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Defence Growth Partnership – Building Future Innovation and Prosperity Landscape By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

modWith a progress report from the Defence Growth Partnership (DGP) anticipated during the Farnborough International Air Show, I will take the opportunity today of reminding the concept, strategy and work that the DGP is designed to undertake together with some of the initial achievements.

Funded by an initial investment of £30m back in September 2013 (this was subsequently increased to £50 million) the DGP may be regarded as an exceptionally well-structured government/industry partnership based defence initiative that has as its primary aim the securing of future growth for the UK defence industry.

DGP is co-chaired by Anna Soubry, Minister of State for Small Business, Industry and Enterprise alongside, since February this year, Mr. Allan Cooke, Chairman of WS Atkins and who brings to the organisation considerable defence industry experience and is well respected by industry and government alike.

Senior representatives from sixteen major UK member defence companies, plus a representative of the trade association ADS, and the current Minister of Defence Procurement (MinDP), Mr. Philip Dunne and who also has direct responsibility for MOD involvement in defence exports, make up the all-important DGP Ministerial Committee. Over 500 companies of whom 70% are small and medium sized enterprises (SME’s), trade associations and universities have already participated in the DGP.

The DGP initiative may well be regarded as belated and much needed recognition by Government of the importance that defence plays in the national economy. Coming as it did, two years before publication of the SDSR 2015 (Security Defence Strategy Review) which voiced strong emphasis on the need for innovation in defence and that marked important recognition by the government the role that defence plays within the prosperity agenda, suffice to say that the DGP has, in a relatively short period of time, delivered a road map covering a large number of required aspects for future UK defence growth to be achieved. DGP has also, in my view, set the tone for recognition that if we are to be more successful in defence exports that there needs to be better recognition (by government) that selling defence products abroad can rarely be achieved by industry alone – in other words, it needs the full engagement of HMG as well.

Back in 2013 when the DGP was launched the now outgoing Prime Minister, Mr. David Cameron reminded that “Britain’s defence industry is a national success story and one that we are right to take pride in”. “Across the country” he said “British engineers, scientists, apprentices and manufacturers are working to ensure that our armed forces have the best equipment in the world”. He might well have added that we are the second largest exporter of defence product in the world and that a great deal of our past success has been built on industry working with government and government itself working with customer governments.

We are good at what we do and to my mind the DGP was belated recognition that with a strategy and plan not only could we do more but also that we need to be better, more fleet of foot and innovative if we are to grow on the success already achieved.

Moreover, the DGP has brought home to a new and wider audience a better understanding of what defence brings to the economy together with how the importance of relationship between industry and government departments such as the MOD and UKTI needs to be better understood and coordinated.

As well as making an essential contribution to our national security, the Prime Minister was in the aftermath of the damaging SDSR 2010 and lack of a formal defence industrial strategy amongst the first to acknowledge that the defence industry really was vital to economic growth. He is to be commended for that and few would disagree. Indeed, having had the misfortune to observe previously very successful organisations such as Defence Export Services Organisation degraded over the years and particularly after 2007 it is not hard to see why to industry the DGP offered the belated prospect of a reversing negative Government attitudes to defence that had prevailed for far too long. In my view, the DGP has already achieved much in driving forward industry confidence and new objective but clearly there remains a lot more work to do.

While DGP is also about encouraging large, medium and small companies to work better together, to bring out, forge and create new ideas and innovation it is also about assisting the exportability drive forward, working alongside UKTI DSO, and making better use of the considerable amount of experience built up by them. It is also about ensuring better communication of ideas. A lot is expected of the DGP and gathering more and better intelligence and making this available to industry will be an important part of the DGP process of success.

UK defence exports (£8.5bn in 2014) may well be considered relatively small by some in Government within the overall context of UK goods and services exports, but recognising and developing engineering ability, encouraging research and development and innovation together with doing what it can to ensure recognition of skills retention needs are all within the wider DGP brief.

Direct employment within the UK defence sector is currently estimated to be around 146,000 with another 111,000 jobs in the supply chain. These are highly skilled mainly engineering related jobs that the UK really needs. Add to this number an estimated 4,300 apprentices plus an unquantified number of graduate trainees also employed and this combined provides a very good sense of another important aspect of what defence brings to wider economy. In addition defence brings tax receipts to the Chancellor, a very important skills base and a significant export element that should not be ignored.

