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Defence Industry Market Review 2003

  • ID: 34800
  • July 2003
  • Region: United Kingdom
  • Key Note Ltd
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Although the Armed Forces have been in the public eye recently, the industry that sustains them is probably less well understood. In the run-up to the 2003 Iraqi Campaign, the UK defence industry responded to 170 Urgent Operational Requirements, valued at £500m, in order that the Services would be properly equipped. This seventh edition of our Market Review of The Defence Industry examines the complex world surrounding the Ministry of Defence (MoD), in which the industry operates.

A Strategic Defence Review (SDR) was undertaken after the Labour Party's victory in the 1997 General Election. Eventually published in July 1998, the SDR indicated the way ahead for the Services: from static (Army and Royal Air Force) positions in Germany to expeditionary warfare based around two new, large aircraft carriers. Following the terrorist attacks on the US on 11th September 2001, the MoD had to revise its thinking and a New Chapter to the SDR was published in July 2002. The resultant policy from these deliberations is examined in Chapter 1 of this Market Review (Defence Policy), which also looks at the MoD's planning, capabilities and requirements. Attention is given to the European READ MORE >

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TABLE OF CONTENTS:
<BR>
<BR>Executive Summary 1
<BR>
<BR>1. Defence Policy 12
<BR>
<BR>INTRODUCTION 12
<BR>Strategic Defence Review 12
<BR>A New Chapter 12
<BR>Performance and Expenditure Records 13
<BR>Policy Papers 13
<BR>POLICY CONSIDERATIONS 14
<BR>The Strategic Environment 14
<BR>Policy Priorities 14
<BR>NATO 14
<BR>European Union 15
<BR>Wider Security Interests 15
<BR>DEFENCE MISSION 16
<BR>Purpose 16
<BR>How the Mission is Achieved 16
<BR>Attitude to Personnel 16
<BR>Overall Goals 17
<BR>DEFENCE PLANNING 17
<BR>DM A: Peacetime Security 17
<BR>DM B: Security of the Overseas Territories 18
<BR>DM C: Defence Diplomacy 18
<BR>DM D: Support to Wider British Interests 19
<BR>DM E: Peace Support and Humanitarian Operations 19
<BR>DM F: Regional Conflict and Crisis 19
<BR>DM G: Regional Aggression Against NATO 19
<BR>DM H: Strategic Attack on NATO 19
<BR>CAPABILITIES AND REQUIREMENTS 20
<BR>NATO Transformation 20
<BR>Defence Capabilities Initiative 20
<BR>Prague Capability Commitment 20
<BR>EU Headline Goal 21
<BR>European Shortfalls 22
<BR>Table 1.1: EU Capability Targets — Shortfalls Remaining, December 2002 22
<BR>European Capabilities Action Plan 23
<BR>
<BR>2. Armed Forces 24
<BR>
<BR>INTRODUCTION 24
<BR>Number of Defence Personnel 24
<BR>Civil Servants 24
<BR>Table 2.1: Civil Service Staff in Post (number and %), 1995-2002 24
<BR>Regular Forces 25
<BR>Table 2.2: Strength of the UK's Regular Forces (number and % female), 1989-2003 26
<BR>Reserves 27
<BR>Regular Reserves 27
<BR>Table 2.3: Strength of the UK's Regular Reserves (number and % female), 1st April 2002 27
<BR>Volunteer Reserves 28
<BR>Table 2.4: Composition of the UK's Volunteer Reserves, 1st April 2002 28
