The defence market in the UK is expected to become more challenging in the coming years.
Overall defence spending is being held to low levels of real growth, at just over 2% of GDP, despite significant ongoing operational commitments. Spending on defence equipment in the UK is under particular pressure, balancing the demands of procurement with personnel-related costs and the impact of ongoing operations in Afghanistan and Iraq. A high level of activity due to Urgent Operational Requirements (UORs) has resulted from these operations.
Implementation of the UK’s Defence Industrial Strategy (DIS) is underway against a challenging set of milestones. BAE Systems continues to work with the UK MoD to ensure transformation of the business to meet challenging requirements, particularly focused on developing Long-Term Partnering Agreements (LTPAs) across air, land and naval domains.
The UK government’s publication of the DIS version 2 has been delayed into 2008 to take account of the difficult decisions required in the UK MoD’s current Planning Round 08 following the 2007 Comprehensive Spending Review. To deliver value for money and meet current and future equipment needs of the armed forces, the securing of through-life capability management and appropriate LTPAs will be even more necessary under difficult budgetary conditions.
