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Obama offers hope to order-starved defence firms

As the US presses ahead with plans to beef up defence spending and Japan announces a record budget, the UK is expected to tighten its purse strings even further
Obama offers hope to order-starved defence firms

News that President Barack Obama has requested a substantial increase in US defence spending has come as welcome news for a host of UK defence contractors. As part of a $4 trillion 2016 fiscal budget shopping list presented to congress, the US president surprised onlookers by asking for a base defence budget of $534bn (£350m), plus $51bn to fund wars in Syria, Iraq and Afghanistan.

Rising geopolitical tensions, and cyber attacks, are pressing priorities for a US government under pressure from Republican opposition, although questions are already being asked over whether this ambitious request for more funds will be granted. As the limit set by sequestration is just shy of $500bn, Obama's latest appeal breaches the austerity fiscal policy by about 7 per cent.

Nevertheless, shares in the UK defence companies most closely aligned to the spending patterns of the world's biggest buyer of military hardware climbed following the announcement. And while still nowhere close to the $664bn the US shelled out in 2010, the likes of BAE Systems (BA.), Chemring (CHG), Cobham (COB), Meggitt (MGGT) and Ultra Electronics (ULE) will be hopeful that the days of hefty cuts are finally over.

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