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Employment
The pessimism evident in the 2013 and 2014 surveys concerning the employment outlook took a turn for
the better in 2015. Last year expectations of employment growth showed a positive result, a net increase
of 15%, while this year the positive net result increased sharply to 27%. This shows that the optimism for
hiring that emerged in the the last year has taken hold more generally and that, although pessimism
persists in Europe (expectations of increased jobs remain at a net 17%), there is greater optimism evident
in North America and the rest of the world.
The shift in attitudes of those representing the largest organisations (those with revenues greater than
USD1 billion) was particularly notable. In 2014 expectations of an increase in employment were a net 6%: a
figure that jumped to 27% in the 2015 survey. Smaller companies were also more optimistic than in 2014,
suggesting that the defence industry jobs market more generally has turned a corner.
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How will your organisation's payroll change in the next 12 months? (IHS)
1568953
Competition
The majority of respondents believe that competition in their industry increased in the last 12 months (net
increase: 45%). The figure was below the 2014 total (55%), but was broadly in line with the five-year trend.
The view that competition increased during the last 12 months was down in all regions, with the sharpest
fall among North American respondents.
Budget issues continue to drive competition, according to 64% of respondents. Fully 63% of respondents
made reference to political and conflict changes: an increase from 43% in 2014. Other issues cited were
costs and prices (42%); changing requirements and technologies (42%); and the economic crisis (33%).
2014
2015
North America
74%
45%
Europe
65%
57%
75%
60%
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2014
2015
77%
55%
60%
52%
Confidence
As in past years there was a spirit of optimism apparent in the 'IHS Jane's World Defence Industry Survey'
of 2015. When asked if they expected their organisation to be in a better position in 12 month's time, a net
total of 44% gave a positive response. This is down on the 2014 level (55%) but is in line with the five-year
trend.
Confidence was highest in North America, with European respondents marginally more pessimistic than
their counterparts in other regions. In common with previous surveys, respondents took the view that their
own organisation was likely to fare better than their competitors. The 2015 survey was no exception,
although a strong increase in those expecting better times ahead for their peers pointed to a general
perception of improved market conditions. North American respondents once again took the most
pessimistic view on the prospects of competitors.
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What market position do you expect your peers to hold in the next 12 months? (IHS)
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1568950
[Continued in full version]
Challenges
The challenges faced by defence organisations are evolving. Asked to identify the top three, only 11%
ticked budget challenges (2014: 22%), 10% cited political and regional stability (2014: 5%), and 9%
identified the economy (2014: 7%).
This reflects the greater external instability that faced the world's defence markets over the past year in
terms of political upheaval and security threats in numerous regions of the world, as well as ongoing
economic uncertainty, in contrast with the perception of greater defence spending visibility in most key
military markets.
[Continued in full version]
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Looking at specific countries, how do you expect their defence spending will change over the next five
years? (Jane's Defence Budgets)
1568949
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Industrial consolidation
The defence markets of Europe and North America were reshaped by an acquisitions boom in the 2000s
that focused on the United States. Defence companies in the West sought exposure to the world's largest
military market during a virtually unprecedented spending boom. Beyond 2010, however, M&A
transactions declined at the upper levels although lower-tier activity continued, driven in part by
divestments of businesses by upper-tier contractors.
Continuing the theme of activity and recovery, now more than half of respondents (55%) expect
consolidation activity to remain constant in the next 12 months (2014: 4%), while only 36% believe activity
will increase (2014: 50%). On a net increase basis only 29% are expecting M&A activity to increase, in sharp
contrast to expectations of the previous five years where the expectations have averaged +42%.
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It is notable, however, that views on the outlook for consolidation differ markedly by region. The 2015
survey showed a strong expectation of consolidation in markets beyond Europe and North America: a view
that has been borne out in recent M&A activity tracked by IHS Jane's and that reflects the growing
sophistication and aspirations of some emerging markets.
[Continued in full version]
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