Weapons Industry Revenue Forecaster Enthuses Over Global Turmoil

Contrary to expectations that weapons industry revenue would fall as the U.S. downsized its military presence in Iraq and Afghanistan, the professional services firm Deloitte gushes in a new report that “the resurgence of global security threats” promises a lucrative “rebound” in military spending.

As Lee Fang writes at The Intercept, “[t]he report alerts investors that ‘revenue growth’ is ‘expected to take a positive turn’ due to the terrorism and war in the Middle East and the tensions in Eastern Europe and the South China Sea.”

Fang quotes the report at length:

2015 was a pivotal year that saw heightened tensions between China, its neighbors and the US over “island building” in the South and East China Seas, and the related claims of sovereign ocean territory rights by China. In addition, Russia and the Ukraine are at odds related to Russia’s takeover of Crimea and their military actions in Eastern Ukraine. North Korea continues to threaten its neighbors with its nuclear ambitions and aggressive rocket launches. The Islamic State (ISIS) has become a key threat in Syria, Iraq, and Afghanistan and is involved in exporting terrorism to Europe, Africa, and elsewhere. The recent tragic bombings in Paris, Beirut, Mali, the Sinai Peninsula, and other places have emboldened nations to join in the fight against terrorism.

Several governments affected by these threats are increasing their defense budgets to combat terrorism and address sovereign security matters, including cyber-threats. For defense contractors, this represents an opportunity to sell more equipment and military weapons systems. Products, which are expected to experience renewed interest from buyers, include armored ground vehicles, ground attack munitions, light air support aircraft, intelligence, surveillance and reconnaissance electronic sensors, cyber protections, maritime patrol ships and aircraft, as well as provision for equipment maintenance and sustainment, as the military operations tempo is likely to increase and more missions are executed.

It is expected that a return to growth for defense subsector companies will likely occur, due to the increased interest by several involved nations as described above. In addition, many large, mainly US DoD defense programs representing billions of US dollars, are likely to start soon, enter the engineering manufacturing design phase, and reach low-rate or full-scale production over the next few years. These programs include Ohio Class Submarine replacement, F-35 fighter jet, KC-46A aerial refueling tanker, Long Range Strike Bomber, USAF T-X trainer, and Rafale fighter programs.