My apologies that due to the need to sift through hundreds of pages of so-called Integrated Review strategy documents this week that providing a view on the final episode of the Integrated Review process – Defence and Security Industrial Strategy: A Strategic Approach to the UK’s Defence and Security Industrial Sectors – has of necessity been pushed to the back of the queue.
Glossy, pretty and readable it may well be but my first thought on reading the 112-page DSIS document yesterday was to see whether the UK’s defence, aerospace and security trade body ADS had provided us with a view and lo and behold, despite being rather short of people who really understand defence, outgoing CEO Mr. Paul Everitt placed these comments on the ADS website in respect of DSIS:
“Industry has worked closely with the MOD to develop this Defence and Security Industrial Strategy which looks to meet the UK’s national security priorities, support resilience and build on domestic industrial capability. The DSIS lays the foundation for a defence and security industry that will have the confidence to invest in the advanced capabilities needed by the UK Armed Forces and security services. A more nuanced approach to competition and more opportunities for SMEs will deliver a more agile, innovative and resilient UK industrial base. Industry looks forward to working in partnership with the MOD on this new way forward”.
Well, DSIS certainly does lay foundations but reading through the document I came to the conclusion that it was full of ‘ifs’ and ‘buts’ and while it shares the common values of intent that government and the defence and security industry undoubtedly share, I began to wonder whether those in the Department responsible for writing it could actually see the wood for the trees.
My frustration turned to annoyance when on page 58 of the document I came across this little gem “The orders for Offshore Patrol Vessels and Type 26 and Type 31 frigates will sustain thousands of jobs in Scottish shipyards and the wider supply chain into the 2030s”. Did anyone in the department not bother to check that the last if five Offshore Patrol Vessels ordered by the MOD for the Royal Navy, HMS Spey, was delivered last October? Attention to detail is hugely important and the more I read in this document the more disappointed I became – not because of the subject matter was wrong but because it was so full of ‘we will’ and ‘we are’ and that I have read so much of this intent before.
That is not to suggest that it lacked the odd nugget and I very much welcome the comments related to “The MOD has also been undertaking a comprehensive review of the Single Source Contract Regulations, focusing on simplifying the regime, speeding up the contracting process and introducing new ways of incentivising suppliers to innovate and support government objectives. These reforms will be designed to ensure that we have a sustainable supply base that is capable of meeting the UK’s needs in a rapidly changing world”. About time too although I would have much preferred to see that rather than reform Single Source Contracts Regulations but scrapped them entirely. Anyway, we are promised another ‘Command Paper’ later this year setting out in more detail the policy proposals for reforming SSCR’s and the legislative and other mechanisms by which these reforms will be implemented, and we are told that HMG is already engaging with industry on future policy through the Defence Industry Council and the Defence Suppliers Forum.
The DSIS informs us that the MOD intends to build on progress made through its acquisition and approvals transformation portfolio (whatever that is?) in areas such as category management, technology exploitation, cultural change and that it will continue to increase the capability of the commercial function. Sounds lovely but who is going to do this, do they have the people, skills and experience are they prepared to adapt and change and most important of all, are they prepared not only to listen too but respect industries views on all this?
As I implied only last week in my view that the MOD DE&S procurement operation needs for more SQEP while there has been some notable improvement DE&S moves at a speed that is so much slower than industry, probably has too many journeymen, is not exactly political aware and remains stuck with a culture of indifference.
There are bits and pieces about Intellectual Property (IP) strategies, productivity, strengthening supply chains, resilience, limitation of contractor liabilities update/reform, skills, talent, diversity, transparency, driving implementation of the MOD Strategic Partnering programme, refreshing MOD’s commitment to SME’s and reducing barriers to entry and many other good things. Yes, full of intent, beautifully described but as we all know, actions speak louder than words.
One is pleased to see talk of strengthening the Defence Suppliers Forum (DSF) in DSIS and rather laughably, the document also talks about conducting a strategic review of the Defence Growth Partnership (DGP). For goodness sake, the whole problem with the DGP is that it has, unlike the other growth partnerships created by Cameron, never been funded because of the ridiculous view that this would be politically incorrect. There – I have saved them time and money by providing the solution – no need for another review!
And then, as we move through the 112 pages, we arrive at International Cooperation, Exports and Foreign Investment. Rightly and without mentioning the politically unacceptable words of sovereign capability, DSIS talks of the huge importance that overseas based companies support the Armed Forces and our industrial base not “just through their products, but in creating employment and investment in UK based research and development. DSIS reminds that “Our openness to collaboration and investment, as well as our industrial and scientific strengths, are what makes the UK a partner of choice for international partners, whether that be collaboration between governments or businesses”. So, it does – but not when some companies are treated in the manner that they have been in the wider Integrated Strategy and find themselves facing the prospect of cutting jobs because of sudden and what I can only describe as being ill thought out procurement strategy.
