Recently released market study: United Kingdom Defence & Security Report Q1 2011

New Defense market report from Business Monitor International: "United Kingdom Defence & Security Report Q1 2011"
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Jan. 23, 2011 - PRLog -- On October 19, the Government published its Strategic Defence and Security Review (SDSR). The headline theme is a serious reduction in funding capacity, within the framework of overall deficit reduction. An 8% cut in real terms over the next four years shows a slightly more generous treatment of the Ministry of Defence than other departments. That said, this apparent light treatment has not stopped complaints from Liam Fox, the Defence Secretary, and others within the armed forces. They claim these 'draconian' cuts will cause grave and irreversible damages to the capabilities of the armed forces. This comes in the context of widespread defence cuts throughout Europe, with overall spending likely to fall under US$260bn by 2012, according to Forecasting International, a consultancy. However, there is widespread belief that UK spending will pick up in a predictable fashion after 2015. In order to reach previous commitments, the armed forces hope this will be in the region of 2% a year in real terms.

General Sir David Richards, the Chief of the Defence Staff, has painted the reach and scope of the review as 'trading the perfect for the acceptable'. He highlights the fact that 'a plan is not a plan if it doesn't take into account the resources available'. The review, in all, would appear to attempt to repair a disjoint of the available resources and national political and military aspirations, which has been at the core of recent defence thinking, according to defpro.daily, an industry newspaper.

In total, it is expected that 42,000 staff will be lost from both the MoD and the armed forces. The RAF and Navy will both lose 5,000 staff, the army 7,000 and a further 25,000 civilian jobs will be lost in the MoD. Further cuts have been made, in particular to air capacity (the retirement of the Harrier fleet). The likelihood of the Navy ever having both of the aircraft carriers from Future Carrier Project in service at the same time has also been put in serious doubt.

Reforms have taken place on a political as well as procurement stage, most notably the deepening of military co-operation between the UK and France, sharing nuclear research and in establishing a joint military force. This effort to increase the value gained from any defence spending has been widely lauded by alliances such as NATO and the European Defence Agency (EDA). However, as this represents the two largest spenders in terms of European Defence, Reuters reports that there is a concern that this may undermine any further military alliance - an issue raised by a the European Council of Foreign Relations, a think tank, Whilst both nations re-affirmed their belief in NATO as the primary defender of European security, this agreement does mean that both forces can more easily operate in a bilateral fashion. Added to this, the likelihood of a 'shared' carrier group in the near future sets the stage for a substantial change in the ability of the UK to engage in unilateral operations.

The effects which this will have on the defence industry in the UK are manifest. Several companies are moving away from traditional markets. For instance, Qinetiq, a former MoD owned research organisation, has won a contract to assist NASA with engineering issues at the Kennedy Space centre, in a contract worth potentially upwards of US$1bn. However, defence spending cuts are likely to hurt all suppliers. BAE systems now earns more than 50% of its profits in the American market, and looks likely to cut around 9000 jobs in the UK in the coming year. A Forbes report recently noted that BAE is considered a US company by US Department of Defence weapons purchasers, and so is unlikely to receive the usual short shrift felt by foreign companies from the Pentagon in periods of spending retrenchment. The conclusion reached is a question as to for how much longer BAE will base itself in the UK, particularly given the likelihood of even smaller profit margins from UK Government procurement.

Talk continues about the future role of dissident groups in Northern Ireland. Patrick Mercer MP, in the Wall Street Journal, has suggested that the Real IRA and the Continuity IRA will attempt to 'bomb themselves back to significance', through targeting the mainland. However, according to Reuters, many analysts believe that this potential has been lost and that these groups are now concentrating on gang-like enforcement activities and localised acts of terrorism. There have been over 110 terrorist incidents in the first ten months of 2010, including a car bomb aimed at the building housing MI5, and a grenade attack against two members of the Northern Ireland Police, according to the BBC.

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
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Tags:Defence, Security, Britain, Coalition, Armed, Perceived, Notably, British, Gbp20bn, Bae
Industry:Defense, Government, Research
Location:Massachusetts - United States
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