I would like to thank Chatham House for gathering such a varied and prominent group of contributors on this important issue.
Thank you also to Ambassador Amorim, for his interesting and insightful remarks.
I am here to give an industrial perspective, but of course recognise that the defence and security industry does not exist in a vacuum.
So I plan to say something about the current environment in which we are operating, the challenges we face as an industry, how we are responding and the importance of a partnership approach with government and across industry.
It’s particularly timely to discuss defence and security challenges. The Chief of the Defence Staff General Sir Nicholas Houghton explained how many of the defence and security issues – facing the UK and its allies – had changed over the previous 12 months in his RUSI speech before Christmas.
Yet it would seem that, both here in the UK, and internationally, we face an even more unpredictable period in the year ahead.
Recent events across the world demonstrate the depth and breadth of the challenges for governments.
I was recently at the Munich Security Conference, where the impact of events in Ukraine – and their potential for even greater instability in Europe – was brought home to me in a very tangible, and human, way. Angela Merkel’s speech, amongst others involved in the attempts to broker peace in the Ukraine, showed how immediate the prospect of conflict is for people on the European continent, and how close to the boundaries of NATO this threat exists.
Cyber security presents another rapidly evolving and complex threat. We live in an increasingly inter-connected and digital world, with significant benefits for how we work and live. But it also opens up new and significant vulnerabilities in cyber security, especially for governments, financial institutions, and national infrastructure.
In the UK, there are also some uncertainties ahead. We are now in the run-up to a general election in May. In my time at BAE Systems, we have been through a number of elections and we’ve worked constructively with several different governments and administrations. However, while I am no expert on polling, I know enough to understand that forecasting the outcome of this particular election is a mug’s game!
From a defence industry perspective, budgetary constraints in the UK and US have required us to make significant changes to drive new efficiencies, which often leads to the need for tough decisions about our domestic footprint.
But it also means searching for new markets. It means looking for new business in the international arena. And it means driving new opportunities in connected sectors.
For my own company, that has seen us apply our defence electronics expertise to grow our business in commercial avionics, and leverage our intelligence and cyber security expertise to develop leading products and services for the commercial sector.
We have also had to ensure we continue to invest in developing skills and technologies for the future. This is absolutely vital to continue providing leading edge defence capabilities at an affordable cost for taxpayers.
We expect the new UK government – whatever shape that may take after the election – to announce a Strategic Defence and Security Review.
The SDSR marks an important milestone in determining the UK’s future posture and place in the world. We welcome the fact that both major parties are committed to holding a review this year.
The review provides a timely opportunity to consider the UK’s defence and security requirements today and into the future. And it provides the next Government with the chance to set out how the UK’s defence and security interests are to be protected and addressed.
For industry, including my own Company, decisions in the 2010 Review, led to painful adjustments, affecting the lives of many of our employees.
But it also gave us clarity, and more certainty for the following five years, including commitments to a number of major, long-term programmes that we are actively engaged on today.
Amidst the rhetoric and various arguments about defence spending, it would be a mistake to assume the British public did not care about how we see Britain’s place in the world.
The recent Chatham House attitude survey showed that more than 60% of people responding believed that Britain should remain ‘a great power’ – and nearly 70% of them that Britain has a responsibility to maintain international security.
More than 60% thought that NATO is ‘vital or important’. And almost 4 out of 5 taking part said that defence spending should not be cut.
I believe a central part of the next National Security Strategy, and SDSR, will be to consider these issues.
Delivering national security is the first duty of any government, and protecting the homeland is at the core of that.
But helping to shape a more stable world, in order to reduce the risks to the UK’s values and strategic interests, is also a key part of our national identity.
That includes sustaining the UK’s standing through its role in NATO, and other international institutions, including its permanent seat on the UN Security Council.
Continuing to meet these challenges will not be easy against a difficult fiscal background over the next 5 years.
But security and prosperity cannot be disentangled. It is essential that the next Government plots a credible way through all of this.
Whatever outcome, industry will continue to play a major role in delivering – and supporting – the capabilities needed by our armed forces, and in protecting the UK’s security.
The capability we have developed has given the UK real operational advantage, and provided successive governments with the freedom to act when – and where – they need to.
In times of crisis, we have enabled the UK to field capabilities quickly, through innovation and hard work. We have become an integral part of the UK’s ability to counter the terrorist threat.
And we are supporting the country’s ability to protect its key infrastructure – and commercial assets – from cyber-attack.
Partnership between government and industry is key. By working in partnership, recognising our many shared objectives and common aims, we can get the best for our armed forces at a competitive cost, but also ensure we have the sovereign capabilities and skills we need for the future.
I would say that the UK defence industry has also developed a unique pedigree in partnering effectively – with government but also across companies and, where appropriate, national borders.
With our industrial partners, in Europe and the US, we continue to develop and manufacture world class products, services and systems.
With our national partner in the UK, we have moved from a transactional relationship – in the support of equipment – to a strategic one, which is delivering better capability to the armed forces, at a lower cost.
And, in the international market, we have developed an approach with our key customers, which delivers great operational capability, at the same time as helping them deliver their national agendas – especially in respect of the development of their own industry.
The success we have achieved in the international market has also formed the core of some of the UK’s key international partnerships and alliances, especially in the Middle East.
And, of course, industry has delivered great economic benefit to the UK – generating world class technology, engineering and manufacturing, national skills development, tax revenues, and export success.
Our supply chain covers the length and breadth of the country. BAE Systems alone has 9,000 UK suppliers, almost a third of which are SMEs. Prime contractors represent the lifeblood of smaller businesses.
This is a national endeavour of which I think we should be proud, but in order for it to be sustained, we have to remain relevant and prove that we can continue to deliver what our armed forces need, and at a price they can afford.
I know there are concerns about the development of what have become known as exquisite systems.
But the nature of the threats our armed forces face mean that they need the military edge that would enable them to face up to hugely sophisticated threats, as well as the more rudimentary.
We need to work with our customer in MOD to ensure that we get this right.
But we must also transform the way we do our business to continue to earn their trust, and to deliver affordable capability.
I believe we have a huge opportunity to do that. Through new technologies, virtual engineering models and new manufacturing techniques, we can transform the defence industry into a leader, not a follower, in international markets.
Our experience in partnered support is enabling us to deliver capability at a better price, and will drive further improvements into the support of new systems.
We can leverage the UK’s capability in synthetics to deliver major change – at reduced cost – in training and in mission support.
All of this is achievable in the context of a long term plan, which recognises the continuing role that industry has to play.
The Government’s recent commitment to the Type 26 Ship programme which we will build on the Clyde – and to the Successor submarine programme which we will build in Cumbria are hugely important in this respect.
And finding a new national consensus to meet the requirement for a future combat air system, maybe a so called ‘unmanned’ aircraft – will be an important part of the next SDSR – adapting to a future that will be networked and interoperable, in a way we have not seen before.
In conclusion, this will be an important year for all of us. Defence and security will remain high on government’s priorities, in an environment characterised by complex and evolving threats.
Against that background, the SDSR will have important judgements to make about the future of the UK’s defence and security and the posture we want to have in the world.
From an industry perspective, we will continue to focus on delivering the capabilities that the armed forces here and around the world need.
We must continue to adapt and transform our operations to keep us relevant and meet our customers’ affordability challenges. We must also maintain a leadership position in the world market – developing the skills and technologies that deliver the economic benefits that mean so much to the UK.
In return, we need clarity on defence priorities, certainty in the funding for key programmes and a true partnership approach that allows industry, government and our armed forces to plan for the long term.