UK Defence Export Orders Stay Ahead of Ten Year Average

Collated from a UKTI DSO survey of UK defence companies together with ‘rest of the world’ competitor data and released in compliance with a formal code of practice as ‘Official Statistics’ this morning UK defence exports for 2015 are shown to have been worth £7.7 billion, down by £800 million on the equivalent figure for 2014. Security based exports were up by £600 million to £4bn from the equivalent £3.4bn in 2014.

Nevertheless, over a five year period UK defence exports continue to be above trend and in viewing these figures it is important to recognise that year to year fluctuations are not unusual. Sikes in 2007 and in 2013 were to an extent offset by poor years recorded in 2008 and in the context of an increasingly competitive global market, the UK’s defence export total of £7.7 billion last year is a reasonable achievement, particularly given the limited number of large platform orders.

The UK remains the third largest exporter of defence equipment behind the US and France and over the past year, as witnessed in the 2015 Security and Defence Review [SDSR 2015] the Government have shown a new determination to assist UK defence exports through recognition of the importance and value that they bring to the economy. Defence exports will play an increasingly larger role within the Governments’ prosperity agenda and the encouragement and support that innovation based industry/military partnerships such as the Defence Growth Partnership working together with UKTI Defence and Security Organisation and the MOD good will come from this.

In comparing and contrasting the UK defence figures today it is worth noting that UK defence export figures represent new orders, whilst those covering the rest of the world usually represents contracts signed. The UK has been assessed to be the third highest placed global defence exporter in 2015 and to have successfully retained its ten-year average position as the second largest global exporter of defence equipment.

Of orders included the largest was a multi-million pound deal signed with the Royal Saudi Air Force for a further 22 Hawk ‘Advanced Jet Trainers’ in December 2015. At 85%, the air domain continues to represent the largest level of UK defence related exports and the outlook here in my view remains very strong.

While the UK’s share of the global defence export market in 2015 was at 12%, down from 16% in 2014, UKTI DSO estimate that on a rolling 10 year average the UK’s average market share is 19%. If so this would be consistent with the long term trend.  By region, defence export destinations continue to be dominated by the Middle East (68%) and North America (18%).  UK defence exports to Europe and the Asia-Pacific were slightly down on 2014, the figures included a large win in Norway and wins in the Asia-Pacific region included Thales to supply missiles to the Malaysian and Thai armed forces and the Devon based company Supacat providing 82 Extenda vehicles to Australia.

The Middle East and Asia-Pacific continue to be seen as important growth markets in 2016; together with activity in Latin America and Africa also likely to be active. Defence export markets are always challenging and the UK defence sector companies face constant challenges from key defence competitors such as the USA, France, Russia and Germany. Other emerging defence export competitors include the Republic of Korea, Turkey, Canada and Brazil.

Security export in 2015 showed significant growth over those of 2014 (£3.4 billion which represents an increase of 18% sales increase. This was the largest year on year increase since 2010 and enabled the UK to close the gap on the 5th highest exporter of security equipment – Germany with £4.04 billion of sales in 2015. The UK’s share of the global security export market was 5.3%, an improvement on the 2014 figure of 4.5%.UKTI DSO have also said that there has been an increase in global demand for physical security products, this being largely due to the rise of so-called IS/Daesh and need of various countries to enhance Counter-Terrorism activities.

Key UK security competitors are China, USA, India, Japan and Germany. The enclosed chart if it comes out on your copy may be useful in respect of UK defence exports.

CHW (London – 26th July 2016)

Howard Wheeldon FRAeS

hwheeldon@wheeldonstrategic.com

Tel: 07710-779785

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