Sector's insights

Defence industry: a booming market

12 de May de 2022

The change in the geopolitical scenario imposed by Russia’s war in Ukraine has given a boost to new contracts that will strengthen the defence industry internationally. Spain plans to double its €10 billion budget, and countries such as Germany, the United States and France have taken the first step with the forecast of record spending not seen since World War II.

Strategic muscle

With a view to improving defence capabilities, the world’s leading economies have adjusted new budgets, in some cases doubling or tripling them. Spain will increase its budget by 1% of GDP, Germany has strengthened its budgets to €100 billion and the United States has reached a consensus to allocate €2 trillion, an increase of €800 billion.

Spain: at the forefront

Spain is in a strategic and privileged position within the industry. The naval, land and aerospace segments had a turnover of 7 billion euros in 2020, and for the following years, better equipment is expected with the boost of the new FCAS combat aircraft, under development together with other European countries, with the government committing more than 2.5 billion euros to this project. At the same time, by 2027, the first five F-110 frigates will be delivered, which will be an oxygen pump for the naval industry and will create more than 3,000 jobs directly, while other projects such as Navantia’s S-80 plus submarine are taking shape and will allow the defence industry to continue to have the most advanced systems.

The justification that Spain is a pioneer in the production of defence equipment is no coincidence; it has leading companies that allow it to carry out outstanding projects. Airbus, the aerospace giant, has its two main defence headquarters in the country. Urovesa, a Galician company dedicated to the manufacture of ground combat vehicles, is a reference in the production and export of off-road trucks and VAMTACs. At the same time, Galicia is consolidating its position as an Aerospace Pole, with great potential in unmanned vehicles, a growing vector also in defence.

International panorama

Other countries are also working to improve their technological and operational capabilities. The impact of the Russian war has caused aerospace and defence companies to outstrip their numbers due to increased military spending by Western governments. These increases are geared towards bolstering their national defence systems, but are also partly earmarked in military aid packages to Ukraine. The US, UK and other allies have provided more than €4 billion worth of aid to Ukraine.

Which countries have strengthened the most in 2021 and 2022?

The defence investment estimates for the past year and so far in 2022 leave the industry in a new paradigm, with developments in the mobility of battle tanks, drones, warships and frigates seeking a new dimension with more than $2 trillion invested globally. The United States tops the list with 39% of the total, NATO members 20% and the Asian giant 14%.

The defence industry is facing major changes and developments driven by countries’ needs for better protection. In this context, the industry’s value chain is benefiting from new international contracts that have allowed the defence industry to rebound after years of lower investment.