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KN75000
KEY NOTE DEFENCE EQUIPMENT JANUARY 2000
Overview

ISBN 1-84168-079-6

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TABLE OF CONTENTS

Executive Summary


1. Market Definition

UK PROCUREMENT
Table 1: UK Defence Equipment Expenditure by Sector by Value (£m), 1996/1997-1999/2000
Table 2: Quoted Companies Paid Over £25m Annually by the Ministry of Defence in 1998/1999
Overseas Suppliers
Table 3: UK Imports of Defence Equipment by Value (£m), 1995-1998
‘Smart Procurement’
Acquisition Cycle
Concept
Assessment
Demonstration
Manufacture
In-Service
Disposal
Changes from Downey Cycle
Equipment Capability
Equipment Approvals Committee
Defence Procurement Agency
Integrated Project Teams
Defence Logistics Organisation
Financial Delegation
Political Approval
GLOBAL MARKET
UK POSITION


2. Market Size

DEFENCE BUDGET
Table 4: Large Spending Departments by Share of Total Annually Managed Expenditure ( percent), 1998/1999-2001/2002
Table 5: Annual Defence Expenditure as a Share of Gross Domestic Product ( percent) 1991/1992-2001/2002
Divisions of the Defence Budget
Table 6: Main Divisions of the UK Defence Budget by Share of Total Defence Budget ( percent), 1995/1996-1999/2000
Table 7: UK Defence Personnel Budget by Value and Share of Total Defence Budget (£m and percent), 1985/1986-2001/2002
Table 8: UK Defence Equipment Budget by Value and Share of Total Budget (£m and percent), 1985/1986-2001/2002
DEFENCE EQUIPMENT EXPENDITURE
Table 9: UK Defence Sea Systems Budget for Development, Production, Repair and Spares by Value and Share of Total Defence Equipment Budget (£m and percent), 1985/1986-2001/2002
Table 10: UK Defence Sea Systems Production and Repairs Expenditure by Value (£m), 1994/1995-1997/1998
Table 11: UK Defence Land Systems Budget for Development, Production, Repair and Spares by Value and Share of Total Defence Equipment Budget (£m and percent), 1985/1986-2001/2002
Table 12: UK Defence Land Systems Production and Repair Expenditure by Value (£m), 1994/1995-1997/1998
Table 13: UK Defence Air Systems Budget for Development, Production, Repair and Spares by Value and Share of Total Defence Equipment Budget (£m and percent), 1985/1986-2001/2002
1994/1995-1997/1998
DEFENCE EXPORTS
Table 16: Destination of UK Defence
Exports by Share ( percent), 1992-1997
Table 17: Top 10 Defence Exporting Countries by Value ($bn), 1994/1998
Defence Export Services Organisation


3. Industry Background

INDUSTRY CONCENTRATION
Table 18: Number of MoD Contractors Paid over £5m in Each Year, 1988/1989 to 1996/1997
EMPLOYMENT
Table 19: UK Defence Employment, 1994/1995-1997/1998
Table 20: Estimated UK Defence Employment by Region, 1997/1998
INDUSTRY CONSOLIDATION
US Influence
European Experience
New Industrial Groupings


4. Competitor Analysis

THE MARKETPLACE
Table 21: Selected Major UK Defence Equipment Suppliers by Turnover (£m), 1999
MARKET LEADERS
Alvis PLC
BAe Systems PLC
Cobham PLC
GKN PLC
Hunting PLC
Racal Electronics PLC
Rolls-Royce PLC
Smiths Industries PLC
Vosper Thornycroft Holdings PLC


5. Strengths, Weaknesses, Opportunities and Threats

STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
to the Industry
DEFENCE SUPPORT AGENCIES
Table 22: Defence Agencies by Staff Numbers and Budget (£m), 1998/1999
MANAGEMENT CONSULTANTS
by Value (£m), 1995/1996-1998/1999


7. Current Issues

CURRENT PROCUREMENT
Background
Major Projects 1998
Table 24: Major Defence Equipment Projects by Value In-Service Date (£m), as at 31st March 1998
Eurofighter
SECURITY REVIEWS
Strategic Defence Review
NATO’s Adaptation
NATO AND EUROPE
European Aspirations
Defence Capabilities
INDUSTRIAL CHALLENGES
Contracting Markets
Table 25: NATO Military Expenditure by Value ($m at 1990 price levels and exchange rates), 1990-1999
Armaments Co-operation
Competing Agencies
Future Prospects
RECENT ANNOUNCEMENTS


8. Forecasts

BUDGET FORECASTS
Table 26: UK Defence Budget and Forecasts by Value (£m), 1998/1999-2004/2005
DEFENCE ACCOUNTING
PROCUREMENT TRENDS


9. Company Profiles

Alvis PLC
BAe Systems PLC
Cobham PLC
GKN PLC
Rolls-Royce PLC
Smiths Industries PLC
Vosper Thornycroft Holdings PLC


10. Glossary


11. Further Sources

Associations
Periodicals
Directories
General Sources
Bonnier Information Sources
Government Publications
Defence Agencies
Other Sources

Key Note Research

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EXECUTIVE SUMMARY

The incoming Government’s Strategic Defence Review (SDR) was belatedly published in July 1998, introducing considerable change for the Armed Forces and their suppliers. Further change has also been instigated by HM Treasury, affecting all government departments including the Ministry of Defence (MoD). Explanation of these changes is a feature of this report. As with other departments of state, accurate information has become increasingly difficult to obtain from the MoD since the present Government took office. The annual reporting cycle, by the MoD to Parliament, has been completely changed with some publications no longer produced. This report seeks to fill the void which has resulted, with factual information from a wide variety of unclassified sources. UK expenditure on defence equipment was £9.8bn in 1999/2000, and the market can be divided into three primary sectors: sea systems land systems air systems. Defence equipment is increasingly being supplied by a smaller number of large companies, whether in continental Western Europe, the US or in the UK. Against the necessary financial background, the effects of industrial restructuring together with the procurement decisions arising from the SDR are examined in this report In financial terms, defence is not high on the domestic political agenda and the associated expenditure has been under considerable pressure throughout the 1990s. Exports have thus been, and will continue to be, an important factor in cushioning the UK’s equipment suppliers against the impact of a decline in the defence budget. A great deal of rhetoric has been heard from the Prime Minister and others, during the past 2 years, about the future of the Armed Forces. Whatever plans there may be for the Services, they will have to conduct their affairs with less money. The forward equipment programme, however, contains considerable prospects for a restructured defence industry as described in this report.

Text © 2000 Key Note

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Last updated by Duncan Nottage 5th March 2000