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UK Defence Industry market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Defence Industry market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Covered in this report

For the purposes of this report, UK public expenditure on defence falls under the heading Total Managed Expenditure (TME). This is segmented into Departmental Expenditure Limits (DEL) and Annually Managed Expenditure (AME).

DEL is further broken down between resource and capital budgets, with the resource budget formerly known as the current budget, while AME is largely made up by Main Departmental Programmes and locally-financed expenditure.

Public Private Partnerships (PPP) covers a variety of procurement initiatives, such as Private Finance Initiative (PFI), Partnering Arrangements, Outsourcing, the Wider Markets Initiative, and the Defence Estates Prime Contract Programme.

PFI remains the cornerstone of the PPP programme. Through PFI, the government is committed to seeking value for money by using private sector management expertise, innovation, and capital investment. This involves the private sector creating or buying a new asset and then selling a range of services based on those assets to the MoD.

A Partnering Arrangement describes a long-term contract based on the partnering ethos until the end of the project. There is not necessarily a clear direction in a Partnering Arrangement, but developed during the life-time of the contract.

Company profiles

  • BAE Systems
  • Cobhams
  • General Dynamics UK
  • Leonardo MW Limited (formerly Leonardo Helicopters)
  • Lockheed Martin (UK)
  • Rolls-Royce

What you need to know

According to NATO, the UK’s defence expenditure in 2017 was the equivalent of 2.14% of GDP - down from just over 3% in the early 1990s to just over the current 2%.The UK is one of only six of the 28 NATO member states that currently spend at least 2% of national wealth on defence - the others are the US, Greece, Estonia, Romania, and Poland.

Pressures on the UK defence budget provide more opportunities for military outsourcing. Private firms can provide a range of military services often undertaken ‘in-house’ by military units. These comprise equipment support and other support services, including estates and facilities management services.

Expert analysis from a specialist in the field

Written by Lewis Cone, a leading analyst in the B2B sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

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
Senior B2B Analyst

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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