Our international Defence & Security team contributes to the global 2024 edition of 'Lexology Panoramic: Defence & Security Procurement'

The annual publication provides excellent expert analysis on how to navigate defence procurement, including the regulatory environment, hot topics on contracting, export control, dispute resolution, anti-corruption, employment law and more.

An Overview of the Global Defence & Security Market

Against the backdrop of increased geopolitical instability over the past year, we now look ahead to the shifts and changes 2024 may bring. Our thoughts remain with all those caught up in conflict around the world, and we hope that a peaceful end to the violence will be reached quickly and that current geopolitical tensions subside.

The war in Ukraine has continued into its second year, but with Ukraine’s counteroffensive failing to achieve any significant breakthrough, uncertainty remains as to how the conflict will come to an end. Conflict in the Middle East has once again come to a head following the Hamas attacks on Israel on 7 October 2023 and with Gaza facing a humanitarian crisis as a result of the ongoing war. Further east, China’s ‘grey zone’ tactics in Taiwan are causing mounting concern, with the growing risk that the United States and its Asian allies, such as Japan and South Korea, may be drawn into a wider conflict.

The backdrop to these global conflicts remains one of economic uncertainty as global recovery remains slow in the wake of the pandemic and the sanctions levied against Russia following its invasion of Ukraine. While we saw signs of resilience in early 2023, a global attempt to curb inflation has stalled economic activity and vastly diluted the risk appetite of developing economies. Regional divergences are also growing, leading to concerns about geo-economic fragmentation, and leaving little margin for error at the hands of policymakers across all jurisdictions, particularly those of advanced economies.

At the same time, we have seen rapid advances in technology – AI in particular – over the past 12 months, which has fuelled some growth within key markets. By reaching the mass market with applications such as ChatGPT, this new age of generative AI is expected to open the door to greater investment and innovation. It comes with a word of caution, however, as the world prepares to face a historic year of elections in 2024 that could be impacted by AI.

Lastly, the focus on ESG and climate change remains at the top of almost all agendas. The record-breaking COP28 in 2023 resulted in countries agreeing for the first time on the need to transition away from the use of fossil fuels in energy systems. However, the agreed deal fails to compel states to take any particular action, and no timescale for this green transition has been specified.

Notwithstanding these challenges, the defence industry has remained fairly well insulated with indexed and cost-plus government contracts largely mitigating the continuing high inflation environment, and persistent geopolitical tensions continuing to drive increases in national defence budgets. The sector’s commitment to net zero also remains on track, with progress being made to decarbonise military production and processes, as well as calls to introduce mandatory carbon reporting requirements at both EU and UN levels.

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Reproduced with permission from Law Business Research Ltd. This guide was first published in Lexology Panoramic: Defence & Security Procurement 2024 (Published: January 2024).