It is of course all too easy for MOD to say “Ensuring that government and industry are working together effectively is important to promote interoperability with allies; establish secure supply chains; codevelop new technologies and capabilities; share the costs and resources associated with capability development and achieve export success.
On page 73 one finds this gem:
“The internationalisation of the defence market and overseas based companies in the UK The UK’s defence and security industrial sectors have over recent years increasingly internationalised and several defence and aerospace companies founded in the UK have significant global reach. For instance, BAES’ turnover in the US in 2019 was £8.6bn, representing 43% of their total sales, against 19% in the UK11; and the majority of its employees are now overseas, as are a high proportion of its shareholders. Other examples of companies with significant overseas operations and sales include Rolls Royce, Martin Baker Aircraft and Ultra Electronics. At the same time, overseas based companies have chosen to invest in or move parts of their businesses into the UK. Notable examples include: Leonardo, with its headquarters in Italy, which employs over 7,500 people in the UK and Thales, a multinational aerospace and defence company headquartered in France, which operates nine key sites and employs over 6,500 people across the UK, Airbus, a European firm headquartered in the Netherlands, which operates more than 25 sites in the UK with a workforce of 12,500.. All the top five US-based primes have also invested in sites in the UK, primarily to deliver to MOD. International joint ventures also can play a significant role, with one of the most successful being MBDA, a joint venture of Airbus, BAES and Leonardo, which employs over 11,500 people across France, Germany, Italy, Spain and the UK”.
Where is the mention of important players in the defence and security industry that also export such as Meggitt, QinetiQ, Babcock International, Smiths Group, Marshalls, Cobham and smaller but no less important highly specialist companies that bring huge benefits to the UK economy, jobs and skills such a Cam Lock that export the vast majority of what the produce? There are many others that deserve a mention in this rather hollow DSIS document as well.
So why not mention Lockheed Martin, Raytheon, Boeing, Leidos, Northrop Grumman and others by name! Each and every one of these has not only invested in the UK but is engaged in supporting the UK and for some, exporting. And what about the many smaller companies such as
And then we arrive at DSIS words in relation to defence exports. And where we are told once again that the UK is the second largest exporter of defence products globally after the US and the third largest in security products. We are told that most transactions are business to business but that there is a significant role for government – a reference to government to government – G2G of which we are told that “A new G2G mechanism will establish parameters for HMG’s liability, with scope to vary the exact terms for each agreement. This new mechanism will be accompanied by behavioural and structural changes to better promote cross-government collaboration, and ensure effective joint working and risk-sharing between government and industry”.
Quite rightly, under the export heading there is, as you would expect, a reminder of how the UK operates one of the most robust export licensing regimes in the world, how the MOD says that it wants to transform the support it provides to SME’s through building on the Dept For International Trade’s Export Academy and the establishment of a Defence and Security Faculty. My first thought? Not another talking shop I hope and why after all the knowledge and experience gained over the years of why defence exports need to be very much a part of the MOD rather than being an adjunct to the Dept of Trade are we still failing to learn the lesson?
There is a one page reminder about UK Export Finance – the UK’s export credit agency and the historic importance that this has played in relation to defence but amazingly, in a 112 page document, defence exports are afforded just three pages and part of those is a page on export finance that covers all international trade as opposed to just defence.
Given the huge value of defence exports to the UK economy, jobs, skills, tax revenues and everything else that goes with it, there is not a word in DSIS that suggests to me that after years of dithering and playing the political correctness card, the government has any intention to really get behind our defence export potential now or of how, because of its agenda to increase UK presence, of the importance of working closer with international governments and our industry to win more exports.
Where is the mention of strengthening of the hitherto highly successful Defence Export organisation? Nowhere to be found. Where are the long-awaited responses and support to Philip Dunne’s excellent ‘Growing the Contribution of Defence to prosperity’ of 2018 and that was commissioned by the then Secretary of State for Defence? Nowhere to be found despite a very small reference to this. And where are words recognising the importance of maintaining sovereign defence manufacturing capability?
Glossy documents such as DSIS posing as forward strategy and intent need to be far more than telling us what we already know. They need to be about providing answers and actions. They need to be brave, to take risk and to be seen to recognise how important the Government sees defence playing in respect of the prosperity agenda, exports and building and maintaining stronger sovereign manufacturing capability.
My case rests.
CHW (London – 25th March 2021)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785