The US continues to be the most attractive of all the major defence markets, accounting for around 50% of global defence expenditure in markets accessible for business by the Group (see chart on the market page) and approximately 4% of GDP. The US will remain one of BAE Systems’ key markets, offering programme scale and high levels of investment in research and development. BAE Systems has continued to grow in the US by leveraging its market leadership positions and introducing new capabilities that meet customers’ needs. The Group is well placed to support the US Department of Defense in its likely emphasis on force sustainment and readiness and affordable transformation.
The short-term outlook for defence continues to be favourable, although growth in US defence spending is expected to slow beyond 2010. Politically, the US is now starting the run-up to the next presidential election in November 2008. Both parties remain supportive of national security and consequently, whatever the outcome, support for defence spending is expected to remain robust.
In recent years, US defence spending has been buoyed by supplemental budgets aimed at covering additional defence costs related to the ongoing operations in Afghanistan and Iraq. When the US disengages from these operations, the scale of these supplemental budgets will probably decline.
