How is the global defense industry performing? 3 takeaways from a key report on revenue

WASHINGTON — Deloitte has released a detailed snapshot of the worldwide defense industry and contracting environment. The report by the U.K.-based consulting firm analyzes 2017 results from the aerospace and defense industry, with three notable conclusions.

1. Overall, the global defense sector has grown, but there’s been a slowdown for the commerical aerospace market.

According to the report, A&D industry revenues grew by 2.7 percent to reach $685.6 billion in 2017. Mainly powered by increased defense spending in the U.S. and Europe, “the increased military actions/growth in Russia, China, and North Korea and continued hostilities in the Middle East region are spurring the increased defense spending,” report author Robin Lineberger said.

Global commerical aerospace revenue growth cooled, increasing by only 1.2 percent in 2017 (down from more than double that rate the year before) largely due to “a slowdown in twin-aisle aircraft deliveries in the U.S.,” the report noted.

2. American industry still dwarfs other nations in revenue, but there are surprising developments in Europe.

The U.S. continues to comprise the majority of global A&D revenue at 60 percent, with the U.S. Department of Defense as the major customer. However, European revenues enjoyed a major expansion and quadrupled their rate of growth from 2016. “European defense spending is increasing," Lineberger noted.

The American efforts to pressure NATO members on defense spending played a key role in European defense revenue growth, according to the report. “Based on the recent European leaders commitments to meet the 2% goal at the most recent NATO leadership summit, we expect European defense spending to continue to increase.”

3. Top industry players remain on top.

The big dogs continue to dominate, as the revenues of the top 20 global A&D companies accounted for 73.6 precent of overall A&D industry revenues in 2017. The study described the industry as “concentrated” in these larger firms.

Boeing led as the top performer in the metric of revenue ($93.3 billion), besting rivals Airbus Group ($75.2 billion) and Lockheed Martin ($51 billion).

Unless tensions in areas like Eastern Europe and the South China Sea are resolved, “expect the Western countries to continue to expand and modernize their forces as a defensive measure,” Lieberger said, “thus sustaining the spending and potentially increasing it.”

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