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

 Published On: Dec, 2017 |    No of Pages: 161 |  Published By: SDI | Format: PDF
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Summary

The Future of the UK Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022, published by Strategic Defence Intelligence, provides readers with detailed analysis of both historic and forecast defense industry values, factors influencing demand, the challenges faced by industry participants, analysis of industry leading companies, and key news.

Synopsis

This report 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.
In particular, it provides an in-depth analysis of the following -
- 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

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

Table of Contents
1 Introduction 11
1.1 What is this Report About? 11
1.2 Definitions 11
1.3 Summary Methodology 13
1.4 About Strategic Defence Intelligence 14
2 Executive Summary 15
3 Market Attractiveness and Emerging Opportunities 17
3.1 Current Market Scenario 18
3.1.1 Primary Threat Perception 18
3.1.2 Military Doctrine & Strategy 21
3.1.3 Military Fleet Size 24
3.1.4 Procurement Programs 29
3.1.5 Social, Political and Economic Environment and Support for Defense Projects 30
3.1.6 Political and Strategic Alliances 30
3.2 Defense Market Size Historical and Forecast 31
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% 31
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% 33
3.2.3 Counter-terrorism activities, procurements, and peacekeeping operations are the primary factors driving defense expenditure 35
3.2.4 Defense budget as a percentage of GDP will decrease at an average of 1.9% over the forecast period 36
3.3 Analysis of Defense Budget Allocation 38
3.3.1 The allocation towards capital expenditure to remain constant 38
3.3.2 More than 90% of the UK’s defense budget is allocated for defense capabilities 40
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 42
3.3.4 Expenditure on defense capability is expected to grow at a CAGR of 3.90% over the forecast period 44
3.3.5 Expenditure on Army to make up largest share of defense expenditure 46
3.3.6 Budget allocation for the army is expected to remain highest over the forecast period 48
3.3.7 Capital expenditure is anticipated to record CAGR of 5.96% over the forecast period 52
3.4 Homeland Security Market Size and Forecast 54
3.4.1 The Homeland Security market in UK is expected to grow at a CAGR of 0.35% during the forecast period 54
3.4.2 Border security and cyber-security will be the key drivers for homeland security 56
3.4.3 The UK is ‘highly affected’ by terrorist activities 57
3.4.4 UK faces a high risk of terrorist attack 58
3.4.5 The UK faces a substantial threat from terrorist organizations 60
3.5 Benchmarking with Key Global Markets 61
3.5.1 The UK ranks among major Global Defense Markets 61
3.5.2 The UK is expected to be among the top 10 defense spending countries in the world 63
3.5.3 The UK allocates a significant percentage of GDP towards defense 64
3.6 Market Opportunities: Key Trends and Growth Stimulators 65
3.6.1 Submarine - Ballistic Missile 65
3.6.2 Multi-role Aircraft 66
3.6.3 IT Services- Networking 67
3.6.4 Facilities Management 68
3.6.5 Multi-mission Helicopter MRO 69
4 Defense Procurement Market Dynamics 70
4.1.1 Import Market Dynamics 71
4.1.2 Defense imports are expected to remain consistent with the historic trends 71
4.1.3 The US is the leading arms exporter to UK, a trend expected to continue in the coming years 72
4.1.4 Aircraft, Missiles, and Engines account for more than three-quarters of UK arms imports 73
4.2 Export Market Dynamics 74
4.2.1 The UK’s Defense Exports increased at a CAGR of 11.6% during the historic period 74
4.2.2 Saudi Arabia, India, and Indonesia are the main buyers of UK defense exports 75
4.2.3 Aircraft make up the majority of UK defense exports 76
5 Industry Dynamics 77
5.1.1 Five Forces Analysis 77
5.1.2 Bargaining power of supplier: low 78
5.1.3 Bargaining power of buyer: medium to high 78
5.1.4 Barrier to entry: medium 78
5.1.5 Intensity of rivalry: medium 78
5.1.6 Threat of substitution: medium 78
6 Market Entry Strategy 79
6.1 Market Regulation 79
6.1.1 Offset policy discarded in order to maintain competitiveness of domestic suppliers 79
6.1.2 The UK permits 100% FDI in its defense industry 79
6.1.3 Government initiatives to boost the defense industry 79
6.2 Market Entry Route 80
6.2.1 Budgeting Process 80
6.2.2 Procurement Policy and Process 81
6.2.3 Joint weapons development programs are a viable market entry opportunity 82
