Growth opportunities in UK defence logistics markets

The defence logistics markets in the United Kingdom will register growth across all its major sectors, with the exception of the Integrated Logistics Support (ILS) systems segment, which is likely to shrink due to various contracts tied to the forthcoming Future Logistics Information System (FLIS) programme. While challenges such as cultural resistance and technical difficulties may impede overall market expansion over the short term, the industry will overcome these due to the significance that the UK Ministry of Defence (MOD) places on logistical reform as a cost-saving measure.

Frost & Sullivan finds that the UK Defence Logistics Markets earned revenues of GBP 3.23 billion in 2005 and estimates this to reach GBP 4.60 billion in 2015.

"The defence logistics markets in the United Kingdom will grow steadily over the next ten years, as the UK government increasingly outsources the majority of its support functions and develops new systems to optimise its logistic capabilities," notes Frost & Sullivan Research Analyst Graham Cushway. "These developments will be a result of reduced military budgets coupled with increasing military commitments and a change of priority from conventional warfighting to OOTW."

Key segments including asset tracking systems, ILS systems, availability contracting and support services are set to grow over 2006, thereby exponentially boosting revenues in the UK defence logistics markets.

The asset tracking systems segment is set to increase substantially in value due to the UK MOD's enthusiasm for the widespread adoption of Radio Frequency IDentification (RFID) Total Asset Visibility (TAV) technology. This is a direct result of the success of TAV on Op Telic, in comparison to the perceived failure of the country's asset tracking systems during the Gulf War.

The support service segment will also see rapid growth due to increasing pressure on the MOD to reduce support services across the nation in order to provide funds to the teeth arms. Moreover, the outsourcing of support services to private contractors is seen as the best way to achieve large savings.

Availability contracting is poised to become the most important method of procurement in the United Kingdom since this model allows the MOD a more predictable level of service while saving money on manpower and facilities.

Source: Frost & Sullivan

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