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‘Peak Defence’ On Horizon As US, UK & Europe Erodes Competitive Edge

Stocks in this article: IHS

Asia Pacific budgets are set to outstrip USA and Canada by 2021, fuelled by an explosion in global arms trade that threatens the competitive edge and dominance of US, UK and European defence trade according to the biggest budget and export study since the economic downturn. The study – The Balance of Trade – is presented to clients on 25 June by IHS Inc. (NYSE: IHS), the leading global source of information and analytics.

1.   Asia Pacific’s defence budgets are forecast to outstrip North America by 2021, up 35 percent from 2013 levels to $501bn. Total global defence budgets are forecast to continue rising, reaching $1.65tn by 2021, an increase of 9.3 percent over 2013 levels.
2. Israel will sell twice as many UAV (‘drone’) as the USA in 2014 and will become the biggest exporter by the end of 2013. The top UAV (‘drone’) exporter is currently the USA not Israel (despite press reports).
3. Global arms trade (exports and imports between countries) is up significantly despite the global economic downturn, increasing 30 percent between 2008 and 2012, from USD56.5bn to USD73.5bn. At this rate, defence trade between countries will have more than doubled by 2020. The global defence export and services market will have reached $100bn by 2018. IHS analysis suggests that world trade is at least 30 percent higher than as stated in other prominent studies publicly available. Western Europe’s share of exports declined, Asia Pacific’s rose.

Asia Pacific’s exports are up. Western Europe’s exports are down. Western Europe’s share of the global market was 34.5 percent in 2008 and fell to 27.5 percent in 2012. Asia Pacific’s share (including China) rose from 3.7 percent ($2.0bn) in 2008 to 5.4 percent ($3.7bn) in 2012 – with many in Asia doubling exports. China has jumped up from 10th place in 2008 to be the world’s 8th largest exporter today.


USA has imported $10.5BN in military related equipment and services since 2008 – foreign imports to USA are forecast to continue rising through 2013. Rise of Asia Pacific exports threatens US dominance of global defence industry.


Guy Anderson, Senior Principal Analyst (A&D), IHS Jane’s, said: “The global arms market is about to get very turbulent. We may already have reached ‘peak defence’ with the US dominance of the global defence market under threat. The big Western defence companies have no option – export or shrink – but this could be sowing the seed of their own demise; the opportunities in the East are a double edged sword, fuelling a trend which threatens US dominance of defence. Low end defence equipment dominates the global market now but the West’s edge on technology will erode this decade as Asia outspends the USA and Europe. However, money alone is not enough. India is proof of that. And size doesn’t matter. Israel is set to complete its domination of the UAV (‘drone’) market in 2013. Turkey, Singapore, South Korea and China are also racing to innovate. Give Asia and the Middle East a decade and they will be selling world class kit. The US is now buying significant amounts of foreign imports.”

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