The war in Ukraine and tensions in various parts of the world are driving the demand for weapons and ammunition. Nevertheless, producers recorded a decline in turnover last year.
Despite the increase in the number of weapons orders due to the war in Ukraine, the total revenues from the sale of weapons and military services of the world’s 100 largest defense industry companies in 2022 amounted to $597 billion, or 3.5%. less than in 2021. These conclusions come from a report by the International Peace Research Institute (SIPRI) in Stockholm.
Reasons for the decline in income
Russia’s invasion of Ukraine and geopolitical tensions around the world have contributed to a sharp increase in demand for weapons and military equipment in 2022.
However, despite receiving new orders, many US and European companies were unable to significantly increase production capacity due to workforce shortages, rising costs and supply chain disruptions exacerbated by the war in Ukraine. Moreover, many governments placed new orders at the end of the year, so the increase in demand is not yet reflected in the turnover of these companies.
At the same time, unfulfilled orders and a sharp increase in the number of new contracts indicate that global revenues from arms sales could increase significantly in the coming years, SIPRI emphasizes.
“Many companies encountered difficulties in transitioning to the production of weapons intended for high-intensity warfare. However, new contracts have been signed, in particular for the supply of ammunition, which is expected to translate into an increase in revenues in 2023 and in subsequent years. years,” the organization writes in its report.
American companies are losing
Analysts note that the decline in sales mainly concerns American companies: 42 representatives of the United States earned 7.9% in 2022. less than a year earlier.
European companies from the top 100 recorded a slight increase – by 0.9%. Arms manufacturers from Asia and Oceania increased their turnover – by 3.1%. – and for the second year in a row they are ahead of their European competitors in total annual turnover, which was $134 billion for Asian companies, compared to $121 billion for European companies.
“Companies in China, India, Japan and Taiwan have benefited from continued state investments in modernizing their armed forces,” said Xiao Liang, a researcher at SIPRI’s program on military spending and arms production.
Source: Do Rzeczy
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
