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The Future of the UK Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

The Future of the UK Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Summary

United Kingdom, which consists of England, Northern Ireland, Scotland, and Wales, is currently in the process of restructuring its armed forces and armed forces personnel with the aim of reorienting its military into a small but agile force that continues to fulfill its standing commitments. It is an active member of NATO which serves as the bedrock of the country’s defense policy. The country is ranked seventh globally in terms of military expenditure but has been facing constant budget cuts over the historic period in accordance with the nation’s aim of reducing overall expenditure. UK defense expenditure registered a CAGR of nearly -4.5%, declining from over US$57 Billion in 2013 to just over US$48 Billion in 2017.

Revenue expenditure forms the largest share of the UK defense budget, with an average allocation of around 77%, and the remainder of about 22% assigned for capital expenditure during the historic period. Expenditure for revenue purposes is expected to dominate the budget over the forecast period, although its allocation is expected to decrease to an average of around 75.5% and correspondingly, the share for capital expenditure is projected to increase to an average of about 24.5%.

UK’s homeland security expenditure, spending on internal security, maintaining law and order, judiciary and prisons, and other related activities was valued at over US$23 Billion in 2013 and has declined to just over US$14 Billion in 2017, registering a CAGR of about -11%. Due to modernization plans, the allocation in terms of value is expected to rise over the forecast period.

Furthermore, threats from internal and external terrorist groups, the procurement of modern weapons for police personnel, and the strengthening of border security will increase the country’s homeland security expenditure over the forecast period. The homeland security budget stands at about US$14 Billion in 2018 and is predicted to grow to around US$14.8 Billion in 2022, reflecting a CAGR of about 0.3%.

The report ""The Future of the UK Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022"" offers detailed analysis of the UK defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

This report provides insights into -
- The UK defense industry market size and drivers: detailed analysis of the UK defense industry during 2018–2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns.
- Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country.
- Porter’s Five Force analysis of the UK defense industry: analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: analysis of prevalent trends in the country’s imports and exports over the last five years.
- Market opportunities: details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: analysis of the competitive landscape of the UK defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Companies mentioned in this report: BAE Systems, GKN Aerospace Services, Rolls-Royce, Babcock International, Leonardo, Thales UK, General Dynamics UK, Boeing UK, L-3 Communications Group, Northrop Grumman UK, Lockheed Martin UK, Aibus S.A.S.

Scope

- The UK, which consists of England, Northern Ireland, Scotland, and Wales, is currently in the process of restructuring its armed forces and armed forces personnel with the aim of reorienting its military into a small but agile force that continues to fulfill its standing commitments. It is an active member of NATO which serves as the bedrock of the country’s defense policy. The country is ranked seventh globally in terms of military expenditure but has been facing constant budget cuts over the historic period in accordance with the nation’s aim of reducing overall expenditure. UK defense expenditure registered a CAGR of -4.49%, declining from US$57.9 billion in 2013 to US$48.2 billion in 2017.
- Revenue expenditure forms the largest share of the UK defense budget, with an average allocation of 77.1%, and the remaining 22.9% assigned for capital expenditure during the historic period.
- The UK’s homeland security expenditure, spending on internal security, maintaining law and order, judiciary and prisons, and other related activities was valued at US$23.3 billion in 2013 and declined to US$14.3 billion in 2017, registering a CAGR of -11.45%.

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the UK defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the UK defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts


