(Stockholm) The sale of arms and services intended for the military sector increased in 2021, however affected by supply problems linked to the pandemic and the war in Ukraine which should both amplify these difficulties and stimulate demand, according to a new report released on Monday.
According to the report by the Stockholm International Peace Research Institute (SIPRI), the 100 largest arms companies sold arms and services for the military sector for a total of 592 billion dollars in 2021, i.e. an increase of 1.9% compared to 2020.
This growth, however, was severely impacted by widespread supply chain issues.
“The lasting impact of the pandemic is really starting to show in arms companies,” Nan Tian, a researcher at SIPRI and co-author of the report, told AFP.
Problems in terms of labor shortages and the supply of raw materials have “slowed down the ability of companies to produce weapons systems and deliver them on time”.
“What you’re really seeing is possibly slower growth than many had expected in arms sales in 2021,” he said.
Supply problems are expected to worsen with the war in Ukraine, in particular “because Russia is a major supplier of raw materials used in the production of weapons”, according to the authors of the report, but also because this conflict has led to an increase in demand.
However, it remains difficult to assess the level of this increase according to Nan Tian, which depends both on the need of the countries which have helped Ukraine with weapons to replenish their stocks and on the worsening of the security environment, meaning that “countries seek to procure more weapons”.
Although American companies still dominate the global arms production market, accounting for more than half of global sales (or $299 billion), the United States is the only region in the world to have seen a drop in its sales compared to 2020.
Of the five biggest companies in the market – Lockheed Martin, Raytheon Technologies, Boeing, Northrop Grumman and General Dynamics – only Raytheon saw its sales grow.
Meanwhile, sales of China’s eight largest arms companies soared 6.3% in 2021 to $109 billion.
European companies, which now make up 27 of the top 100 companies, totaled $123 billion in revenue, up 4.2% from 2020.
The report also notes a trend among private equity firms to buy arms companies, a development the report’s authors believe has been more visible in the past three or four years.
According to them, this trend threatens to make the arms industry more opaque and therefore more difficult to trace.
“Because these private investment companies are going to buy these companies and practically no longer produce public financial data”, explains Mr Tian.