2. INTRODUCTION 4
2.1 Definitions 5
2.2 Methodology 5
2.3 Abbreviations 6
2.4 Political 7
2.5 Market Positioning 8
2.6 UK Economy 9
2.7 Market Factors 13
2.7.1 Defence White Papers and Reviews 13

3. MARKET SIZE AND TRENDS 17
3.1 Chapter Summary 18
3.2 Market Size 18
3.3 PPP/PFI 25
3.4 Market Segmentation 28
3.4.1 Aircraft and Spacecraft Defence Equipment 28
3.4.1.1 Strength of the Royal AirForce 32
3.4.2 Sea Defence Equipment 33
3.4.2.1 Strength of the UK Royal Navy 37
3.4.3 Land Defence Equipment 38
3.4.3.1 Strength of the British Army 42
3.5 Market Trends 43

4. SUPPLY SOURCES 47
4.1 Chapter Summary 48
4.2 Production 48
4.3 Imports 49
4.4 Exports 51

5. INDUSTRY STRUCTURE 56
5.1 Chapter Summary 57
5.2 Industry Development 57
5.3 Structure by Employment 59
5.4 Structure by Turnover 61
5.5 Defence Contracts 62
5.6 Company Profiles 63
5.6.1 AgustaWestland International 63
5.6.2 BAE Systems 65
5.6.2.1 BAE Systems Land Systems (Weapons & Vehicles) 70
5.6.3 GKN 72
5.6.3.1 GKN Aerospace Services 74
5.6.4 Westland Helicopters 76
5.6.5 Thales UK 77
5.6.6 Rolls-Royce 80
5.6.7 Smiths Group 83

6. FORECAST 88
6.1 Chapter Summary 89
6.2 Market Size 89
6.3 Industry 94

7. FURTHER SOURCES & CONTACTS 96
7.1 Trade Associations 97
7.2 Trade Magazines 97
7.3 Trade Exhibitions 99

LIST OF TABLES

1: The UK Defence Departmental Expenditure Limits, 2002/2003-2006/07 20
2: Total Managed Expenditure, by Category, 2002/2003-2006/07 20
3: DEL, by Government Department, 2002/2003-2006/07 22
4: Planned MoD Capital Employed, 2004/05-2007/08 23
5: Defence Equipment Expenditure Outturn in the UK, 2001/02-2005/06 23
6: MoD PFI Signed Projects, Capital Value, 2002-2006 26
7: MoD Payments on PFI Projects: 2006/2007 27
8: Defence Aircraft and Spacecraft Expenditure Outturn in the UK, 2001/02-2005/06 28
9: Number of Service Aircraft Accidents, by Type of Aircraft, 1996-2006 29
10: Royal Air Force Defence Output Cost, 2005/06 and 2006/07 32
11: Total Strength of UK Royal Air Force, by Gender, 2003-2007 33
12: % of Royal Air Force Officers, by Gender, 2003-2007 33
13: Defence Shipbuilding and Repair Expenditure Outturn in the UK, 2001/02-2005/06 34
14: Naval Service Defence Output Cost, 2005/06 and 2006/07 36
15: Total Strength of UK Naval Service, by Gender, 2003-2007 37
16: % of Navy Officers, by Gender, 2003-2007 37
17: Defence Land Equipment Expenditure Outturn in the UK, 2001/02-2005/06 38
18: Defence Armoured Fighting Vehicles, 2007 40
19: Army Defence Output, 2005/06 and 2006/07 41
20: Total Strength of UK Army Service, by Gender, 2003-2007 42
21: % of Army Officers, by Gender, 2003-2007 42
22: Defence Spending 2006 44
23: Intramural and Extramural Gross Expenditure on MoD Research & Development,
2001/02- 2005/2006 46
24: UK Imports of Defence Equipment, 2002-2006 50
25: UK Imports of Defence Equipment, by Type, 2002-2006 50
26: UK Exports of Defence Equipment, 2002-2006 53
27: UK Exports of Defence Equipment, by Type, 2002-2006 53
28: Identified Orders of UK Exports of Defence Equipment, by Sector, 2002-2006 54
29: Analysis of the Changes in the Structure of the Weapons and Ammunition Industry,
2003-2007 59
30: Analysis of the Changes in the Structure of the Shipbuilding and Repairing Industry,
2003-2007 59
31: Analysis of the Employment Structure of the Weapons and Ammunition Manufacturing Industry, 2006 and 2007 60
32: Analysis of the Employment Structure of the Shipbuilding and Repair Industry, 2006
and 2007 60
33: Analysis of the Financial Structure of the Weapons and Ammunition Manufacturing
Industry, 2006 and 2007 61
34: Analysis of the Financial Structure of the Shipbuilding and Repair Industry, 2006 and
2007 62
35: Financial Analysis of AgustaWestland International, 2002-2006 64
36: Key Financial Ratios for AgustaWestland International, 2002-2006 65
37: Financial Analysis of BAE Systems, 2002-2006 68
38: Turnover Analysis of BAE Systems, by Business Segment, 2005 and 2006 69
39: Key Financial Ratios for BAE Systems, 2002-2006 69
40: Financial Analysis of BAE Systems Land Systems (Weapons & Vehicles), 2002-2006 71
41: Key Financial Ratios for BAE Systems Land Systems (Weapons & Vehicles),
2002-2006 72
42: Financial Analysis of GKN, 2002-2006 73
43: Key Financial Ratios for GKN, 2002-2006 74
44: Financial Analysis of GKN Aerospace Services, 2002-2006 75
45: Key Financial Ratios for GKN Aerospace Services, 2002-2006 76
46: Financial Analysis of Westland Helicopters, 2002-2006 77
47: Key Financial Ratios for Westland Helicopters, 2002-2006 77
48: Financial Analysis of Thales UK, 2002-2006 79
49: Key Financial Ratios for Thales UK, 2002-2006 80
50: Financial Analysis of Rolls-Royce, 2002-2006 82
51: Financial Analysis of Rolls-Royce, by Business Segment, 2005 and 2006 83
52: Key Financial Ratios for Rolls-Royce, 2002-2006 83
53: Financial Analysis of Smiths Group, 2003-2007 86
54: Turnover Analysis of Smiths Group, by Business Segment, 2006 and 2007 87
55: Key Financial Ratios for Smiths Group, 2003-2007 87
56: Forecast Total Managed Expenditure, by Category, 2007/08-2011/12 90
57: Forecast UK DEL on Defence, 2007/08-2011/12 91
58: Total Expenditure on the Provision of Defence Capability by the MoD, 2004/05-2007/08 91
59: Major Equipment Projects of Post Main Gate Project, 2007 92
60: PFI Defence Expenditure Forecast, Signed Deals, 2007/08-2011/12 93
61: PPP/PFI Projects at Preferred Bidder Stage, 2006/07-2007/08 94