6.2.4 Joint ventures open up new market entry strategy choices 83
6.2.5 Forming subsidiaries in the UK and acquisition domestic companies provide good market entry opportunities 83
6.2.6 Procurement Policy and Process 83
6.3 Key Challenges 84
6.3.1 Consistent defense budget cuts have negative implications for defense companies 84
6.3.2 Dominance of domestic and EU defense companies impede the progress of non-European firms 84
7 Competitive landscape and Strategic Insights 85
7.1.1 Competitive landscape Overview 85
7.2 Key Domestic Companies 87
7.2.1 BAE Systems Plc.: overview 87
7.2.2 BAE Systems Plc.: Products 87
7.2.3 BAE Systems Plc.: recent announcements and strategic initiatives 88
7.2.4 BAE Systems Plc.: alliances 89
7.2.5 BAE Systems Plc.: Recent contract wins 90
7.2.6 BAE Systems Plc.: financial analysis 94
7.2.7 GKN Aerospace Services: overview 96
7.2.8 GKN Aerospace Services: products 96
7.2.9 GKN Aerospace Services: recent announcements and strategic initiatives 97
7.2.10 GKN Aerospace Services: alliances 98
7.2.11 GKN Aerospace Services: recent contract wins 98
7.2.12 GKN Aerospace Services: Financial Analysis 100
7.2.13 Rolls-Royce Plc.: overview 102
7.2.14 Rolls-Royce Plc.: products 102
7.2.15 Rolls-Royce Plc.: recent announcements and strategic initiatives 103
7.2.16 Rolls-Royce Plc.: alliances 104
7.2.17 Rolls-Royce Plc.: recent contract wins 105
7.2.18 Rolls-Royce Plc.: financial Analysis 107
7.2.19 Babcock International Group Plc.: overview 110
7.2.20 Babcock International Group Plc.: products and services 110
7.2.21 Babcock International Group Plc.: recent announcements and strategic initiatives 110
7.2.22 Babcock International Group Plc.: alliances 111
7.2.23 Babcock International Group Plc.: recent contract wins 112
7.2.24 Babcock International: Financial Analysis 113
7.3 Key Foreign Companies 115
7.3.1 Leonardo MW Limited: overview 115
7.3.2 Leonardo: products 115
7.3.3 Leonardo MW Limited: recent announcements and strategic initiatives 115
7.3.4 Leonardo MW Limited: alliances 116
7.3.5 Leonardo MW Limited: recent contract wins 117
7.3.6 Thales UK: overview 119
7.3.7 Thales UK: products 120
7.3.8 Thales UK: recent announcements and strategic initiatives 122
7.3.9 Thales UK: alliances 123
7.3.10 Thales UK: recent contract wins 124
7.3.11 General Dynamics UK Ltd: overview 126
7.3.12 General Dynamics UK Ltd: products 126
7.3.13 General Dynamics UK Ltd: recent announcements and strategic initiatives 126
7.3.14 General Dynamics UK Ltd: alliances 127
7.3.15 General Dynamics UK Ltd: recent contract wins 128
7.3.16 Boeing UK: overview 130
7.3.17 Boeing UK: products 130
7.3.18 Boeing UK: recent announcements and strategic initiatives 130
7.3.19 Boeing UK: alliances 131
7.3.20 Boeing UK: recent contract wins 131
7.3.21 L-3 TRL: overview 133
7.3.22 L-3 TRL: services 133
7.3.23 L-3 TRL: recent announcements and strategic initiatives 133
7.3.24 L-3 TRL: alliances 134
7.3.25 Northrop Grumman UK: overview 135
7.3.26 Northrop Grumman UK: services 135
7.3.27 Northrop Grumman UK: recent announcements and strategic initiatives 135
7.3.28 Northrop Grumman UK: alliances 136
7.3.29 Northrop Grumman UK: recent contract wins 137
7.3.30 Lockheed Martin UK Ltd: overview 138
7.3.31 Lockheed Martin UK Ltd: products and services 138
7.3.32 Lockheed Martin UK Ltd: recent announcements and strategic initiatives 138
7.3.33 Lockheed Martin UK Ltd: alliances 140
7.3.34 Lockheed Martin UK Ltd: recent contract wins 141
7.3.35 Airbus S.A.S.: overview 143
7.3.36 Airbus S.A.S.: services 143
7.3.37 Airbus S.A.S.: recent announcements and strategic initiatives 144
7.3.38 Airbus S.A.S.: alliances 144
7.3.39 Airbus S.A.S.: recent contract wins 145
8 Business Environment and Country Risk 146
8.1 Economic Performance 146
8.1.1 Gross Domestic Product Per Capita 146
8.1.2 Gross Domestic Product at Current Price US$ 147
8.1.3 Exports of goods and services, current prices 148
8.1.4 Imports of goods and services, current prices 149
8.1.5 Gross National Disposable Income, current prices 150
8.1.6 Local Currency Unit per US$, Period Average 151
8.1.7 Market Capitalization of Listed Companies (US$ Billions) 152
8.1.8 Market Capitalization of Listed Companies (% GDP) 153
8.1.9 Government Cash Surplus/Deficit, as a Percentage of GDP (LCU) 154
8.1.10 Goods Exports as % of GDP 155
8.1.11 Goods Imports as % of GDP 156
8.1.12 Services Imports as a % of GDP 157
8.1.13 Services Exports as a % of GDP 158
8.1.14 Foreign Direct Investment, BoP, Current Values in US$ Billions 159
8.1.15 Net Foreign Direct Investment as a % of GDP 160
8.1.16 Mining, Manufacturing, Utilities Output 161
9 Appendix 162
9.1 About SDI 162
9.2 Disclaimer 162

