This most probably being the final defence related paper for 2017, I will below provide a few additional thoughts and reflections on what has been a very mixed year for UK defence. I’ll start by mentioning a few positive points that occurred during what most of us will conclude has been a pretty eventful Brexit driven year.
Having mentioned only last Thursday that the brilliant Airseeker programme had won the MinDP acquisition award, it was great to see confirmation over the weekend that with all three RC-135W Rivet joint aircraft delivered ahead of time and also on budget, that the Airseeker programme has now reached Full Operational Capability (FOC). My sincere congratulations to ISTAR Force Commander, Air Commodore Dean Andrew together with Air Commodore Ian Gale, Senior Responsible Owner – Command, Control, Intelligence, Surveillance, Reconnaissance Programmes and all at 51 Squadron RAF Waddington for the work they have done to bring this crucially important SIGINT capability to FOC.
Similarly, in respect of air power and as the former Secretary of State for Defence, Sir Michael Fallon had promised that it would, I believe that I am correct in saying that the 15th and final aircraft of the initial batch of ordered Lockheed Martin F-35 Joint Strike Fighter (STOVL) capability for the UK was delivered in the USA over the past week. During the summer of 2018 we can look forward to observing the first UK F-35 aircraft arriving at RAF Marham as part of 617 Squadron and that will from that time be operating from the base and also for F-35 sea trials to begin on the Royal Navy’s newly commissioned aircraft carrier HMS Queen Elizabeth.
Meanwhile, RAF Tornado GR4 and Typhoon FGR4 aircraft based at RAF Akrotiri in Cyprus have continued to provide tactical fast jet precision bombing support to our allied partners in the fight against Daesh in Iraq and Syria. All the various squadrons deployed and those that support them have and continue to do a brilliant job of work. Typhoon aircraft have and continue to be deployed supporting our Eastern European allies against and ever strengthening Russian threat. Typhoon is a superb capability and it the level of increased maturity is great to see.
It is worth reminding too that towards the end of 2016 BAE Systems and Northrop Grumman having last year secured that the UK would be the global repair hub responsible for sustaining an initial 48 out of a possible 774 repairable components. This was a formidable and very important valuable win for the UK that includes the partnership providing maintenance, repair, servicing, overhaul and upgrade services for what will eventually be many hundreds of European based F-35 Joint Strike Fighter aircraft [the work involved maintenance and repair of systems for the F-35 aircraft including electronic and electrical components, fuel, mechanical, hydraulic systems and ejection seats] at a location in North Wales (BATTLESPACE Comment: DECA, an MOD Facility see below*). This programme is likely to be worth very many billions of pounds to the UK through the lifetime of the F-35 build and service operation programme. Note too that with only the first 65 component elements awarded so far, that there are other large elements of F-35 work that the UK is also seeking to win.
Securing the first element of the F-35 global repair hub system from the F-35 joint program office was, as Andrew Tyler, CEO of Northrop Grumman Europe, put it last year, “a notable achievement and one that recognises the military aircraft support skills and capabilities that we have here in the UK”. I can hardly argue with that!
With BAE Systems having also won a contract to supply 24 Typhoon aircraft to Qatar, this has been a good year for Britain’s largest defence equipment supplier. Typhoon is doing well and the aircraft is involved in a number of other international programme competitions. So too is the Hawk.
Whilst there remain a number of uncertainties in relation to the as yet unknown quantity of separate defence and security reviews, the results of which are due in the New Year, suffice to say that the majority of companies involved in UK defence can probably look back on 2017 with a degree of pleasure. Yes, there have been many obstacles to progress and the imposition of additional regulatory aspects on single source contracts has been regrettable.
No longer wearing an investment hat these days I rarely comment on share price movements but I will say that in my view the poor share performance of companies such as QinetiQ and Babcock International has surprised. Both these companies have an excellent forward strategy and both are not only delivering good results but have in my view an excellent outlook both nationally and internationally.
Looking at some other companies in the sector, Cobham is moving down the road of recovery good strategy and yet the share price is in the doldrums. Meggitt has thankfully done a little better share price wise but still only a fraction above where it was a year ago. Although defence plays a much small role than civil, it is good to see that Rolls-Royce has seen some small improvement in its share price during the year as it moves through a long process of efficiency improvement.
That defence spending is on the rise globally, that there is greater recognition that Europe needs to spend more on defence and also that here in the UK there is now a growing element in the House of Commons who are not prepared to see further erosion in defence spending provides us all with a modicum of hope that the Government will need to think long and hard about how it handles the gap between funding resource and requirements for strong defence.
While publishing a specific report on a Sunday would appear to be a rather strange time for the House of Commons Defence Select Committee to do this, I have to say that on reading the ‘Gambling on Efficiency: Defence Acquisition and Procurement’ paper in full I was somewhat underwhelmed by what the Committee had concluded. In relation to the forecasting of inevitability that due to the failure by the MOD to produce the required efficiency savings planned in SDSR 2015 that there will either be a reduction in the number of ships, aircraft and vehicles or to even greater delays in procurement I consider that the Committee appears to have blinkered itself into a belief that no additional funding will be made available. While history may be on its side, reality in this case may not!
Even if it is true that the MOD has failed to achieve the level of planned efficiency improvements that it anticipated in SDSR 2015 and that it has been further damaged due to Brexit induced change to the value of sterling against the dollar and which has subsequently pushed up the cost of what we plan to acquire from the US, I find it strange that the Committee should have concluded that this will automatically lead to cutting numbers in respect of planned aircraft and other planned purchases or pushing back deliveries.
