Growth of UK SMEs in electronic warfare increased M&A activity in the defence sector
This rise of highly innovative UK SMEs with specialised products competing for government contracts with defence primes indicates the potential for greater M&A activity.
Advancements in understanding and technology have proliferated the use of electronic warfare (EW) on the battlefield, now established as a fixture in the arsenal of all technologically advanced militaries. With a projected global compound annual growth rate of 12.5% from 2023 to 2028, EW has emerged as a powerful tool in the defence sector for sensing and protecting communication. However, its potential for offensive use continues to pose significant threats, enabling militaries to manipulate the electromagnetic spectrum to disrupt, deny and degrade adversaries’ capabilities without the need for conventional destructive weaponry such as missiles or artillery shells.
A recent example can be linked to Israel’s synchronised pager and hand-held radio attacks on the militant group Hezbollah, which saw thousands of devices explode across Lebanon, killing 32 and injuring thousands. It was Hezbollah’s adoption of rudimentary pager and radio technology for communication that was forced as a result of Israel’s ability to locate and target individuals through their mobile phone devices using EW techniques.
According to Heligan Group, EW is emerging as a pivotal market and an essential requirement in military operations to gain control, exploit vulnerabilities, reduce threats, and thwart hostile use of the electromagnetic spectrum.
Will Ashford-Brown, strategic insights director at Heligan Group, said, “Traditionally, the development of EW capability has been the preserve of the defence primes, all having established EW programmes closely aligned with the UK Ministry of Defence (MOD). However, initiatives like Project CRENIC, a £45m refresh of the MOD’s tactical EW equipment, are fostering increased collaboration between the MOD and SMEs.
“This rise of highly innovative UK SMEs with specialised products, now competing for government contracts with established defence primes, signals a growing potential for greater M&A activity in the sector. As geopolitical tensions and conflict drive demand for cutting-edge technology, the EW market is poised for steady growth in the coming years, presenting a wealth of opportunities for companies to meet the evolving needs of modern armed forces and contribute to advancements in defence capabilities.
“However, the growth of the EW market is somewhat constrained by regulatory framework governing research and development, limiting the market from reaching its full potential. Factors such as a lack of technical expertise, reluctance to adopt new technologies, and restrictions on R&D investment are impeding progress and innovation.”
Ashford-Brown concluded, “As SMEs continue to compete alongside defence primes for government contracts, the EW market is likely to become increasingly robust, benefiting from a more collaborative and dynamic sector. Despite this, progress will remain limited unless critical barriers to innovation are addressed. Only then can the UK leverage the full strategic advantages of EW, capitalising on its potential to drive sustained growth and establish the UK as a leader in both the EW market and the broader global defence landscape.”
