War in Ukraine has triggered a boom in Europe’s defence industry
“WE ARE WORKING flat-out,” says Armin Papperger, chief executive of Rheinmetall, Germany’s biggest arms-maker. Ever since Russia invaded Ukraine in February last year, the Düsseldorf-based maker of tanks, ammunition and other military kit has been inundated with orders. On August 10th the firm reported that sales of its military ware in the first half of the year had risen by 12% compared with the same period in 2022, and Mr Papperger expects growth to hit 20-30% for the year as a whole. A few days later the company said it had secured an order from the Ukrainian army for drones, and on August 18th it is due to inaugurate a large new factory in Hungary. Its share price has roughly tripled since the start of last year.
In the decades after the end of the cold war Western defence budgets dwindled, procurement decisions were put on ice and the industry scaled back its production. The war in Ukraine has jolted it back into action. “Defence budgets move with the geopolitical threat,” says George Zhao of Bernstein, a broker. That threat is now all too clear to governments, leading to a deluge of demand for arms. Nowhere is that more true than in Europe.
One problem is a lack of visibility. Michael Schöllhorn, head of the defence division of Airbus, a European aerospace giant, complains that many countries offer little guidance on their long-term spending plans, making it hard for companies to invest. Micael Johansson, boss of Saab, grumbles that his firm has so far taken on all the risk of increasing production.
2023-08-17 08:33:27
Original from www.economist.com
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