Analysis: Can the defence industry re-ignite the economy?

After a bull run lasting for much of the present decade, global defence expenditure is starting to stutter. Jane's expects military spending in the world's largest market - the US - to fall by USD75 billion in real terms by 2010 from its 2008 peak of USD696 billion.

The 27-nation EU, meanwhile, is in no position to take up the slack. The combined budgets of the trading bloc are on course to edge up just two per cent (USD6 billion) to USD297 billion over the next two years.

That leaner times have come after a boom that saw global expenditure swell from USD1.114 trillion in FY02 to USD1.4 trillion this year - helping to push global defence and aerospace revenues from USD427 billion in 2004 to USD804 billion in 2007 - offers little comfort.

The loss of 1,000 jobs from the US and UK plants of BAE Systems and Boeing (200 and 800 respectively) reported by Jane's on 20 November followed a series of payroll reductions across the industry, with bleak announcements having come from Rockwell Collins (cutting 300 jobs) and Bell Helicopter (500) during the preceding weeks.

A fatalistic acceptance that bust must follow boom would underplay both the significance of the aerospace and defence (A&D) sectors to national economies and the potential the industries have to affect wider change.

Image: The Eurofighter Typhoon programme has been cited as having a positive impact on the UK industrial base. (Jane's/Patrick Allen) 221 of 987 words