» Jack Loughney, Senior Data Analyst
The difficulties of tracking the market
Military and armament production is difficult to track because many large conglomerates earn huge amounts of revenue in the arms sector but also operate in other sectors. Companies like Rolls-Royce, Boeing and Hanwha group, for example, are industrial giants who also manufacture armaments.
What’s more, armament and military vehicle production is not always specifically called out in production data. Additionally, there is a large ‘grey’ market which is difficult to track. According to the council on foreign relations, the annual value of illegal trafficking of small arms and light weapons reached $1 billion in 2013—a number that is likely to have increased in the past 12 years.
Who is spending the most on military armaments?
According to SIPRI, the US has the single largest military expenditure, accounting for a higher percentage than the following 9 countries combined, two of whom are actively at war.
Most of the top spenders spend an average of 2% to 3% of their total GDP on their military; however, the current US President Donald Trump has asserted that he expects NATO members to reach 5% of GDP relatively quickly. This is further supported by several indications from the EU as well as verbal commitments from regional governments to increase military spending and procurement.
In theory, given the sensitive nature of the goods produced, one would expect the production to occur in or near to the country making the purchase. Although in some cases this does occur, most companies with the expertise, resources and contracts to produce this equipment are based in highly industrialized nations.
Who stands to gain?
SIPRI also provides a database of the revenues of the top 100 arms-producing and military services companies. Of the top 10 companies, five are American, one is British and three are Chinese. They also include Rostec; however, they indicate that Rostec is a stand-in for multiple Russian companies and does not have a specific manufacturing base.
Of the companies listed above, most are either missile or vehicle producers with large portfolios of war machines. They dominate global defense production and are heavily integrated into the largest militaries in the world. Any increase in global military expenditure is likely to benefit these producers.
If we look at the entire list segregated by region it quickly becomes apparent that the US is the country which stands to gain the most from an increase in military spending, especially if European states do not fulfil their pledge to increase procurement from within the bloc. Historical evidence suggests they will not: the current EU goal is to have 35% of its own military procurement being from European producers, and it has not managed to meet even this comparatively modest goal.
In conclusion, while the push for higher military spending is framed as a matter of national security, the true beneficiaries are concentrated: a small group of defense giants, largely American, stand to profit the most. Unless Europe backs rhetoric with domestic procurement, it risks becoming not just a strategic dependent, but an economic one too.