Defence budgets rising despite pandemic costs, says Saab CEO

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AEROSPACE & DEFENCE

Defence budgets and military spending is rising with governments concerned about ongoing geopolitical tensions, the increased threat of cyberattacks, or another pandemic, according to the CEO of Swedish defence company Saab.

In an interview with the FT, Micael Johansson said that the initial concern among some analysts that the economic effects of Covid-19 would lead to governments making cuts to military spending has not come to pass.

“Right now we don’t see that. On the contrary, we see increased spending. We see many governments increasing their defence bills and spending, such as in our home country Sweden, where there has been a record increase,” he said.

A number of European countries have announced drastic rises in defence budgets in recent years, including some with long-standing policies of neutrality, or which do not have traditionally large defence budgets.

Read more: Saab signs support contract with French Ministry of Defence

In December, the Swedish parliament approved a 40% increase in military spending over the next five years - the largest in the country in 70 years - with military chiefs and the government becoming increasingly concerned about Russia's plans in the Baltic Sea.

For almost 200 years, the Scandinavian country maintained an official policy of neutrality. This ended in 2009 when Sweden signed a number of mutual self-defence treaties with the EU and other Nordic nations, though it is still not a member of NATO. In 2011, Sweden participated in the NATO-led contingent in the war in Libya - the countries first foreign military intervention in two centuries.

Earlier this month, Germany reported a record €53 billion in NATO defence budget spending for 2021 - a 3.2% increase on the previous year - partly in the hope that it could ease trans-Atlantic tensions over burden-sharing among NATO member states. Former President Donald Trump repeatedly accused Germany and other nations of shirking its contribution responsibilities and allowing the US to shoulder the burden.

Read more: Germany awards part of £1.3bn Eurofighter contract to BAE

In November, UK Prime Minister Boris Johnson announced the largest rise in the country's military spending since the end of the Cold War, adding an additional £16.5 billion (€18.9 billion) bringing its defence budget for 2021 to £53.3 billion (€61.1 billion). Johnson told parliament at the time that the country was at risk of "waking up to discover our armed forces have fallen below the minimum threshold of viability" and that he had "decided the era of (defence budget) cutting must end, and end now".

Last September, the French Armed Forces Ministry presented a €49.7 billion draft 2021 defence budget to parliament which would have seen an increase of 4.5% on the previous year and a 22% increase since 2017. The proposed rises were ultimately rejected by French lawmakers but public calls for increases continue.

Several other European countries have also increased defence spending. With historical tensions with neighbouring Turkey rising amid alleged illegal oil drilling in Cypriot waters, Greece announced a military budget increase of 57% on the previous year.

Read more: Cyprus nervous as Turkey sends warships to support drilling

There have also been sharp spikes in military expenditure between 2010 and 2019 in several Central European and Baltic state NATO members citing rising concern over Russia as a context. During that ten year period, Poland increased its military budget by 51%, Romania by 154%, Bulgaria by 165%, Latvia by 176% and Lithuania by 232%.

Johansson told the FT that "increased tensions" had led to some of the extra government spendings, but added that politicians in Europe were waking up to the need to boost their preparedness for other threats.  

For example, Finland is maintaining long-term spending plans for training and new measures to counter a range of events, from cyber attacks to conventional military aggression.

The Saab CEO also said that the coronavirus pandemic had brought to light the importance for nations to maintain a certain amount of self-sufficiency in times of crisis. 

“If you have a shutdown and can’t interact with your partners or friends, then you need some capabilities and readiness,” he said.

Johansson's remarks come as Saab released its 2020 annual results, revealing that it had seen a 56% upswing in order intake compared with the previous year, largely helped along by a large contract from the UAE for its GlobalEye early-warning aircraft.

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