Global defence spending set to rise as balance shifts to East

Fuelled by growing strains in Middle East and Asia, global defence spending looks set to rise in 2014 for the first time since the 2008 financial crisis.

A study of the world’s top 100 arms companies by the Stockholm International Peace Research Institute (SIPRI) this month showed their total arms sales for 2012 falling 4.2 per cent from the previous year to $395bn (£238bn), their second annual fall.

The global defence market remains dominated by western firms, with Lockheed Martin, Boeing, BAE Systems, Raytheon, General Dynamics and Northrop Grumman top in terms of sales. Emerging competitors, however, are clawing their way up the list, particularly in Asia and the former Soviet Union.

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Chinese firms are excluded from the SIPRI table because of a lack of truly reliable data. If they were included, SIPRI researchers believe four to six of China’s largest state-owned defence conglomerates would be in the top 20 global arms firms and one – aviation firm AVIC – would be in the top 10.

China’s dramatic military growth and growing tensions over assorted maritime disputes have caused spending elsewhere in the region to be ramped up.

“There’s no doubt Asia is where it is happening and it shows no sign of stopping,” says Mike McDevitt, researcher at the Center for Naval Analyses, a US government-funded body that advises the military.

“Other countries in the region are alarmed by China’s naval expansion in particular and that is really driving their procurement.”

According to IHS Jane’s, a defence publisher, the Asia-Pacific region is the only part of the world to see military spending grow steadily since 2008. It is expected to be spending some $474bn (£286bn) annually by the end of the decade, 28 percent of global military spending, up from 24 per cent in 2013.

China is believed to have more than quadrupled its military spending since 2000 and by 2015 is expected to be outspending Britain, France and Germany combined.

Even with Chinese spending stripped out, however, the rest of the Asia-Pacific region is seen overtaking the whole of Western Europe by the same date.

In the last two years, Middle East military spending has been rising even faster as Gulf Arab states worry about Iran and their own domestic stability.