Press Release

 

Contact: Dan Darling, European Defense Analyst

Phone: (203) 426-0800

Fax: (203) 426-4262

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E-mail: Daniel.darling@forecast1.com

Forecast International, Inc.

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FOR IMMEDIATE RELEASE

U.K. Still Facing Defense Spending Questions Despite Increase  

NEWTOWN, Conn. [July 30, 2007] — Faced with tackling two overseas conflicts while financing expensive long-term equipment projects, the United Kingdom confronts tough choices concerning its future defense spending. According to a recent Forecast International U.K. Military Markets report, an array of factors have combined to form the British military’s current funding dilemma in spite of the British Ministry of Defense’s recent announcement of a three-year, GBP7.7 billion ($15.87 billion) defense budget increase.

A high operational tempo, costly defense programs that soak funds from immediate battlefield material needs, and past government refusals to recognize that an armed force undergoing combat operations cannot operate on a peacetime spending platform all have combined to serve as elements of a larger problem.

Observed at face value, U.K. defense spending seems quantitatively high for a country its size, as Britain funds the second largest defense budget in the world after the U.S. at around GBP33.45 billion (roughly $69 billion). But as a percentage of GDP, defense spending has decreased from a past annual average of 3 percent to around 2.4 percent this year and will fall to 2.1 percent next year. Additionally, in terms of defense spending in proportion to national wealth, the U.K. lags behind fellow European NATO members France, Turkey and Greece, as well as Alliance newcomer Bulgaria.

The most prominent drains on defense coffers are the country’s overseas combat operations in Iraq and Afghanistan, which have each lasted over four years. British forces have been redeployed to the volatile Helmand Province of southern Afghanistan since last summer and have endured constant combat operations against resurgent Taliban elements. And though rumors abounded prior to Gordon Brown taking over as prime minister from Tony Blair that British forces would be fully drawn down from the remaining 5,000+ troops in Iraq by mid-2008, the withdrawal plans conceptualized mainly sought to shift these forces from one operational zone to the next by redeploying them to the Afghan theater.

While both conflicts continue to drag on, the U.K. Treasury Department had previously been rumored to be seeking to rein in defense spending through its 2009-2012 Comprehensive Spending Review, urging the Ministry of Defense to trim some GBP150 million ($309 million) and bring its budget back within desired limits. The announcement of the three-year spending increase effectively cancels out those rumors, but the green-lighting of two new CVF aircraft carriers means that half of the new funds will be consumed within that project.

In the meantime, the immediate need of re-arming the military seems to have taken a back seat to other long-range priorities such as the Eurofighter Typhoon jets, the F-35 Joint Strike Fighter program, the Bowman communications system, FRES armored vehicles, Type 45 destroyers, and Astute class submarines, plus the FIST future soldier concept – all of which serve to support and sustain the U.K. domestic defense industry.

“The winner in the MoD’s recent announcement is the British defense industry – particularly the maritime sector, but not necessarily the active British armed forces,” said Forecast International Military Markets Analyst Dan Darling. “Between the carrier project, the possibility of two additional Type 45 destroyers, and a replacement for the Trident nuclear deterrent, the differential of the three-year budgetary increase has pretty much been consumed.”

“When one considers that earlier in the year there were rumors that as much as GBP1 billion in cuts had been demanded of the armed forces by April of 2008, then the recent announcement by the MoD is certainly a positive,” continued Darling. “But taken in the context that this increase will average $5.3 billion a year for a military deployed across the globe, engaged in two difficult high-intensity overseas operations, and thirsting for more manpower and immediate equipment, it is not nearly as robust as it initially seems.”

“Ultimately, the U.K. is confronting a dilemma where defense spending is concerned unless it dials-down its engagements in Iraq and Afghanistan or injects greater investment into its armed forces,” Darling adds. “Absent more vigorous funding, it will be left with some stark choices, including scaling back on some long-term projects – some of which were envisioned for Cold War or pre-9/11 engagements, reducing flight training and army exercises, canceling the third batch of Eurofighter Typhoon multirole aircraft, or further trimming its naval inventory. Simply put, without larger infusions of investment, there are few good options out there for an armed force gradually being exhausted taking on overseas assignments in conflict zones.”

Forecast International, Inc., is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics.  Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.  To arrange an interview with Forecast International’s editors, please contact Ray Peterson, Vice President, Research & Editorial Services (203-426-0800, ray.peterson@forecast1.com).