Willis flags new emerging risks facing defense industry

Core Insights - The defense sector is experiencing a surge in demand driven by geopolitical instability, but faces significant production lag and insufficient international collaboration [2][4] - The report outlines five key economic risks impacting the defense industry, including fiscal pressures and social backlash against increased defense spending [3][7] Economic Risks - The defense sector is confronted with structural challenges such as economic nationalism, fiscal fragility, and supply chain risks [1][2] - Rising debt-to-GDP ratios in Europe, North America, and Japan exceed 100%, leading to potential "soft defaults" through inflation or financial repression [3] - Increased defense budgets may provoke political grievances if they result in higher taxes or cuts to social programs, particularly in an environment of uncertain economic growth [3] Geopolitical Context - The shift from non-state threats to state-sponsored violence has reshaped the defense procurement landscape, necessitating a reevaluation of global defense supply chains [4] - The ongoing Ukraine conflict is expected to maintain robust defense procurement in Europe, regardless of whether the war continues or a ceasefire is reached [2] Emerging Threats - Experts highlight the risk of social backlash against defense spending amid fiscal pressures and the potential for looming fiscal crises [3] - The industry faces challenges related to tariff wars, reliance on Chinese materials, and the difficulty of reindustrializing in Western nations [7]