Global Defense Industry Suppliers:CEO Business Outlook Survey 2013-2014

Friday 29 March 2013, Amsterdam

$ The majority of respondents from the global defense suppliers industry identified ‘the economic crisis leading to defense budget cuts globally’ as one of the key trends likely to affect the global defense industry in the next two years. Additionally, 48% and 40% of respondents identified that ‘China’s significant increase in defense expenditure leading to other Asian countries increasing their defense spending’ and ‘fiscal deficit of top spenders such as US, UK and Italy’ are other key trends respectively. Uncertainty of the European debit crisis, austerity measures by the US, and increasing pressure on governments to divert funds to poverty alleviation measures are expected to force a decrease in overall defense budgets.

Survey results show that 63% of respondents identify ‘new market opportunities’ as a principal factor driving changes in their organization's business strategies. Furthermore, 54% and 37% of respondents identify ‘defense budget pressures’ and ‘pricing pressures’ as key factors driving changes within their organization's business strategies respectively.

Figure 1 :Key Influential Trends in the Global Defense Suppliers’ Industry (%), 2013–2014

                                                                                                                               

Overall, executives from the global defense suppliers industry anticipate increased levels of consolidation over the next two years with 52% of respondents anticipating either a significant increase or a slight increase in M&A activity. Furthermore, 26% of respondents project ‘no change’ in levels of consolidation, whereas 21% of respondents anticipate a ‘slight decrease’ in levels of consolidation over the next two years. The expected levels of consolidation in the industry could be due to new cost or demand pressures, repayment of debt, the potential need to meet new compliance procedures, business expansion in existing and new markets, and to gain economies of scale.