The DGP was as I have said established for a number of different reasons and one that may be considered as being the most important is finding new ways to develop and sustain the existing skills base.

Today UK defence is still a large industry but without significant effort that may not be the case in the years ahead. Last year as an industry, UK defence produced an annual turnover estimated at £24bn, a figure that was up 18% on that of 2010. Interestingly, defence is also an industry that has achieved a remarkable 29% growth in productivity over that same period. While there can be no targets for growth yet the hope is that by bringing the industry better together new ideas, concepts and innovation will be the result.

If the creation of the DGP was blunt recognition that something needed to be done to ensure that the many strengths that the UK had built up in the defence industrial sector over the years would not be allowed to wither on the vine it has made a very good start. The DGP has also made a very good start in relation to its work on skills retention and training. Behind all this is another hope on the part of Government – one that suggests the work of the DGP along with other established ‘growth partnerships’ will eventually play a big part in better balancing economic output between manufacturing and services. Clearly we need to manufacture more of what we consume in the UK and in a competitive world, raise our level of exports. On both those scores there is still a very long way to go.

Defence will certainly play a part in the required transition referred to above and that in part explains why the DGP has been built around future needs and with innovation being the key requirement for future success. Building on existing strengths is clearly important but more so than the DGP also providing a blueprint that encourages new opportunities and ideas to be created and fulfilled be this singularly, through collaboration or other means.

Clearly, in regard to defence exports the UK’s primary strength and one that over the years has yielded the greatest success is built around air capability. But I suppose that just because 82% of the UK’s export success is currently built around the air domain does not mean that maritime and land equipment should be ignored.

Importantly, the DGP as an organisation has recognised that a much wider field of opportunity for growth is potentially available within the defence construct if sufficient effort is put in to develop it. Under this heading the DGP mission would include intelligent systems, development of the electronics, software and systems integration and many other aspects of defence and security including I assume, cyber related.

Understanding customer needs and as a result, the ability and willingness to develop coordinated UK solutions that can be tailored to the needs of the export customer are very relevant to future success. No more telling the customer what he can have but instead, asking him what it is he wants, designing it and hopefully manufacturing it as well. Technology enterprise also has a big role to play in establishing more effective ways of creating and exploiting intellectual property.

Here I also come back to skills. In the process of its work the DGP has fully recognised the vital importance of developing the next generation of apprentices, technicians, engineers and other professionals that will be required for the future. It has also recognised the need for value chain competitiveness or in other words, the need to improve competitiveness of the UK’s defence value chain and also for it to provide differentiation in respect of capability, cost and market access.

The DGP mission may be part summed by suggesting that it is there to help create conditions that industry needs in order for it to be able to continue to generate and enhance innovation, create and retain highly skilled jobs increase high value exports and play a significant role within what the government has termed as the prosperity agenda.

So what has the Defence Growth Partnership achieved in the first 30 months of its existence? Rather a lot would be my answer to that and while I will not attempt to pre-empt what the DGP team will say at Farnborough, I will mention a few aspects of work already done of which the largest of these is the creation of the UK Defence Solutions Centre which I discuss below.

The establishment by the DGP of the UK Defence Solutions Centre (UKDSC) as an independent entity designed to bring together the best minds from right across the UK defence sector – large, medium and small – into what is termed ‘a pre-competitive collaborative space to create innovation and world beating products and services’ is to me a very interesting example of the current approach that the DGP is taking to solving what the UK will in future need if it is to enhance it role in defence.

Looking as long as 15 years out and acting as the central coordinating body for what is intended to be a collaborative approach, UKDSC is also charged with delivering the UK’s required competitive advantage.

Formed as part of the DGP implementation plan in 2015 and again, jointly funded by government and industry, the UK DSC is tasked with positioning the UK defence industry to be more successful in exports through having an improved alignment with the Government, collaboration within the UK value chain and through stimulating innovation and investment from a broad range of sources. To achieve this UK DSC will work closely with UKTI DSO, the organisation that retains the lead responsibility for defence exports, outside those that are now the sole responsibility of the MOD.

UKDSC is staffed by an independent CEO, Steve Brittan who I met with last week at the organisations Farnborough headquarters, together with a staff comprising secondees from 16 DGP partner companies. This is a value chain proposition throughout and UKDSC will work with a vast range of organisations covering every aspect of defence product and service.