1 Introduction
1.1 What is this Report About?
1.2 Definitions
1.3 Summary Methodology
1.4 About Strategic Defence Intelligence
2 Executive Summary
3 Market Attractiveness and Emerging Opportunities
3.1 Current Market Scenario
3.1.1 Primary Threat Perception
3.1.2 Military Doctrine & Strategy
3.1.3 Military Fleet Size
3.1.4 Procurement Programs
3.1.5 Social, Political and Economic Environment and Support for Defense Projects
3.1.6 Political and Strategic Alliances
3.2 Defense Market Size Historical and Forecast
3.2.1 The UK’s defense budget (inclusive of Foreign economic aid, R&D Defense and Defense Network-enabled Capability(N.E.C.)) is anticipated to increase at a CAGR of 4.21%
3.2.2 The UK’s expenditure on defense functions (exclusive of Foreign economic aid, R&D Defense and Defense n.e.c.) is expected to increase at a CAGR of 3.71%
3.2.3 Counter-terrorism activities, procurements, and peacekeeping operations are the primary factors driving defense expenditure
3.2.4 Defense budget as a percentage of GDP will decrease at an average of 1.9% over the forecast period
3.3 Analysis of Defense Budget Allocation
3.3.1 The allocation towards capital expenditure to remain constant
3.3.2 More than 90% of the UK’s defense budget is allocated for defense capabilities
3.3.3 The allocation for peacekeeping operations is expected to remain constant over the forecast period but foreign military aid is expected to reduce
3.3.4 Expenditure on defense capability is expected to grow at a CAGR of 3.90% over the forecast period
3.3.5 Expenditure on Army to make up largest share of defense expenditure
3.3.6 Budget allocation for the army is expected to remain highest over the forecast period
3.3.7 Capital expenditure is anticipated to record CAGR of 5.96% over the forecast period
3.4 Homeland Security Market Size and Forecast
3.4.1 The Homeland Security market in UK is expected to grow at a CAGR of 0.35% during the forecast period
3.4.2 Border security and cyber-security will be the key drivers for homeland security
3.4.3 The UK is ‘highly affected’ by terrorist activities
3.4.4 UK faces a high risk of terrorist attack
3.4.5 The UK faces a substantial threat from terrorist organizations
3.5 Benchmarking with Key Global Markets
3.5.1 The UK ranks among major Global Defense Markets
3.5.2 The UK is expected to be among the top 10 defense spending countries in the world
3.5.3 The UK allocates a significant percentage of GDP towards defense
3.6 Market Opportunities: Key Trends and Growth Stimulators
3.6.1 Submarine - Ballistic Missile
3.6.2 Multi-role Aircraft
3.6.3 IT Services- Networking
3.6.4 Facilities Management
3.6.5 Multi-mission Helicopter MRO
4 Defense Procurement Market Dynamics
4.1.1 Import Market Dynamics
4.1.2 Defense imports are expected to remain consistent with the historic trends
4.1.3 The US is the leading arms exporter to UK, a trend expected to continue in the coming years
4.1.4 Aircraft, Missiles, and Engines account for more than three-quarters of UK arms imports
4.2 Export Market Dynamics
4.2.1 The UK’s Defense Exports increased at a CAGR of 11.6% during the historic period
4.2.2 Saudi Arabia, India, and Indonesia are the main buyers of UK defense exports
4.2.3 Aircraft make up the majority of UK defense exports
5 Industry Dynamics
5.1.1 Five Forces Analysis
5.1.2 Bargaining power of supplier: low
5.1.3 Bargaining power of buyer: medium to high
5.1.4 Barrier to entry: medium
5.1.5 Intensity of rivalry: medium
5.1.6 Threat of substitution: medium
6 Market Entry Strategy
6.1 Market Regulation
6.1.1 Offset policy discarded in order to maintain competitiveness of domestic suppliers
6.1.2 The UK permits 100% FDI in its defense industry
6.1.3 Government initiatives to boost the defense industry
6.2 Market Entry Route
6.2.1 Budgeting Process