<BR>Table 2.5: Strength of the UK's Volunteer Reserves (number and % female), 1st April 2002 28
<BR>Pay 2000 29
<BR>Table 2.6: Annual Basic Military Salaries (£), from 1st April 2003 30
<BR>Personnel Management 31
<BR>Civil Service Reform 31
<BR>Armed Forces Legislation 31
<BR>Armed Forces' Overarching Personnel Strategy 32
<BR>ROYAL NAVY AND ROYAL MARINES 34
<BR>Trained Strength 34
<BR>Table 2.7: Royal Navy/Royal Marines — Trained Strength (number and % female), 1st January 2002 and 2003 34
<BR>Number of Ships/Major Units 34
<BR>Table 2.8: Royal Navy, Royal Marines and Royal Fleet Auxiliary — Number of Ships/Major Units, 1st April 1990 and 2002 35
<BR>The Fleet 36
<BR>Table 2.9: The Royal Naval Fleet, 2003 36
<BR>Base Ports 43
<BR>Devonport Flotilla 44
<BR>Faslane Flotilla 44
<BR>Portsmouth Flotilla 44
<BR>Naval Aircraft 45
<BR>Table 2.10: Number of Naval Aircraft and Their Roles, 1st April 2002 45
<BR>Naval Weapon Systems 45
<BR>Sea-Launched Missiles 45
<BR>Air-Launched Missiles 46
<BR>Torpedoes 46
<BR>Submarine-Launched Ballistic Missiles 46
<BR>Guns 46
<BR>Royal Marines — Structure and Roles 47
<BR>Royal Marines Command 47
<BR>3 Commando Brigade RM 47
<BR>Royal Naval Reserve Training Centres 48
<BR>Table 2.11: Royal Naval Reserve Training Centres, 2003 49
<BR>University Royal Naval Units 49
<BR>ARMY 50
<BR>Trained Strength 50
<BR>Table 2.12: The Army — Trained Strength (number and % female), 1st January 2002 and 2003 50
<BR>Number of Major Units 50
<BR>Table 2.13: The Army — Number of Major Units, 1st April 1990 and 2002 51
<BR>Regular Army 52
<BR>Table 2.14: The Army — Regiments and Corps (number of regular units), 2003 52
<BR>Table 2.15: Army Divisions — Approximate Manpower and Major Equipment Holdings, 2000/2002 56
<BR>Territorial Army 56
<BR>Table 2.16: The Restructured Territorial Army — Major Units, 2002 56
<BR>Officers' Training Corps 59
<BR>Table 2.17: Officers' Training Corps — Number of Cadets by University, 2002 59
<BR>ROYAL AIR FORCE 60
<BR>Trained Strength 60
<BR>Table 2.18: The Royal Air Force — Trained Strength (number and % female), 1st January 2002 and 2003 60
<BR>Number of Squadrons 60
<BR>Table 2.19: The Royal Air Force — Number of Squadrons, 1st April 1990 and 2002 61
<BR>Flying Squadrons and Units 62
<BR>Table 2.20: The Royal Air Force — Flying Squadrons and Units, 2003 62
<BR>Total Aircraft Strength 67
<BR>Table 2.21: The Royal Air Force — Total Aircraft Strength, 3rd May 2002 67
<BR>Air Surveillance and Control Systems 68
<BR>The UK 68
<BR>Falkland Islands 68
<BR>Regiment Squadrons and Units 69
<BR>Table 2.22: The Royal Air Force — Regiment Squadrons and Units, 2003 69
<BR>Royal Auxiliary Air Force Units 70
<BR>Table 2.23: Royal Auxiliary Air Force Units, 2003 70
<BR>University Air Squadrons 71
<BR>Table 2.24: University Air Squadrons and Air Cadet Air Experience Flights, 2003 71
<BR>JOINT ORGANISATIONS 71
<BR>Permanent Joint Headquarters 72
<BR>Joint Rapid Reaction Forces 72
<BR>Joint NBC Defence Headquarters and Regiment 72
<BR>Joint Ground-Based Air Defence 72
<BR>Joint Helicopter Command 72
<BR>Joint Force Harrier 73
<BR>Defence Academy 73
<BR>Joint Doctrine and Concepts Centre 73
<BR>Logistics 73
<BR>Equipment Capability 73
<BR>
<BR>3. Defence Expenditure 74
