Global sales of arms and military services rise to $592 billion in 2021 despite supply chain issues

Stockholm International Peace Research Institute (SIPRI) released data which showed that the sales of arms and military services by the 100 largest companies in the industry reached $592 billion in 2021. It is a 1.9 per cent increase as compared to the year before that.

The rise in 2021 marked the seventh consecutive year of rising global arms sales. The report further showed that the rate of growth was higher in 2021, but it was still below the average for the four years probably because of the coronavirus (COVID-19) pandemic.

The significant rise has been reported despite supply chain issues that jeopardised shipments of critical components, which is expected to worsen due to the ongoing Russia-Ukraine war.

The year 2020 was impacted due to the coronavirus, and the subsequent global restrictions were massive. The SIPRI report noted that many parts of the arms industry were still affected by pandemic-related disruptions in global supply chains in 2021. The disruptions led to delays in global shipping and shortages of vital components.

Lucie Béraud-Sudreau, director of the SIPRI Military Expenditure and Arms Production Programme, said in a statement: "We might have expected even greater growth in arms sales in 2021 without persistent supply chain issues."

"Both larger and smaller arms companies said that their sales had been affected during the year. Some companies, such as Airbus and General Dynamics, also reported labour shortages," the statement.

Russia-Ukraine war and its impacts

Notably, Russia is a major supplier of raw materials used in arms production and the Ukraine war amplified the supply chain challenges for arms companies.

In the report published on Monday, SIPRI Senior Researcher Dr Diego Lopes da Silva said, "Increasing output takes time. If supply chain disruptions continue, it may take several years for some of the main arms producers to meet the new demand created by the Ukraine war."

The report underlines how US companies have dominated the top 100 list, but there's a decline in sales. As per the report, the arms sales of the 40 US companies in the list totalled $299 billion in 2021.

High inflation in the US economy during 2021 was partly responsible for around 0.8 per cent real-term decline. The top five companies in the Top 100 have all been based in America since 2018.

SIPRI Senior Researcher Dr Nan Tian said, "We can probably expect to see stronger action from the US government to limit arms industry mergers and acquisitions in the next few years. The US Department of Defense has expressed concern that reduced competition in the industry could have knock-on effects on procurement costs and product innovation."

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As per the report, the combined arms sales of the 21 companies in Asia and Oceania included in the Top 100 reached $136 billion in 2021, which is 5.8 per cent more than in 2020.

Chinese companies had a rapid growth in Asian arms sales as the eight companies in the list had total arms sales of $109 billion, a 6.3 per cent increase.

Meanwhile, the firms based in the Middle East generated $15.0 billion in arms sales in 2021, which was a 6.5 per cent increase compared to the previous year. The pace of growth in the Middle East region was the fastest of all regions represented in the Top 100.

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