Britain shoots for big stakes

Britain is the world's second-largest arms exporter after the US and ahead of Russia, which suffered from the break-up of the Soviet Union and difficulties providing after-sales service. Britain captured a quarter of the world market last year, up from 16 per cent in 1994 and 19 per cent in 1995 - and the arms companies want it to stay that way. In no other export sector is Britain achieving anything like this proportion of the world market.

Arms exports earn Britain pounds 5bn a year - between a third and a half of the total output of the British defence industry, which employs 360,000 people.

Besides financial earnings, military equipment goes hand-in-hand with support, training teams and advisers, which help maintain international influence.

The "responsible transfer" of defence equipment is consistent with Article 51 of the UN Charter, which recognises the inherent right of states to self-defence. The new government has said it will scrutinise future exports closely to prevent sales to repressive regimes but is not opposed to "responsible" exports. Indonesia - where it is alleged British aircraft have been used against people in East Timor and where riot-control equipment has been used for repression - was an embarrassment for the previous government, although the allegations that Hawks were used have been denied. All applications to export defence equipment are considered on a case-by-case basis. The final decision is with the Department of Trade and Industry, which seeks advice from the Ministry of Defence and Foreign Office. Also involved is the DTI's Export Credits Guarantee Department.

East Asia is the world's third- largest arms-importing region, which receives 12 per cent of the world's arms after the Middle East, the largest, and Western Europe. Britain has strong ties with countries in the first two areas as part of its colonial legacy, and both are lucrative markets because of oil revenues and the expansion of the tiger economies of East Asia. The UK has 20 "priority markets", forecast to provide more than 80 per cent of future British defence-equipment orders.

The Defence Export Services Organisation was set up in 1966 to oversee a coherent strategy for arms exports. It aims to prevent destructive competition between British companies by selectively supporting only one company in cases where British chances of beating foreign competition would otherwise be damaged.