List of Tables
Table 1: The UK Army Strength 24
Table 2: The UK Air Force Strength 26
Table 3: The UK Navy Strength 28
Table 4: The UK- Ongoing Development and Procurement Programs 29
Table 5: The UK- Ongoing Development and Procurement Programs 29
Table 6: UK Defense Budget (GBP Billion & US$ Billion), 2013-2022 31
Table 7: UK Defense Budget Split between Capital and Revenue Expenditure (%), 2013-2022 38
Table 8: UK Defense Budget Break Up(%), 2013-2022 40
Table 9: UK Peacekeeping Services Budget and Foreign Military Aid (US$ Billion), 2013-2022 42
Table 10: UK Defense Capability Budget (GBP Billion & US$ Billion), 2013-2022 44
Table 11: UK Defense Capability Expenditure Break up (%), 2013-2022 46
Table 12: The UK Defense Budget in GBP Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 48
Table 13: The UK Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 50
Table 14: Capital Expenditure (GBP Billion and US$ Billion), 2013 2022 52
Table 15: UK Homeland Security Expenditure (GBP Billion & US$ Billion), 2013-2022 54
Table 16: Terrorism Index,2017 58
Table 17: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022 61
Table 18: The UK Budget Formation Timetable 80
Table 19: UK's Participation in International Defense Development Programs 82
Table 20: Competitive Landscape of the UK Defense Industry 85
Table 21: BAE Systems Plc. - Product Focus 87
Table 22: BAE Systems Plc. - Alliances 89
Table 23: BAE Systems Plc. - Recent Contract Wins 90
Table 24: GKN Aerospace Services - Product Focus 96
Table 25: GKN Aerospace Services - Alliances 98
Table 26: GKN Aerospace Services - Recent Contract Wins 98
Table 27: Rolls-Royce Plc. - Product Focus 102
Table 28: Rolls-Royce Plc. - Alliances 104
Table 29: Rolls-Royce Plc. - Recent Contract Wins 105
Table 30: Babcock International Group Plc. - Product Focus 110
Table 31: Babcock International Group Plc. - Alliances 111
Table 32: Babcock International Group Plc. - Recent Contract Wins 112
Table 33: Leonardo MW Limited - Product Focus 115
Table 34: Leonardo - Alliances 116
Table 35: Leonardo MW Limited - Recent Contract Wins 117
Table 36: Thales UK - Product Focus 120
Table 37: Thales UK - Alliances 123
Table 38: Thales UK - Recent Contract Wins 124
Table 39: General Dynamics UK Ltd - Product Focus 126
Table 40: General Dynamics UK Ltd - Alliances 127
Table 41: General Dynamics UK Ltd - Recent Contract Wins 128
Table 42: Boeing UK - Product Focus 130
Table 43: Boeing UK - Alliances 131
Table 44: Boeing UK - Recent Contract Wins 131
Table 45: L-3 TRL - Product Focus 133
Table 46: L-3 TRL - Alliances 134
Table 47: Northrop Grumman UK - Product Focus 135
Table 48: Northrop Grumman UK - Alliances 136
Table 49: Northrop Grumman UK - Recent Contract Wins 137
Table 50: Lockheed Martin UK Ltd - Product Focus 138
Table 51: Lockheed Martin UK Ltd - Alliances 140
Table 52: Lockheed Martin UK Ltd - Recent Contract Wins 141
Table 53: Airbus S.A.S. - Service Focus 143
Table 54: EADS UK - Alliances 144
Table 55: EADS UK - Recent Contract Wins 145

