Modest growth for EU defense sector

BRUSSELS, July 6 (UPI) -- While Britain's military budget could be cut by as much as 15 percent, an industry group predicts "modest growth" for the European defense sector in 2009.

The head of the AeroSpace and Defense Industries Association of Europe, or ASD, said last week in Brussels that Europe's defense sector will see "modest growth" in 2009, Defensenews.com reports. ASD President Allan Cook, who also heads Britain's Cobham, said companies are getting ready to supply high-growth markets in the United States, India, the Far East and the Middle East.

Sales in the aerospace and defense sector grew by 2.5 percent in 2008, to around $193 billion, the ASD says. Spending for research and development, however, has slightly declined.

Cook said declining military spending in Europe despite a bouquet of international crises worried him.

"This was a major concern in 2008 and is even more critical in 2009," Defensenews.com quotes him as saying.

Cook's concerns correlate with a new report by a military think tank that predicts defense spending in Britain will decline significantly over the next six years because of fiscal constraints.

The London-based Royal United Services Institute expects the military budget to be cut by between 10 percent and 15 percent, or up to $9.7 billion, in the 2010-2016 period.

However, it could be even worse: "If the government decides to provide even a modest level of real terms growth to health and education, or if the economy fails to recover its previous trend rate of growth by 2010, even tax increases may not be able to prevent even deeper defense spending reductions," writes the report's author, Malcolm Chalmers, a defense professor at London's King's College.

The economic aid packages have blown a big hole into the government's overall budget. The latest projections by the Organization for Economic Cooperation and Development in Europe suggest that Britain's 2010 deficit could climb to a staggering 14 percent of GDP, the highest of any OECD economy. There is no question that London will have to tighten its belt, and the military will likely face some deep spending cuts. While the core defense budgets for 2009-10 and 2010-11 have already been set and are unlikely to be substantially changed, any budget after that will likely see some significant austerity.

Britain has been discussing what kind of armed forces it should maintain. Earlier this month, the Institute for Public Policy Research in a comprehensive security report called for a "full review of the U.K.'s defense requirements," adding that less large equipment and more specialized units could make the British armed forces more mobile and less costly.