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II. The SIPRI Top 100 arms-producing companies, 2007
III. The arms industry and the global financial crisis
IV. Arms industry mergers and acquisitions in 2008
Global arms production continued to increase in 2007. The combined arms sales of the SIPRI Top 100 arms-producing companies reached $347 billion, an increase of 11 per cent in nominal terms and 5 per cent in real terms over 2006. Since 2002 the value of the Top 100 arms sales has increased by 37 per cent in real terms.
Forty-four US companies accounted for 61 per cent of the Top 100’s arms sales in 2007, while 32 West European companies accounted for 31 per cent of the sales. Russia, Japan, Israel and India accounted for most of the rest.
Thirty companies increased their arms sales by more than 30 per cent. Most fell into one of three groups:
The US presidency of George W. Bush—during which US military expenditure increased sharply—was a period of continuity in the arms industry. This followed a period of rapid consolidation in the 1990s and early 2000s. Indeed, the level of concentration in the industry, as measured by the share of the Top 100 arms sales accounted for by the top five companies, has gradually declined since 2002.
The global financial crisis has yet to have an impact on major arms companies’ revenues, profits and order backlogs, which generally continued to increase in 2008. However, their share prices have fallen in line with the major stock markets. Arms companies may face reduced demand in the future if governments cut military spending in response to rising budget deficits. Russian companies have experienced particular cash-flow difficulties and are receiving government aid.
The two largest acquisitions of arms-producing companies in 2008 were the acquisition of the IT services company EDS by Hewlett-Packard for $13.9 billion, and the $5.2 billion acquisition of the US military electronics firm DRS Technologies by Finmeccanica of Italy. The latter of these was the first major acquisition of a US company by a continental European company. British companies also made numerous US acquisitions. Most major British arms companies now have a significant US presence, and several now have more assets and employees in the USA than in the UK.
Dr Sam Perlo-Freeman (United Kingdom) is a Senior Researcher with the SIPRI Military Expenditure and Arms Production Programme.