Economic challenges and programme delays are threatening the future of an increasing number of Australian defence companies, putting at risk the country's planned modernisation of the Australian Defence Force (ADF). Jane's understands that at least 10 defencerelated small- and medium-sized enterprises (SMEs) operating in niche capability areas have been forced to either cease trading or withdraw services from the defence sector since the beginning of 2011 and more are expected to face difficulties in 2012. Nearly all the companies that decided to withdraw cited pressures related to Australia's falling defence expenditure, the strength in local currency and delays to the awarding of defence contracts. The latter in particular has often proved a decisive factor, although recent procurement approvals by the Australian Department of Defence (DoD) may help to alleviate concerns. Graham Priestnall, president of the Australian Industry & Defence Network, an organisation that represents Australian defence SMEs, told Jane's that if the situation is not addressed Australia's defence industry capability will be substantially depleted over time. "The big issue is that there is not enough work coming through," warned Priestnall. He added that, if contraction of the industrial base continues, "we will lose key strategic capability in country. Companies will either collapse through cash flow issues or they'll move to other industry sectors and they won't come back."
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