Recent trends in arms production

The arms sales of the 100 largest arms-producing companies in the world apart from China in 2007—the SIPRI Top 100—increased by 5 per cent in real terms over the arms sales of the Top 100 for 2006 and by 37 per cent over those of the Top 100 for 2002. (See table below).

US companies dominate the SIPRI Top 100: 44 US firms accounted for 61 per cent of the combined Top 100 arms sales of $347 billion in 2007. Some 32 West European companies accounted for another 31 per cent and 7 Russian companies for 2.4 per cent. Companies based in Israel, Japan and India, in descending order, accounted for most of the remaining 5.4 per cent of world arms sales.

Five US companies, five Western European companies, and one Russian company increased their arms sales by more than $1 billion in 2007 and 21 companies increased their arms sales by more than 30 per cent. Most of these fell into one of three groups: producers of armoured vehicles, especially mine-resistant ambush-protected (MRAP) vehicles highly demanded by US and other forces in Iraq and Afghanistan; military services companies benefiting from the continuing process of outsourcing of military activities to private companies; and UK companies expanding through acquisitions, especially in the US. Some companies in the high-tech electronics and communications sector were also among the biggest increasers. Russian aerospace companies continued to perform well and increase their sales, both through exports and sales to the Russian armed forces; but other sectors such as shipbuilding and armoured vehicles have done less well, and indeed all Russian companies in the Top 100 for 2007 are from the aerospace (aircraft, missiles, air defence, aero engines) sectors.

The global financial crisis has so far had a limited impact on the arms industry in most major producing countries. While companies' share prices have fell along with the rest of the market, provisional figures for 2008 suggest that the top ten companies have maintained stable or increasing levels of sales and order backlogs. Furthermore, the long lead times associated with major weapons systems means that it would be some time before a downturn in orders would be felt. Arms companies are somewhat insulated from the effects of the crisis in that they are dependent on government rather than consumer spending. In the coming years, it is possible that the soaring budget deficits caused by the crisis - and by the fiscal stimulus packages implemented to tackle it - may lead to pressure on military spending, but so far there are few clear signs of this, and indeed some countries such as France have included support for the arms industry in their stimulus packages. The Russian industry has been somewhat more severely hit by the shortage of credit resulting from the crisis, with some reportedly unable to pay their wage bills. The Russian government has promised several billion dollars of aid to the arms industry to tackle the crisis, though the effects of this are yet to be seen.

In contrast to the rapid period of concentration in the arms industry over the 1990s , the period of sharply rising military spending over the past several years has seen a much greater continuity in the arms industry, with little or no change in the composition of the top 10 firms. Indeed, there are indications that the degree of concentration has marginally reduced since 2002. The growing market has allowed more companies to thrive without resorting to the major restructuring of earlier years, especially in the growing sectors of military services and electronics and communication. While some mergers and acquisitions have continued, these have been balanced by the emergence or rapid expansion of new companies in these growth sectors.

Table: Trends in the arms sales of the SIPRI Top 100, 2002–2007

NB: figures refer to the companies that constituted the SIPRI Top 100 in each year, based on the most recently available data.

For more information on recent trends, see Perlo–Freeman, S., Arms Production, Chapter 6 in SIPRI Yearbook 2009: Armaments, Disarmament & International Security, Oxford: OUP.