6.2.2 Procurement Policy and Process
6.2.3 Joint weapons development programs are a viable market entry opportunity
6.2.4 Joint ventures open up new market entry strategy choices
6.2.5 Forming subsidiaries in the UK and acquisition domestic companies provide good market entry opportunities
6.2.6 Procurement Policy and Process
6.3 Key Challenges
6.3.1 Consistent defense budget cuts have negative implications for defense companies
6.3.2 Dominance of domestic and EU defense companies impede the progress of non-European firms
7 Competitive landscape and Strategic Insights
7.1.1 Competitive landscape Overview
7.2 Key Domestic Companies
7.2.1 BAE Systems Plc.: overview
7.2.2 BAE Systems Plc.: Products
7.2.3 BAE Systems Plc.: recent announcements and strategic initiatives
7.2.4 BAE Systems Plc.: alliances
7.2.5 BAE Systems Plc.: Recent contract wins
7.2.6 BAE Systems Plc.: financial analysis
7.2.7 GKN Aerospace Services: overview
7.2.8 GKN Aerospace Services: products
7.2.9 GKN Aerospace Services: recent announcements and strategic initiatives
7.2.10 GKN Aerospace Services: alliances
7.2.11 GKN Aerospace Services: recent contract wins
7.2.12 GKN Aerospace Services: Financial Analysis
7.2.13 Rolls-Royce Plc.: overview
7.2.14 Rolls-Royce Plc.: products
7.2.15 Rolls-Royce Plc.: recent announcements and strategic initiatives
7.2.16 Rolls-Royce Plc.: alliances
7.2.17 Rolls-Royce Plc.: recent contract wins
7.2.18 Rolls-Royce Plc.: financial Analysis
7.2.19 Babcock International Group Plc.: overview
7.2.20 Babcock International Group Plc.: products and services
7.2.21 Babcock International Group Plc.: recent announcements and strategic initiatives
7.2.22 Babcock International Group Plc.: alliances
7.2.23 Babcock International Group Plc.: recent contract wins
7.2.24 Babcock International: Financial Analysis
7.3 Key Foreign Companies
7.3.1 Leonardo MW Limited: overview
7.3.2 Leonardo: products
7.3.3 Leonardo MW Limited: recent announcements and strategic initiatives
7.3.4 Leonardo MW Limited: alliances
7.3.5 Leonardo MW Limited: recent contract wins
7.3.6 Thales UK: overview
7.3.7 Thales UK: products
7.3.8 Thales UK: recent announcements and strategic initiatives
7.3.9 Thales UK: alliances
7.3.10 Thales UK: recent contract wins
7.3.11 General Dynamics UK Ltd: overview
7.3.12 General Dynamics UK Ltd: products
7.3.13 General Dynamics UK Ltd: recent announcements and strategic initiatives
7.3.14 General Dynamics UK Ltd: alliances
7.3.15 General Dynamics UK Ltd: recent contract wins
7.3.16 Boeing UK: overview
7.3.17 Boeing UK: products
7.3.18 Boeing UK: recent announcements and strategic initiatives
7.3.19 Boeing UK: alliances
7.3.20 Boeing UK: recent contract wins
7.3.21 L-3 TRL: overview
7.3.22 L-3 TRL: services
7.3.23 L-3 TRL: recent announcements and strategic initiatives
7.3.24 L-3 TRL: alliances
7.3.25 Northrop Grumman UK: overview
7.3.26 Northrop Grumman UK: services
7.3.27 Northrop Grumman UK: recent announcements and strategic initiatives
7.3.28 Northrop Grumman UK: alliances
7.3.29 Northrop Grumman UK: recent contract wins
7.3.30 Lockheed Martin UK Ltd: overview
7.3.31 Lockheed Martin UK Ltd: products and services
7.3.32 Lockheed Martin UK Ltd: recent announcements and strategic initiatives
7.3.33 Lockheed Martin UK Ltd: alliances
7.3.34 Lockheed Martin UK Ltd: recent contract wins
7.3.35 Airbus S.A.S.: overview
7.3.36 Airbus S.A.S.: services
7.3.37 Airbus S.A.S.: recent announcements and strategic initiatives
7.3.38 Airbus S.A.S.: alliances
7.3.39 Airbus S.A.S.: recent contract wins
8 Business Environment and Country Risk
8.1 Economic Performance
8.1.1 Gross Domestic Product Per Capita
8.1.2 Gross Domestic Product at Current Price US$
8.1.3 Exports of goods and services, current prices
8.1.4 Imports of goods and services, current prices
