On February 22, 2013, the United Kingdom lost the coveted AAA credit rating, a privilege belonging to the best performing and promising economies. Moody, the credit rating agency, downgraded the UK rating to Aa1. This was the first occasion this happens since 1978. The argument for the downgrade was that “the continuing weakness in the UK's medium-term growth outlook, with a period of sluggish growth which Moody's now expects will extend into the second half of the decade.” The woes of the UK economy (and the Eurozone at large) are becoming a never-ending story of ‘things will get better but somehow seem to get worse.' A consequence of the adverse economic outlook was outlined in our previous post, The British Ceremonial Army.

To recap, we revised the plans of the UK government for the further downsizing of the armed forces over a horizon roughly overlapping Moody's forecast period of continuous sluggish growth. The planned reduction is from about 102,000 regular troops to 82,000 by 2020. What are the implications of this reduction for the future of the UK private military industry?

At the outset, we should remember that there is a well-established private military tradition in the UK. This tradition goes back centuries. Its first golden period was during the seventeenth and eighteenth centuries, when the overseas trading companies flourished and helped consolidate the UK as the largest empire of modern times. The key private military protagonist of the period was the English East India Company.

After the end of the Cold War, the British armed forces went through a period of downsizing and reorganization. The downsizing in the 1990s was perhaps as dramatic as the planned 21st century downsizing. Continuing the well-established private military tradition, the British private military industry integrated the released soldiery into the sector. Thus, in the 1990s the UK cemented its position as the world's leading supplier of Private Military Companies together with the United States.

There are currently about 200 corporate identities in the UK employing former service members and in virtual possession of private military capabilities. Many of these companies deliver private military, security, or intelligence services worldwide. Like in decades past, like in the 1990s, the released soldiery will boost and enhance the private military sector over the next decade. Moreover, as many of the released soldiers, in addition to those retiring early because of low morale, are senior and experience personnel, they are likely to lead the creation of new corporate identities. A 20% expansion of the private military sector and 100 new corporate identities in possession of private military capabilities seems to be a moderate estimate of how much the UK private military sector is likely to grow by the end of the decade.

The UK economy is at a standstill and the AAA credit rating of the country is for the time being history. However, an unseen benefit of the downturn is that the British private military sector is thriving and its AAA status will be maintained for yet another century.

April 16, 2013