The likely shape of the Defence Industry in the future

1
The likely shape of the Defence Industry in the
future

• Simon Allan
• Berwin Leighton Paisner LLP

2
Structure of Presentation

• Assumptions
• Some existing trends
• Some sources of change
• Synthesis

3
Policy Assumptions

• DIS maintained
• Defence Procurement Directive implemented
• UK Market remains open
• Constant budget
• Shipbuilding and complex weapons in a special
  position

4
UK Defence Spending as of GDP
Policy Assumptions
Calculation Defence Expenditure Limits as a
percentage of gross domestic product at market
prices. Sources Defence Spending Reviews 2004
and 2007 and UK National Statistics UK Output,
Income and Expenditure 2nd Qtr 2007
5
Industry consolidation
1995
2000
2005
6
Industry Consolidation

• Capacity effects
• Competition effects
• Market attraction effects

7
Mod Procurement Strategies

• Outsourcing/PPPs/Privatisation
• Condo/Sponsored Reserves
• Use of integrator models FRES, MFTS etc

8
Platform Longevity

• Upgrades
• Inserts
• TLCM

9
unmanned Technologies

• Section 220 National Defence Authority Act 2006
• It shall be a goal of the Armed Forces that
• (1) by 2010, one-third of the aircraft in the
  fleet are unmanned and
• (2) by 2015, one-third of the operational
  ground combat vehicles are unmanned

10
Changes to the definition of defence

• Social appetite for sustained ground troop
  deployments?
• Boundaries between defence and homeland
  security
• Cyber warfare economic warfare sovereign
  funds
• Climate change/security of supply issues

11
Synthesis

• Growing support service companies
• High level systems integrators supported by agile
  technology companies
• Consolidation with higher levels of foreign
  ownership
• New product segments eg UAVs, UCAVs etc
• Migration to new markets with higher margins
  and better social profile