Future of the UK Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2023

Table of Contents

1. Introduction 7

1.1. What is this Report About? 7

1.2. Definitions 7

1.3. Summary Methodology 9

1.4. About GlobalData 10

2. Executive Summary 11

3. Market Attractiveness and Emerging Opportunities 13

3.1. Current Market Scenario 14

3.1.1. Military Fleet Size 14

3.1.2. Procurement Programs 19

3.1.3. Key Drivers and Challenges 21

3.2. Defense Market Size Historical and Forecast 23

3.2.1. The UK’s defense budget (inclusive of Foreign economic aid, R&D Defense and Defense Network-enabled Capability [NEC]) is anticipated to increase at a CAGR of

4.33% 23

3.2.2. The UK’s expenditure on defense functions (exclusive of foreign economic aid, R&D defense and defense NEC) is anticipated to increase at a CAGR of

3.39% over the forecast period 25

3.2.3. Counter-terrorism activities, procurements, and peacekeeping operations are the primary factors driving defense expenditure 27

3.2.4. Defense budget as a percentage of GDP is anticipated to decrease over the forecast period 28

3.3. Analysis of Defense Budget Allocation 30

3.3.1. More than 90% of the UK’s defense budget is allocated for defense capabilities 30

3.3.2. The allocations for peacekeeping operations and foreign military aid are anticipated to cumulatively value US$2.4 billion and US$2.8 billion respectively over the forecast period 32

3.3.3. Expenditure on defense capability is expected to grow at a CAGR of

3.32% over the forecast period 34

3.3.4. The allocation towards capital expenditure will remain constant 36

3.3.5. Capital expenditure is anticipated to record CAGR of

5.19% over the forecast period 38

3.3.6. Per capita defense expenditure to increase over the forecast period 40

3.4. Homeland Security Market Size and Forecast 41

3.4.1. The Homeland Security market in UK is expected to grow at a CAGR of

1.73% over the forecast period 41

3.4.2. Border security and cyber-security will be the key drivers for homeland security 43

3.4.3. The UK is ‘highly affected’ by terrorist activities 44

3.4.4. The UK faces a high risk of terrorist attack 45

3.4.5. The UK faces a substantial threat from terrorist organizations 47

3.5. Benchmarking with Key Global Markets 48

3.5.1. The UK ranks among major Global Defense Markets 48

3.5.2. The UK is expected to be among the top 10 defense spending countries in the world 50

3.5.3. The UK allocates a significant percentage of GDP towards defense 51

3.6. Market Opportunities: Key Trends and Growth Stimulators 52

3.6.1. Top 10 Defense market sectors by value (US$ Million) – Projections over period 2018-2023 52

4. Defense Procurement Market Dynamics 53

4.1. Import Market Dynamics 54

4.1.1. Defense imports are expected to remain consistent with the historic trends 54

4.1.2. The US is the leading arms exporter to UK, a trend expected to continue in the coming years 55

4.1.3. Aircraft, Missiles, and Engines account for more than three-quarters of UK arms imports 56

4.2. Export Market Dynamics 57

4.2.1. UK Defense Exports are anticipated to increase over the historic period 57

4.2.2. Saudi Arabia, Oman, and Indonesia are the main buyers of UK defense exports 58

4.2.3. Aircraft make up the majority of the UK’s defense exports 59

5. Industry Dynamics 60

6. Market Entry Strategy 60

6.1. Market Regulation 60

6.1.1. Offset policy discarded in order to maintain competitiveness of domestic suppliers 60

6.1.2. The UK permits 100% FDI in its defense industry 60

6.1.3. Government initiatives to boost the defense industry 61

6.2. Market Entry Route 61

6.2.1. Budgeting Process 61

6.2.2. Procurement Policy and Process 62

6.2.3. Joint weapons development programs are a viable market entry opportunity 63

6.2.4. Joint ventures open up new market entry strategy choices 64

6.2.5. Forming subsidiaries in the UK and the acquisition of domestic companies provide good market entry opportunities 64

6.2.6. Procurement Policy and Process 64

7. Competitive landscape and Strategic Insights 65

7.1. Competitive landscape Overview 65

8. Business Environment and Country Risk 67

8.1. Economic Performance 67

8.1.1. Gross Domestic Product Per Capita 67

8.1.2. Gross Domestic Product at Current Price US$ 68

8.1.3. Exports of goods and services, current prices 69

8.1.4. Imports of goods and services, current prices 70

8.1.5. Gross National Disposable Income, current prices 71

8.1.6. Local Currency Unit per US$, Period Average 72

8.1.7. Market Capitalization of Listed Companies (US$ Billion) 73

8.1.8. Market Capitalization of Listed Companies (% GDP) 74

8.1.9. Government Cash Surplus/Deficit, as a Percentage of GDP (LCU) 75

8.1.10. Goods Exports as % of GDP 76

8.1.11. Goods Imports as % of GDP 77

8.1.12. Services Imports as a % of GDP 78

8.1.13. Services Exports as a % of GDP 79

8.1.14. Foreign Direct Investment, BoP, Current Values in US$ Billion 80

8.1.15. Net Foreign Direct Investment as a % of GDP 81

8.1.16. Mining, Manufacturing, Utilities Output 82

9. Appendix 83

9.1. About GlobalData 83

9.2. Disclaimer 83