and Ammunition Manufacturing Industry, 2017 and 2018, (£000 and Number of Companies)
                                                                                  • Figure 34: Analysis of the Financial Structure of the Air, Spacecraft and Related Machinery Manufacturing Industry, 2017 and 2018, (£000 and Number of Companies)
                                                                                  • Figure 35: Analysis of the Financial Structure of the Shipbuilding and Repair Industry, 2017 and 2018, (£000 and Number of Companies)
                                                                                  • Figure 36: Analysis of the Financial Structure of the Manufacture of Military Fighting Vehicles Industry, 2017 and 2018, (£000 and Number of Companies)
                                                                              • Competitive Strategies

                                                                                • MoD targeting international collaboration to maintain the UK’s global defence status
                                                                                  • Several major companies announce structural changes to reduce debt pressures
                                                                                  • Company Profiles

                                                                                    • BAE Systems
                                                                                      • Recent company activity
                                                                                        • Financial information
                                                                                          • Figure 37: Financial Analysis of BAE Systems, 2013-17, (£ Million)
                                                                                        • Cobham
                                                                                          • Recent company activity
                                                                                            • Financial information
                                                                                              • Figure 38: Financial Analysis of Cobham, 2013-2017, (£ Million)
                                                                                            • General Dynamics UK
                                                                                              • Recent company activity
                                                                                                • Financial information
                                                                                                  • Figure 39: Financial Analysis of General Dynamics UK, 2013-17, (£ Million)
                                                                                                • Leonardo MW Limited (formerly Leonardo Helicopters)
                                                                                                  • Recent company activity
                                                                                                    • Financial information
                                                                                                      • Figure 40: Financial Analysis of Leonardo MW Limited, 2013-17, (£ Million)
                                                                                                    • Lockheed Martin (UK)
                                                                                                      • Recent company activity
                                                                                                        • Financial information
                                                                                                          • Figure 41: Financial Analysis of Lockheed Martin (UK), 2013-17, (£000)
                                                                                                        • Rolls-Royce
                                                                                                          • Recent company activity
                                                                                                            • Financial information
                                                                                                              • Figure 42: Financial Analysis of Rolls-Royce, 2013-17, (£ Million)
                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                              • Abbreviations
                                                                                                                • Methodology
                                                                                                                • Further Sources and Contacts

                                                                                                                  • Trade Associations
                                                                                                                    • Trade Magazines
                                                                                                                      • Trade Exhibitions

                                                                                                                      Defence Industry - UK - November 2018

                                                                                                                      US $1,272.90 (Excl.Tax)