Whatever we have decided to order in respect of new defence equipment and capability has been done for a very good reason and importantly, it has been calculated on absolute need. IF, and I suspect many would agree that defence has been short changed for far too long, there is an issue, then it is most likely because we are failing to fund defence well enough.
Back to some positive aspects of UK defence. It has been particularly pleasing to observe this year that not only did the first of the two new aircraft carriers for the Royal Navy depart from Rosyth earlier in the year and then go on to complete initial sea trials, she also entered her new home port of Portsmouth on time and was commissioned by Her Majesty the Queen just two weeks ago. During the year, the second carrier which is ahead of time in relation to programme build requirement was named.
Worth noting that the Type 26 Frigate programme took a giant step forward with the first three of what is a planned number of eight of these ships ordered by the MOD and the Type 31e programme also moved closer to reality.
There are plenty of other positives that occurred in 2017 and that I could include but for now will leave it at that. 2017 was, according to Sir Michael Fallon, to be the year of the Navy and he was won’t to imply on many occasions that the Navy was getting larger. That was hardly a correct though and with more ships being decommissioned that commissioned into Royal Navy service whilst others are tied up either awaiting serious upgrade repairs or that are short of sufficient numbers of qualified personnel to enable them to sail, we should all be concerned at the plight that the Royal Navy finds itself in.
Finally, it has to be said that a sudden and unexpected change of Secretary of State for Defence came as a shock to most of us and we are left to wait for a while as the new man, Gavin Williamson gets to grips with his new and very important post. New brooms sometimes sweep clean but so far I am left to admire the rhetoric of challenge that has emanated from Mr Williamson in respect of anticipated defence cuts next year – I live in hope that it is more than rhetoric.
CHW (London – 18th December 2017)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785
- (See: BATTLESPACE UPDATE Vol.18 ISSUE 27, 04 July 2016, NEWS IN BRIEF – EUROPE)
29 Jun 16. BAE, Northrop Partner With UK Agency for F-35 Bid. Two of the principle companies involved in developing the F-35 Lightning II strike jet have teamed with a British state-owned components repair operation in a bid to secure a significant long-term deal to become the avionics sustainment hub for the aircraft in Europe.
A team involving BAE Systems, Northrop Grumman and the Defence Electronics and Components Agency (DECA) are expected to submit a proposal to the F-35 Joint Program Office in August to secure one of the region’s key support contracts for the aircraft, said executives familiar with the program.
The Ministry of Defence (MoD) confirmed the involvement of BAE and Northrop Grumman but declined to say anything about whether DECA would have a role.
“BAE and Northrop Grumman, along with other industry partners, have been assisting the UK MoD in developing a solution for the provision of F-35 maintenance, repair, overhaul and upgrade services. However, at this stage, we cannot discuss the makeup of the bid, as to do so could undermine our position in the down-select process,” a ministry spokesman said in a statement.
DECA’s involvement is, in essence, mandated due to US government insistence that some avionics repairs on the jet here are only undertaken by UK government employees.
“The fact is some repairs will be ring-fenced between industry and government,” according to an executive, who spoke on condition of anonymity. “That is the basis on which the aircraft has been bought.”
The MoD spokesman did not respond to a question about whether there is a government-eyes-only lock on the repair and overhaul of certain F-35 avionics.
Based at Sealand, northern Wales, DECA supports Tornado strike jets and Chinook helicopters for the British military.
The agency was formed last year when the government opted not to privatize the business as part of the sale of the Defence Support Group to Babcock International.
BAE confirmed it is part of the team working the sustainment center proposal, but Northrop Grumman referred inquiries to the MoD.
Executives here said other teams in Europe were also forming to bid for the work. Italy is likely to be among the country’s putting forward proposals, they said.
Britain’s interest in hosting the European avionics repair center was first revealed by the UK’s defense procurement minister, Philip Dunne, during a visit to the US earlier this year, but the makeup of the industrial team behind the proposal was not released.
News of the makeup of the British team comes ahead of the F-35 jet’s appearance next month at the Royal International Air Tattoo and the Farnborough air show.
The executive said the value of the avionics repair deal depends on the eventual size of the F-35 fleet in Europe but that revenues could be measured in “hundreds of millions of dollars a year.”
“It’s a significant work package and an important part of the framework of the global support program [being introduced for the F-35],” the executive said.
Britain, Norway, Denmark, the Netherlands, Turkey and Italy have ordered the jet while nations like Belgium, Finland and Spain could eventually add their names to the customer list.
Italy, Turkey, Norway and the Netherlands have already secured either airframe or engine support contracts as part of the European element of the global support program being implemented by the US.
The Italians also have an F-35 final assembly and checkout line operating at the Cameri Air Base in northern Italy as part of their industrial effort.
Aside from prime contractor Lockheed Martin, BAE and Northrop Grumman are the two largest contractors in the F-35 program.
It’s not clear what avionics are involved in the repair proposal but industry executives here said they would be major, high-value components.
Northrop Grumman supplies a range of key systems including the radar , electro-optical and communications subsystems as well as the communications, navigation and identification avionics and other systems.
BAE’s involvement is likely to center on the company’s logistics management and fleet-support expertise gained from supporting Royal Air Force Typhoon, Tornado and Hawk jets.
Europe’s largest defense player already has a substantial stake in the F-35 program producing the aft fuselage in the UK and key electronic warfare and systems at its US operations.
In April, the company secured a £114m (US $152m) deal from Lockheed Martin to build F-35 maintenance, logistics and training facilities at RAF Marham, the base earmarked to be the home of the British Lightning II. The detailed arrangements relating to who exactly undertakes the maintenance and other work at Marham still has to be hammered out. (Source: Defense News)