8.1.5 Gross National Disposable Income, current prices
8.1.6 Local Currency Unit per US$, Period Average
8.1.7 Market Capitalization of Listed Companies (US$ Billions)
8.1.8 Market Capitalization of Listed Companies (% GDP)
8.1.9 Government Cash Surplus/Deficit, as a Percentage of GDP (LCU)
8.1.10 Goods Exports as % of GDP
8.1.11 Goods Imports as % of GDP
8.1.12 Services Imports as a % of GDP
8.1.13 Services Exports as a % of GDP
8.1.14 Foreign Direct Investment, BoP, Current Values in US$ Billions
8.1.15 Net Foreign Direct Investment as a % of GDP
8.1.16 Mining, Manufacturing, Utilities Output
9 Appendix
9.1 About SDI
9.2 Disclaimer
List of Tables
Table 1: The UK Army Strength
Table 2: The UK Air Force Strength
Table 3: The UK Navy Strength
Table 4: The UK- Ongoing Development and Procurement Programs
Table 5: The UK- Ongoing Development and Procurement Programs
Table 6: UK Defense Budget (GBP Billion & US$ Billion), 2013-2022
Table 7: UK Defense Budget Split between Capital and Revenue Expenditure (%), 2013-2022
Table 8: UK Defense Budget Break Up(%), 2013-2022
Table 9: UK Peacekeeping Services Budget and Foreign Military Aid (US$ Billion), 2013-2022
Table 10: UK Defense Capability Budget (GBP Billion & US$ Billion), 2013-2022
Table 11: UK Defense Capability Expenditure Break up (%), 2013-2022
Table 12: The UK Defense Budget in GBP Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Table 13: The UK Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Table 14: Capital Expenditure (GBP Billion and US$ Billion), 2013 2022
Table 15: UK Homeland Security Expenditure (GBP Billion & US$ Billion), 2013-2022
Table 16: Terrorism Index,2017
Table 17: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 18: The UK Budget Formation Timetable
Table 19: UK's Participation in International Defense Development Programs
Table 20: Competitive Landscape of the UK Defense Industry
Table 21: BAE Systems Plc. - Product Focus
Table 22: BAE Systems Plc. - Alliances
Table 23: BAE Systems Plc. - Recent Contract Wins
Table 24: GKN Aerospace Services - Product Focus
Table 25: GKN Aerospace Services - Alliances
Table 26: GKN Aerospace Services - Recent Contract Wins
Table 27: Rolls-Royce Plc. - Product Focus
Table 28: Rolls-Royce Plc. - Alliances
Table 29: Rolls-Royce Plc. - Recent Contract Wins
Table 30: Babcock International Group Plc. - Product Focus
Table 31: Babcock International Group Plc. - Alliances
Table 32: Babcock International Group Plc. - Recent Contract Wins
Table 33: Leonardo MW Limited - Product Focus
Table 34: Leonardo - Alliances
Table 35: Leonardo MW Limited - Recent Contract Wins
Table 36: Thales UK - Product Focus
Table 37: Thales UK - Alliances
Table 38: Thales UK - Recent Contract Wins
Table 39: General Dynamics UK Ltd - Product Focus
Table 40: General Dynamics UK Ltd - Alliances
Table 41: General Dynamics UK Ltd - Recent Contract Wins
Table 42: Boeing UK - Product Focus
Table 43: Boeing UK - Alliances
Table 44: Boeing UK - Recent Contract Wins
Table 45: L-3 TRL - Product Focus
Table 46: L-3 TRL - Alliances
Table 47: Northrop Grumman UK - Product Focus
Table 48: Northrop Grumman UK - Alliances
Table 49: Northrop Grumman UK - Recent Contract Wins
Table 50: Lockheed Martin UK Ltd - Product Focus
Table 51: Lockheed Martin UK Ltd - Alliances
Table 52: Lockheed Martin UK Ltd - Recent Contract Wins
Table 53: Airbus S.A.S. - Service Focus
Table 54: EADS UK - Alliances
Table 55: EADS UK - Recent Contract Wins
List of Figures
Figure 1: UK Defense Budget (GBP Billion), 2013-2022
Figure 2: UK Defense Budget (US$ Billion), 2013-2022
Figure 3: UK Defense Expenditure (GBP Billion), 2013-2022
Figure 4: UK Defense Expenditure (US$ Billion), 2013-2022
Figure 5: UK GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022