The strengthening of UKTI DSO capability and the placing through the auspices of the DGP and industry of five industry secondees (the plan is to increase this level to 15 secondees later this year) whose work will encompass supporting export companies and customers and in collating and making far better use of the market intelligence that has long been one of UKTI DSO’s strengths.

I would also mention the formation of governance steering committee and agreeing the industry/government sponsorship structure all of which takes time. Already achieved is the establishment of various work streams related to skills and value chain competitiveness, establishment of common interest roadmaps and importantly, of the Joint Innovation Challenge.

Taking what has already been achieved a stage further, I would mention that DGP now has an established a roadmap that will allow a better working together of industry with academia, identified programmes that could potentially better enhance UK defence export engagement and approach (this having made extensive use of UKTO DSO market intelligence) creating better recognition of the importance of government to government approach and strong industry alliances and finally, producing a UK Team Thinking approach across the board.

Key Amongst many advantages that the DGP has made as far as I am concerned would be the significant progress in strengthening the future UK defence industrial and export position through focussing on key strategic areas and activities and which have been agreed as areas of activity that we can with hard work and determination potentially benefit. I would also add provision of much needed support and maybe even first time recognition of the role that the supply chain plays in defence. Add to these emphasis of involvement exploring and exploiting new possibilities and the potential use of novel technologies and of enabling better cooperation between government and industry, establishing a format for better collaboration between and within industry, better enabling and harnessing of SME’s (small and medium sized enterprises) with that of Mid-Tier and large international companies and finally, work done in relation to building and sustaining the skills base that we will need if we are to achieve our future ambitions to the full and one can see that DGP has not been standing still.

Another interesting rationale that DGP has been responsible for is creation of the Innovation Challenge. Funded by a £10m MOD grant the Innovation Challenge is focussed on attracting next generation solutions and technology. So far the various competitions have centered on persistent surveillance from the air, agile, immersive mission training and autonomy and ‘big’ data. The results which are already too many to mention here have featured a very high level of small and medium sized enterprises.

As part of the overall DGP plan the organisation will work very closely with UKTI DSO and as already mentioned, help to strengthen it through the addition of industry secondees for whom it will be responsible. A new DSO Industry Liaison board has been created and this is being chaired by former DGP Co-Chair, Steve Wadey. Another aspect of the DGP is a new £10 million jointly funded project that is intended to back the best new technologies and research that can potentially have what is termed ‘dual use’ in defence and civil sectors. Finally and of huge importance4 is the Systems Engineering Master’s Apprenticeship Programme that will deliver a new and higher standard of requirement in relation to defence sector skills.

In conclusion, DGP is working well and it is well into the process of getting to grips with what the UK defence industry needs if it is to maintain and indeed, enhance progress in the years to come. UKDSC has only been around for less than a year and yet it has already formed a blueprint strategy for developing UK defence product and one that is focussed on the customer in order to determine the most compelling propositions that the UK industry needs to concentrate on. This includes promoting collaboration and advocating leading edge UK solutions to chosen potential customers is already beginning to reap rewards. At the same tie the strategy sets out to ensure that any potential synergies with the MOD are not ignored.

Steve Wadey, the first Co-Chair of the Defence Growth Partnership, is deserving of much praise in my view for the difficult work done in putting the DGP together, for laying the foundations and for bringing the various industry partners and stakeholders together in order to work for the self-same ends of achieving success. The process of standing up the DGP can hardly have been easy and I am in no doubt that occasionally heads needed to be banged together. Equal credit must also go to Allan Cooke who took over the job of chair in February this year and who is now taking the DGP forward. Commanding respect across the defence industry and government as he does Allan Cooke was in my view the perfect choice to lead the DGP on to greater success.

The DGP will as I have said play a huge role in the innovation and prosperity agenda. The DGP is the result of government beginning to understand the importance and the real value that defence brings to the national economy. The DGP is today not just up and running but is now a well-established entity that will in the years’ ahead help to ensure that the UK defence industry and government work together for the self-same ends for future industry success. If they get it right, as I am sure they will, the potential for the UK Defence Solutions Centre to exploit and promote technology based product innovation and investment and to create an environment in which technology innovation becomes the primary enabler of competitive advantage within the UK defence sector cannot come a moment too soon.

CHW (London – 5th July 2016)

Howard Wheeldon FRAeS

hwheeldon@wheeldonstrategic.com

Tel: 07710-779785

 

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