<BR>
<BR>THE UK BUDGET 74
<BR>Fiscal Planning 74
<BR>Table 3.1: The Government's 3-Year Fiscal Cycle 74
<BR>Table 3.2: The Government's Fiscal Calendar, 1998-2004 75
<BR>Government Expenditure 2002/2003 to 2005/2006 75
<BR>Table 3.3: Total Managed Expenditure by Government Department (£m), 2002/2003-2005/2006 76
<BR>Defence Remains a Priority 78
<BR>Table 3.4: Total Managed Expenditure for the Government's Main Spending Departments (£m), 2002/2003-2005/2006 78
<BR>Table 3.5: Total Managed Expenditure for the Government's Main Spending Departments (%), 2002/2003-2005/2006 78
<BR>THE DEFENCE BUDGET 79
<BR>MoD Expenditure Limits 79
<BR>Table 3.6: MoD Departmental Expenditure Limits in Cash Terms (£m), 2002/2003-2005/2006 79
<BR>Table 3.7: MoD Departmental Expenditure Limits on Resource Budgeting Basis (£m), 2002/2003-2005/2006 79
<BR>Table 3.8: The MoD's Total Budget on Resource Accounting Basis (£m), 2002/2003-2005/2006 80
<BR>Little Growth in Defence Spending 80
<BR>Table 3.9: Share of Planned Public Spending Increase Taken by Each Policy Area (%), 2002/2006 80
<BR>Table 3.10: Average Annual Growth in Departmental Expenditure Limits by Government Department (%), 2002/2003-2005/2006 81
<BR>Public Service Agreement 81
<BR>Aim 81
<BR>Objectives and Performance Targets 82
<BR>Responsibility for Delivery 82
<BR>THE BUDGETARY REGIME 83
<BR>MoD Planning Cycle 83
<BR>Top-Level Budget Holders 83
<BR>Central 83
<BR>Operational 83
<BR>Manpower 84
<BR>Equipment Procurement 84
<BR>Logistics Support 84
<BR>Trading Funds 84
<BR>Top-Level Budgets 85
<BR>Table 3.11: The MoD's Top-Level Budgets (£m), 2002/2003 85
<BR>Historical Expenditure on Defence Equipment 86
<BR>Sea Equipment 86
<BR>Table 3.12: Expenditure on the Production and Repair of Sea Equipment by Sector (£m), 1997/1998-2000/2001 86
<BR>Land Equipment 86
<BR>Table 3.13: Expenditure on the Production and Repair of Land Equipment by Sector (£m), 1997/1998-2000/2001 87
<BR>Air Equipment 87
<BR>Table 3.14: Expenditure on the Production and Repair of Air Equipment by Sector (£m), 1997/1998-2000/2001 88
<BR>
<BR>4. MoD Procurement 89
<BR>
<BR>THE PROCUREMENT REGIME 89
<BR>'Smart Acquisition' 89
<BR>The Acquisition Cycle 90
<BR>Table 4.1: The MoD's Acquisition Cycle, 2003 90
<BR>Concept 90
<BR>Assessment 91
<BR>Demonstration 91
<BR>Manufacture 91
<BR>In-Service 91
<BR>Disposal 91
<BR>Integrated Project Teams 92
<BR>Acquisition Stream 92
<BR>The Acquisition Community 93
<BR>Equipment Capability Customer 93
<BR>Table 4.2: The 'Customer' for Defence Equipment by Procurement Phase, 2003 93
<BR>ORGANISATION AND FINANCIAL CONTROL 94
<BR>Defence Procurement Agency 94
<BR>Financial Approval 95
<BR>Table 4.3: Defence Equipment Approval Categories, 2003 96
<BR>Investment Approvals Board 96
<BR>Political Approval 97
<BR>Defence Logistics Organisation 97
<BR>Defence Agencies 98
<BR>Public-Private Partnerships 98
<BR>MAJOR PROJECTS 99
<BR>Accountability 99
<BR>Current Equipment Programmes 99
<BR>Table 4.4: Current Defence Equipment Programmes by Sector, 1st May 2003 100
<BR>Eurofighter Typhoon 106
<BR>Table 4.5: Eurofighter Typhoon — UK Cost Estimates (£m), 31st March 1989-2002 106
<BR>
<BR>5. Defence Suppliers 108
<BR>
