In the military world, flattening defence budgets, the escalating costs of Iraq and Afghanistan and shifting future priorities for the world’s major powers are all having an impact on the sector. Although the largest military order in history - that for the $200bn Joint Strike Fighter contract is keeping Lockheed and its main suppliers busy, large-scale, future manned fighter development is open to question. With the use of sophisticated unmanned drones such as the Predator increasingly being used in many conflict areas, the appetite for risking pilots’ lives is on the decline. In addition, on the back of the huge success of the Mars Rover robotic vehicles, even NASA is favouring unmanned space flight for much of the near-term future exploration projects. Although the International Space Station and potential moon bases keep astronauts in the public eye, for the majority of applications robots are cheaper and more reliable.

Across both segments of the sector, there are also a number of principal suppliers which have increasing influence. These include the likes of Smiths Industries and Honeywell in the avionics arena and GE and Rolls-Royce in the design and manufacture of engines. Both of these companies have been highly successful in creating significant after-sales support services such as TotalCare which now accounts for over half of Rolls-Royce’s revenues and most of its profits. Even in this sector, innovation in services is having as much impact as product and technology innovation.