Figure 6:UK Defense Budget Split between Capital and Revenue Expenditure (%), 2013-2022
Figure 7:UK Defense Expenditure Break-up(%) by Allocations, 2013-2022
Figure 8: UK Peacekeeping Services Budget (US$ Billion), 2013-2022
Figure 9: UK Foreign Military Aid Budget (US$ Billion), 2013-2022
Figure 10: UK Defense Capability Budget (GBP Billion), 2013-2022
Figure 11:UK Defense Capability Budget (US$ Billion), 2013-2022
Figure 12: UK Defense Capability Expenditure Allocation (%), 2013-2022
Figure 13: The UK Defense Budget in GBP Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Figure 14: The UK Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Figure 15: Capital Expenditure (GBP Billion), 2013-2022
Figure 16: Capital Expenditure (US$ Billion), 2013-2022
Figure 17: UK Homeland Security Expenditure (GBP Billion), 2013-2022
Figure 18:UK Homeland Security Expenditure (US$ Billion), 2013-2022
Figure 19: Terrorism Heat Map, 2017
Figure 20: Terrorism Index, 2017
Figure 21: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 22: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion),2017 and 2022
Figure 23: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 24: Submarine - Ballistic Market Size (US$ Million), 2017-2027
Figure 25: Multi-role Aircraft Market Size (US$ Million), 2017-2027
Figure 26: Networking Market Size (US$ Million), 2017-2027
Figure 27: Facilities Management Market Size (US$ Million), 2017-2027
Figure 28: Multi-mission Helicopter MRO Market Size (US$ Million), 2017-2027
Figure 29: UK Defense Imports 2012-2016
Figure 30: UK Defense Imports by Country (%), 2012-2016
Figure 31: UK Defense Imports by Category (%), 2012-2016
Figure 32: UK Defense Exports 2012-2016
Figure 33: UK Defense Exports by Country (%), 2012-2016
Figure 34: UK Defense Exports by Category (%), 2012-2016
Figure 35: Industry Dynamics - Porter’s Five Forces Analysis
Figure 36: BAE Systems - Revenue Trend Analysis (GBP billion), 2012-2016
Figure 37: BAE Systems - Operating Profit (GBP billion), 2012-2016
Figure 38: BAE Systems - Net Profit Trend Analysis (GBP billion), 2012-2016
Figure 39: GKN Aerospace - Revenue Trend Analysis (GBP billion), 2012-2016
Figure 40: GKN Aerospace - Operating Profit (GBP billion), 2012-2016
Figure 41: GKN Aerospace -Profit Before Tax (GBP billion), 2012-2016
Figure 42: Rolls-Royce - Revenue Trend Analysis (GBP billion), 2012-2016
Figure 43: : Rolls-Royce - Operating Profit (GBP billion), 2012-2016
Figure 44: : Rolls-Royce - Profit Trend Analysis (GBP billion), 2012-2016
Figure 45: Babcock International - Revenue Trend Analysis (GBP billion), 2012-2016
Figure 46: Babcock International - Operating Profit (GBP billion), 2012-2016
Figure 47: Babcock International -Profit Trend Analysis (GBP billion), 2012-2016
Figure 48: UK GDP Per Capita, 2015-2025
Figure 49: UK GDP (in US$ Billion) , 2015-2025
Figure 50: UK Exports of goods,( LCU Billions), 2005-2014
Figure 51: UK Imports of goods and services (LCU Billions), 2005-2014
Figure 52: UK Gross National Disposable Income, current prices (US$ Billion), 2005-2012
Figure 53: UK GBP per US$, 2015-2024
Figure 54: UK Market Capitalization of listed companies (US$ Billion), 2005-2012
Figure 55: UK Market Capitalization of listed companies(%GDP), 2005-2012
Figure 56: UK Government Cash surplus/deficit (LCU Billion), 2005-2012
Figure 57: UK Goods exports as % of GDP, 2005-2014
Figure 58: UK Goods imports as % of GDP, 2005-2014
Figure 59: UK Services Imports as a % of GDP, 2005-2014
Figure 60: UK Services exports as a % of GDP, 2005-2014
Figure 61: UK FDI, net (BoP, Current US$ Billion), 2005-2014
Figure 62: UK Net FDI as a % of GDP, 2005-2014
Figure 63: UK Mining, manufacturing, and Utilities Output (US$ Billion), 2005-2014

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