Military

UK to Boost Defense Spending; Good News for Lockheed, Boeing

Lockheed Martin Corp.

The British government on Monday released its 2015 National Security Strategy and Strategic Defence and Security Review, a document Prime Minister David Cameron said will drive the country’s national security strategy for the next five years. The review notes that the U.K. cannot choose between countering state-based conventional threats and threats that emanate from groups that do not recognize state borders—the country must do both.

For U.S. defense contractors, the review offers some good news. The U.K. plans to buy 9 new naval patrol aircraft, and those will be the Poseidon 8, built by The Boeing Co. (NYSE: BA). The country’s armed forces have also recommitted to the F-35 Lightning built by Lockheed Martin Corp. (NYSE: LMT) and said the Royal Navy would add an additional squadron of F-35Bs to the country’s yet-to-be-built new aircraft carriers. The Royal Air Force also affirmed its plan to buy 138 F-35s.

Prime Minister Cameron also noted that the U.K. is living up to all its commitments:

[T]he United Kingdom is the only major country in the world today which is simultaneously going to meet the NATO target of spending 2% of our GDP on defence and the UN target of spending 0.7% of our [gross national income] GNI on development, while also increasing investment in our security and intelligence agencies and in counter-terrorism.

Cameron’s comment addressed an issue that was raised this past summer when the British government refused to commit itself to NATO’s 2% target. The U.K. only met the target in 2015 by counting about $1.6 billion in a fund administered by the Foreign Office and typically used for peacekeeping and similar missions. The U.K.’s contribution to NATO averaged about 2.5% of GDP in the late 1990s, dropping to an average of 2.4% in the years between 2005 and 2009. In 2013 the country spent 2.3% of GDP on defense, compared with 2.2% last year and 2.1% this year.

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