The Government’s austerity programme is expected to put the UK defence industry in a difficult position in 2011, possibly causing manufacturers of such items as military connector to take their business abroad.
According to a new report by Electronics.CA Publications entitled ‘United Kingdom Defence and Security Report’, the cuts made by the Government could begin to impact existing and potential contracts in the military defence sector.
The moves which have already taken place include grounding the Harrier, cancelling various naval projects and cutting the overall size of the army, with further moves expected to follow shortly.
Reforming the procurement system at the Ministry of Defence is also a main priority, and although it is hoped this will mean the Government can save money, the report suggests it limits the profits of firms and disincentiveising research and development if costs have to be borne by the companies themselves.
UK defence firms will possibly focus on exports in the coming year to make their money elsewhere.
The UK’s largest defence firm, BAE Systems, has recently released its 2010 performance figures showing last year slight improvements in their fiscal position. Their sales grew from GBP22billion in 2009 to GBP22.39billion in 2010, despite a worsening of its broader prospects.
The company is seeking to boost its sales in international markets, and in particular the Middle East. They believe this area is an important market for future sales given the security concerns and high budgets of many countries outside the UK, as well as the lack of domestic firms.
Rolls-Royce also revealed the majority of their business is in the marine and civil aviation sectors but the firm received GBP2.1billion in new defence orders in 2010.
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