<BR>THE GLOBAL DEFENCE INDUSTRY 108
<BR>The Leading Suppliers 108
<BR>Table 5.1: The World's Leading Defence Suppliers by Estimated Turnover (£m), 2000/2001 108
<BR>Consolidation in Western Europe 109
<BR>Table 5.2: Consolidation in the European Defence Industry — a Chronology, January 1999-April 2003 110
<BR>THE UK DEFENCE INDUSTRY 115
<BR>Table 5.3: Companies Paid £5m or More by the MoD, 2001/2002 115
<BR>Key Suppliers to the Defence Procurement Agency 119
<BR>Table 5.4: The Defence Procurement Agency's Key Suppliers, 1st January 2003 119
<BR>The Financial Times Aerospace and Defence Sector 120
<BR>Table 5.5: Companies Listed in the Financial Times Aerospace and Defence Sector, 1st May 2003 120
<BR>Table 5.6: Selected Leading UK Defence Suppliers by Market Capitalisation (£m), 31st December 2000-2002 121
<BR>THE TOP TEN UK DEFENCE SUPPLIERS 121
<BR>Table 5.7: The Top Ten UK Defence Suppliers by Defence-Related Turnover (£m and %), 2002 122
<BR>BAE SYSTEMS 122
<BR>Company Structure 122
<BR>Current and Future Developments 123
<BR>Commercial Aerospace 123
<BR>North America 124
<BR>Customer Solutions & Support 124
<BR>Programmes 124
<BR>International Partnerships 125
<BR>Avionics 125
<BR>HQ and Other Business 126
<BR>Financial Results 126
<BR>Thales 126
<BR>Company Structure 126
<BR>Current and Future Developments 127
<BR>Financial Results 127
<BR>Rolls-Royce 127
<BR>Company Structure 127
<BR>Current and Future Developments 128
<BR>Financial Results 128
<BR>GKN 128
<BR>Company Structure 128
<BR>Current and Future Developments 129
<BR>Financial Results 129
<BR>Smiths Group 129
<BR>Company Structure 129
<BR>Current and Future Developments 130
<BR>Financial Results 130
<BR>VT Group 130
<BR>Company Structure 130
<BR>Current and Future Developments 130
<BR>Financial Results 131
<BR>Serco Group 131
<BR>Company Structure 131
<BR>Current and Future Developments 131
<BR>Financial Results 132
<BR>Cobham 132
<BR>Company Structure 132
<BR>Financial Results 132
<BR>Alvis 133
<BR>Company Structure 133
<BR>Financial Results 133
<BR>Ultra Electronics 134
<BR>Company Structure 134
<BR>Current and Future Developments 134
<BR>Financial Results 134
<BR>
<BR>6. European Industrial Developments 135
<BR>
<BR>DEFENCE EXPENDITURE 135
<BR>Declining Budgets 135
<BR>Table 6.1: NATO Military Expenditure† by Region at Constant 1995 Prices ($m), 1995-2002 135
<BR>Table 6.2: NATO Members' Defence Expenditure as a Percentage of Their Gross Domestic Product, 1990, 2000 and 2001 136
<BR>The 'Technology Gap' 137
<BR>Force Modernisation 137
<BR>Table 6.3: NATO Members' Expenditure on Force Modernisation as a Percentage of Their Total Defence Expenditure, 1990, 2000 and 2001 138
<BR>THE EUROPEAN DEFENCE INDUSTRY 140
<BR>Smaller Supplier Base 140
<BR>Industrial Strategy 140
<BR>Table 6.4: Co-operation Initiatives in European Defence Procurement — a Chronology, 1976-2001 141
<BR>A European Equipment Market 142
<BR>UK INDUSTRIAL POLICY 143
<BR>The Defence Sector 143
<BR>Procurement Considerations 144
<BR>Research and Development 144
<BR>Wider Markets 145
<BR>
<BR>7. Global Defence Market 147
<BR>
<BR>THE WORLD MARKET 147
<BR>Market Size 147
<BR>The Leading Weapons Suppliers 147
