The report alerts investors that “revenue growth” is “expected to take a positive turn” due to the terrorism and war in the Middle East and the tensions in Eastern Europe and the South China Sea.
Many analysts predicted declining revenue for the weapons industry as the U.S. scaled down military involvement in Iraq and Afghanistan. After all, as this chart from the Deloitte report shows, no other country even comes close to spending as much as the U.S. does.
But now governments around the world have moved swiftly to hike defense budgets to “combat terrorism and address sovereign security matters.”
The Deloitte report is almost giddy:
2015 was a pivotal year that saw heightened tensions between China, its neighbors and the US over “island building” in the South and East China Seas, and the related claims of sovereign ocean territory rights by China. In addition, Russia and the Ukraine are at odds related to Russia’s takeover of Crimea and their military actions in Eastern Ukraine. North Korea continues to threaten its neighbors with its nuclear ambitions and aggressive rocket launches. The Islamic State (ISIS) has become a key threat in Syria, Iraq, and Afghanistan and is involved in exporting terrorism to Europe, Africa, and elsewhere. The recent tragic bombings in Paris, Beirut, Mali, the Sinai Peninsula, and other places have emboldened nations to join in the fight against terrorism.
Several governments affected by these threats are increasing their defense budgets to combat terrorism and address sovereign security matters, including cyber-threats. For defense contractors, this represents an opportunity to sell more equipment and military weapons systems.
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