List of Figures
Figure 1: UK Defense Budget (GBP Billion), 2013-2022 32
Figure 2: UK Defense Budget (US$ Billion), 2013-2022 32
Figure 3: UK Defense Expenditure (GBP Billion), 2013-2022 34
Figure 4: UK Defense Expenditure (US$ Billion), 2013-2022 34
Figure 5: UK GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022 37
Figure 6:UK Defense Budget Split between Capital and Revenue Expenditure (%), 2013-2022 39
Figure 7:UK Defense Expenditure Break-up(%) by Allocations, 2013-2022 41
Figure 8: UK Peacekeeping Services Budget (US$ Billion), 2013-2022 43
Figure 9: UK Foreign Military Aid Budget (US$ Billion), 2013-2022 43
Figure 10: UK Defense Capability Budget (GBP Billion), 2013-2022 45
Figure 11:UK Defense Capability Budget (US$ Billion), 2013-2022 45
Figure 12: UK Defense Capability Expenditure Allocation (%), 2013-2022 47
Figure 13: The UK Defense Budget in GBP Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 49
Figure 14: The UK Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 51
Figure 15: Capital Expenditure (GBP Billion), 2013-2022 53
Figure 16: Capital Expenditure (US$ Billion), 2013-2022 53
Figure 17: UK Homeland Security Expenditure (GBP Billion), 2013-2022 55
Figure 18:UK Homeland Security Expenditure (US$ Billion), 2013-2022 55
Figure 19: Terrorism Heat Map, 2017 57
Figure 20: Terrorism Index, 2017 60
Figure 21: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022 62
Figure 22: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion),2017 and 2022 63
Figure 23: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 64
Figure 24: Submarine - Ballistic Market Size (US$ Million), 2017-2027 65
Figure 25: Multi-role Aircraft Market Size (US$ Million), 2017-2027 66
Figure 26: Networking Market Size (US$ Million), 2017-2027 67
Figure 27: Facilities Management Market Size (US$ Million), 2017-2027 68
Figure 28: Multi-mission Helicopter MRO Market Size (US$ Million), 2017-2027 69
Figure 29: UK Defense Imports 2012-2016 71
Figure 30: UK Defense Imports by Country (%), 2012-2016 72
Figure 31: UK Defense Imports by Category (%), 2012-2016 73
Figure 32: UK Defense Exports 2012-2016 74
Figure 33: UK Defense Exports by Country (%), 2012-2016 75
Figure 34: UK Defense Exports by Category (%), 2012-2016 76
Figure 35: Industry Dynamics - Porter’s Five Forces Analysis 77
Figure 36: BAE Systems - Revenue Trend Analysis (GBP billion), 2012-2016 94
Figure 37: BAE Systems - Operating Profit (GBP billion), 2012-2016 95
Figure 38: BAE Systems - Net Profit Trend Analysis (GBP billion), 2012-2016 95
Figure 39: GKN Aerospace - Revenue Trend Analysis (GBP billion), 2012-2016 100
Figure 40: GKN Aerospace - Operating Profit (GBP billion), 2012-2016 100
Figure 41: GKN Aerospace -Profit Before Tax (GBP billion), 2012-2016 101
Figure 42: Rolls-Royce - Revenue Trend Analysis (GBP billion), 2012-2016 107
Figure 43: : Rolls-Royce - Operating Profit (GBP billion), 2012-2016 108
Figure 44: : Rolls-Royce - Profit Trend Analysis (GBP billion), 2012-2016 109
Figure 45: Babcock International - Revenue Trend Analysis (GBP billion), 2012-2016 113
Figure 46: Babcock International - Operating Profit (GBP billion), 2012-2016 114
Figure 47: Babcock International -Profit Trend Analysis (GBP billion), 2012-2016 114
Figure 48: UK GDP Per Capita, 2015-2025 146
Figure 49: UK GDP (in US$ Billion) , 2015-2025 147
Figure 50: UK Exports of goods,( LCU Billions), 2005-2014 148
Figure 51: UK Imports of goods and services (LCU Billions), 2005-2014 149
Figure 52: UK Gross National Disposable Income, current prices (US$ Billion), 2005-2012 150
Figure 53: UK GBP per US$, 2015-2024 151
Figure 54: UK Market Capitalization of listed companies (US$ Billion), 2005-2012 152
Figure 55: UK Market Capitalization of listed companies(%GDP), 2005-2012 153
Figure 56: UK Government Cash surplus/deficit (LCU Billion), 2005-2012 154
Figure 57: UK Goods exports as % of GDP, 2005-2014 155
Figure 58: UK Goods imports as % of GDP, 2005-2014 156
Figure 59: UK Services Imports as a % of GDP, 2005-2014 157
Figure 60: UK Services exports as a % of GDP, 2005-2014 158
Figure 61: UK FDI, net (BoP, Current US$ Billion), 2005-2014 159
Figure 62: UK Net FDI as a % of GDP, 2005-2014 160
Figure 63: UK Mining, manufacturing, and Utilities Output (US$ Billion), 2005-2014 161


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