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Hammond: Budget Cuts Will Force Global Industry Restructuring

Nov. 1, 2012 - 12:17PM   |  
By ANDREW CHUTER   |   Comments
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LONDON — Britain’s defense secretary has warned that military spending cuts in Europe, the U.S. and elsewhere will force the industry to restructure.

Philip Hammond told the Royal United Services Institute annual conference on air power in London on Nov. 1 that industry would have to “rationalize or fall off a cliff.” Economic logic and over-capacity will make it happen, he said.

“I have no doubt the reorganization of the defense industries across the developed world will be required over the coming years,” he said.

Britain’s defense secretary said there were “a number of permutations” possible in any consolidation effort but did not specify details.

Restructuring won’t be straightforward, as the recent failure by BAE Systems and EADS to win approval to create the world’s largest defense and aerospace company demonstrated.

“It shows just how significant the national interest barriers are that have to be overcome,” said Hammond. In this case, he said, the issues were not particularly strategic or defense-related but more concerned with industrial impact and jobs.

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