Defence suppliers warning on military spending cuts

FIRMS supplying into the defence industry are likely to find it tough going this year due to further cuts in military spending, Deloitte has warned.

However, those supplying the civil aerospace sector could be in for a bumper time as aircraft manufacturers prepare for record revenues, the firm said in its 2013 global aerospace and defence outlook.

Tom Captain, vice chairman and US and Global Aerospace and Defence leader at Deloitte, said: “The global defence industry should expect to see more aggressive competition for fewer large defence programmes. Renewed foreign military sales efforts into new geographic markets that face increasing national security threats should offset part of the decline.”

However, in contrast to cuts in defence spending, the commercial aerospace sector is expected to reach record levels of revenue in 2013 as a result of increased production rates and the introduction of next generation aircraft.

“In the commercial aircraft sector, expect to see 2013 continue with the trend of global production levels above 1,000 aircraft per year for the third year in a row,” added Mr Captain.

The overall combined revenues for the A&D industry are expected to increase modestly in 2013 given large increases in global revenues for commercial aerospace, coupled with declines in defence spending. The balance of defence and commercial production activity should provide the diversification the A&D industry may need to continue to thrive and grow next year.

Pauline Biddle, UK aerospace and defence sector leader at Deloitte, said: “We are expecting defence contractors to continue focusing on cost cutting and we are likely to see increasing levels of mergers and acquisitions and further market growth over the next few months.

“Focus will remain on cyber-security, intelligence, surveillance and reconnaissance technologies. Continued innovations that are the hallmark of this industry should power the next generation of technology development that can contribute to safer, more fuel efficient aircraft.”