'The UK needs a defence industrial strategy for 2020 and beyond'

02 May 2012

Derek Marshall, industry analyst and former managing director of policy and public affairs at ADS, argues that a long-term strategy for the defence industry is needed to stop the UK becoming dependent on imported equipment

This week, Mike Turner, chairman of Babcock International, and Robin Southwell, chief executive of EADS (UK) and president of trade body ADS, called for a new Defence Industrial Strategy (DIS). Any chance the government will heed their call? Not likely, as things stand.

In February this year the government produced a White Paper on "National Security Through Technology", confirming that its favoured approach to defence procurement is buying off the shelf. Although the paper recognised the positive contribution the defence industry makes to the UK economy, especially through exports, the importance of nurturing technology in the UK, and the concept of preserving the UK's freedom of action in defence matters, the dominant theme was to buy products and services from the global market, ignoring the impact on the UK industrial base because that is not the MoD's responsibility.

It will be tough to change the government's mind as there are many ingrained negative attitudes to a DIS, especially in the Treasury, and the UK is traditionally reluctant to spend on defence, a view exacerbated by divided opinions over the interventions in Iraq and Afghanistan, by the financial problems at MoD and by the government's austerity programme.

Some would argue that we don't have any enemies and that we should spend the money on schools and hospitals instead. On that assumption the share of GDP spent on defence has shrunk nearly to 2 per cent. No enemies? Well, the Olympics have woken people up to the potential threats. Consider instability in the Middle East and AfPak regions; the wider availability of long-range missiles; the relative insecurity of our energy supplies; piracy; cyber-attacks; criminal gangs smuggling in drugs and people; the list goes on. We clearly do need effective and well-equipped defence forces.

Another argument maintains that we should buy products and services on the world market, getting the best for our boys at the cheapest prices and letting other governments do the expensive investment while we just buy the product. This simplistic world view underpins much of the government's thinking. It is a long way from economic reality. Defence is not a global market: there are a series of national markets, all protected by their national governments to a greater or lesser extent, all with controls on the export of technology to other countries. If we do not invest here, the cutting edge in areas like cyber, unmanned systems, space, chemical and biological weapons, and new non-lethal weapons will be elsewhere. We will rely on what other governments will allow us to buy. And why should it be cheaper? It is unreal to suggest that other countries will not recover their costs through their exports, and seek profit. Are we not trying to do that?

Think we don't really benefit from an industry in the UK? Yes, we do, and for two key reasons. First the government has promised "no strategic shrinkage". Our armed forces rely increasingly on the support of industry based here in the UK. The presence of an efficient and supportive industrial capability in the UK is an important part of maintaining the UK's presence in the world. It is an essential bargaining chip to collaborate with key allies like the US, France and NATO. Second, our national power is based on economic strength, and the 300,000 skilled jobs in the defence industry are a vital part of our advanced manufacturing base. If the economy is to return to growth we need to create new jobs supporting national security. By contrast the White Paper implies the government is resigned to seeing UK jobs exported. There is positive talk about exports and SMEs but without investment we will have much less of both by 2020. It is the antithesis of a DIS.

Finally, think: Labour's DIS failed; why try that again? It is true that the Treasury under Gordon Brown stifled the implementation of Lord Drayson's DIS, but the concept was valid. We have defence needs; threats to national security are rapidly evolving and we have to invest to keep up with them. A DIS for 2020 and beyond is needed to ensure our limited resources are applied in the right areas. We have a National Security Strategy, why not a Defence and Security Industrial Strategy to help implement it? Is anyone in government listening?