Defense Contractors Will Face Higher Risks as Spending Increases

Source: Bloomberg

Ongoing geopolitical developments such as Russia’s war in Ukraine and tensions between China and Taiwan have continued to fuel higher US military spending.

The demand for military weapons is the strongest it has been in years, with historic investments by US allies and partners, and record US national defense funding that jumped by $76 billion to $858 billion for fiscal year 2023. This includes $816.7 billion specifically for the Pentagon.

President Joe Biden signed the National Defense Authorization Act into law in late December, targeting defense readiness across the board, including shipbuilding and aircraft, as well as munitions and military exercises around the world.

For government defense contractors, accelerated spending, strict regulatory requirements, and motivated regulators bring elevated enforcement risk.

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