STOCKHOLM: Sales of arms and military services are set to increase in 2021, but they will be constrained by global supply problems, with the war in Ukraine exacerbating supply issues, boosting demand, researchers reported on Monday.
According to the Stockholm International Peace Research Institute's most recent report, the top 100 arms companies sold a total of $592 billion in arms and related services in 2021, up 1.9% from the previous year (SIPRI).
However, widespread supply chain problems had a significant negative impact on growth.
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According to Nan Tian, a senior researcher at SIPRI, "the long-term effects of the pandemic are really starting to show in arms companies."
Labor shortages and problems locating raw materials were interfering with the companies' ability to produce weapons systems and deliver them on time.
So, according to Tian, "what we really see is a potentially slower growth in terms of arms sales in 2021."
According to the authors of the report, Russia's invasion of Ukraine is also expected to exacerbate supply chain problems, as Russia is an important supplier of raw materials for arms manufacturing. But at the same time, demand increased as a result of the war.
According to Tian, the demand will undoubtedly increase in the coming years. Tian pointed to two factors that would affect demand, saying how much they would affect it simultaneously was hard to predict.
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First, the countries that spent hundreds of millions of dollars shipping weapons to Ukraine would like to restore their supplies. Second, "countries are looking to buy more weapons" as a result of the deteriorating security situation.
These efforts may be hampered, the authors noted, as supply shortages are predicted to worsen. With the top 40 companies and more than half of global sales ($299 billion) coming from American companies, the United States continues to dominate the world of arms production.
Additionally, was the only region to experience a decline in sales: down 0.9 percent compared to 2020. Only Raytheon Technologies, which is in the top five along with Lockheed Martin, Boeing, Northrop Grumman and General Dynamics, saw an increase in sales.
The eight largest Chinese arms firms see 6.3 percent growth in 2021 sales to $109 billion. European businesses occupied 27 of the top 100 positions and generated combined sales of $123 billion in 2019, a 4.2 percent increase from 2020.
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The report also notes a pattern of private equity firms acquiring arms businesses, which the authors claim has become more apparent over the past three to four years.
According to Tian, "private equity firms would buy these companies and then essentially no more maintain financial records," which would make the arms industry more opaque and harder to track.