Our View: We expect the UK’s defence budget to continue increasing in absolute terms in the next five
years. This will be driven by the government’s commitment to compensate the reduction in personnel
foreseen in the ’Army 2020’ strategy with an armed force equipped with the latest and highest quality
equipment. As the UK will continue to rely on imports for a large share of the equipment and capabilities it
supplies to its troops, we believe opportunities for both national and international companies will continue
to emerge. However, constraints on the defence budget, as the country continues its road towards recovery,
may place some restrictions on the development of the country’s defence market.
The Strategic Defence and Security Review (SDSR) that was published by the UK government in 2010
foresaw significant reductions in the defence budget for the following years and suggested that these be
supported by a reduction in the number of personnel in three branches of the country’s armed forces, that is,
the Airforce, the Navy and the Army. Within this context, the ’Army 2020’ strategy was elaborated, which
foresaw a reduction in the armed forces personnel to 82,000 while increasing the number of reserves to
30,000. The planned reductions, the strategy continues, will have to be compensated by providing better
training to the reserves and, most importantly, by ensuring that the armed forces are equipped with the most
up-to-date equipment and capabilities.