<BR>Table 7.1: The World's Leading Suppliers of Major Conventional Weapons by Value of Transfers ($m and %), 1997/2001 148
<BR>The Leading Weapons Recipients 149
<BR>Table 7.2: The World's Leading Recipients of Major Conventional Weapons by Value of Transfers ($m and %), 1997/2001 149
<BR>UK WEAPONS EXPORTS 150
<BR>A Partial View 150
<BR>Table 7.3: Identified UK Exports of Military Equipment by Destination by Value (£000 and %), 2001 151
<BR>Table 7.4: Selected Major Identified UK Transfers of Military Equipment by Destination, 2001 152
<BR>The Wider Picture 152
<BR>Table 7.5: UK Defence Exports by Value (£m), 1997-2001 152
<BR>Table 7.6: UK Defence Exports by Value of Contracts, Value of Deliveries and Claimed Share of World Market (£m and %), 1988-2001 153
<BR>Customer Base 153
<BR>Table 7.7: UK Transfers of Major Conventional Weapons by Recipient by Value ($m and %), 1997/2001 154
<BR>Defence Export Services Organisation 155
<BR>Table 7.8: The Defence Export Services Organisation — Profile of Overseas Offices, 2001/2002 156
<BR>Operating Costs 157
<BR>Table 7.9: The Defence Export Services Organisation — Operating Costs (£m), 1997/1998-2002/2003 157
<BR>
<BR>8. Public Opinion of the Armed Forces 158
<BR>
<BR>INTRODUCTION 158
<BR>Overview of Results 158
<BR>Table 8.1: Attitudes Towards the Armed Forces (% of respondents), April 2003 158
<BR>NATIONAL SERVICE FOR MEN 159
<BR>Table 8.2: Views on National Service for Men by Sex, Age, Social Grade and Region (% of respondents), 2003 160
<BR>NATIONAL SERVICE FOR WOMEN 161
<BR>Table 8.3: Views on National Service for Women by Sex, Age, Social Grade and Region (% of respondents), 2003 161
<BR>PROTECTING OVERSEAS TERRITORIES 162
<BR>Table 8.4: Views on the Armed Forces' Commitment to Protecting Overseas Territories by Sex, Age, Social Grade and Region (% of respondents), 2003 163
<BR>PEACE-SUPPORT ACTIVITIES 164
<BR>Table 8.5: Views on the Use of the Armed Forces for Peace-Support Activities by Sex, Age, Social Grade and Region (% of respondents), 2003 164
<BR>NATO ENLARGEMENT 165
<BR>Table 8.6: Views on Whether More Countries Should be Joining NATO by Sex, Age, Social Grade and Region (% of respondents), 2003 166
<BR>IRAQI CAMPAIGN 167
<BR>Table 8.7: Views on Whether the UK was Right to be Involved in the Iraqi Campaign by Sex, Age, Social Grade and Region (% of respondents), 2003 168
<BR>EUROPEAN DEFENCE CAPABILITIES 169
<BR>Table 8.8: Views on Whether Europe Should Have a Defence Capability Independent of the United States by Sex, Age, Social Grade and Region (% of respondents), 2003 170
<BR>DEFENCE EXPENDITURE 171
<BR>Table 8.9: Views on Whether UK Defence Expenditure Should be Increased by Sex, Age, Social Grade and Region (% of respondents), 2003 172
<BR>ROLE OF WOMEN 173
<BR>Table 8.10: Views on Whether Women Should Be Allowed to Have the Same Roles as Men in the Armed Forces by Sex, Age, Social Grade and Region (% of respondents), 2003 174
<BR>
<BR>9. Glossary 176
<BR>
<BR>10. Further Sources 178
<BR>
<BR>Defence Agencies 178
<BR>MoD Contact Points 181
<BR>General Sources 181
<BR>Bonnier Information Sources 181
<BR>Government Publications 183
<BR>Other Sources 183

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