Defence value chains in Europe may become nationalised as a result of the COVID-19 pandemic, according to majority of the respondents of a poll conducted by Verdict.
Approximately 45% of the respondents opined that European defence value chains will become more nationalised after the COVID-19 crisis, while 29% voted that the value chains will not be nationalised.
The remaining 26% of the respondents opined that European defence value chains may be nationalised after the COVID-19 crisis.
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COVID-19 impact on defence value chains
The COVID-19 pandemic has highlighted the strengths and weaknesses of global value chains. Policy makers are increasingly calling for sovereign or national supply chains forcing manufacturers to analyse their existing operating model. Although nationalisation of supply and value chains appears to soften the impact of the pandemic in the short-term, it may lead to contraction of GDP in the long-run, according to the Organisation for Economic Co-operation and Development (OECD).
The disruption in supply chains has led to the delay in acquiring critical components and delivery delays for the defence sector. The defence supply chain may undergo an overhaul to insulate from such unpredictable shocks, according to Cyient. The US Department of Defence (DoD), for example, has called for reshoring of critical component manufacturing such as microelectronics.
The European defence industry is also highly dependent on international supply chains, which were disrupted due to the pandemic. Europe, like many other countries, is dependent on China for the supply of components and parts.