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By Julian Nettlefold, Editor, BATTLESPACE

08 Aug 07. This issue comes at a turbulent time for Defence Exports in the UK with the sudden decision by Gordon Brown to close the DESO operation. This decision was sudden and believed to have been made without consultation and has raised serious response from industry. There have been signs for some time that this Government does like being involved in Arms Exports but with figures of £10bn last year, it is a brave and some would say foolhardy move to ditch such a provider of foreign currency and jobs to provide a sop to the CAT. Without DESO DSEI itself looks vulnerable, a move which would give the French a huge boost to make Eurosatory ‘the’ European event, with all the consequences for British Industry. The role has been offered to Sir Digby Jones’s new DTI Industry Group, but with a very much reduced staff from the 500 employed at DESO.

However other sources suggest that far from being a sop to CAT, the closure has been made for ‘Governmental’ reasons. With 23 outstanding SFO investigations into International Arms Trade, we understand that BAE Systems, originally fingered as the perpetrator of the alleged practices has passed the buck back to Government stating that the contracts are Government-to-Government with BAE being ‘The Contractor.’ Thus it is easier to close the Department and thus the problem, saving any Civil Servants or Ministers from investigation or interview.

This decision also impinges on the Defence Industrial Strategy which requires a degree of Export capability from foreign contractors gaining UK business. Both the DMA and BAE Systems have expressed concern at this move.

This decision, if implemented, will have a severely damaging effect on UK defence exports. This in turn will affect our capacity to provide sovereign support to our Armed Forces and will cost many jobs. The decision seems to be based on a number of misconceptions.

As is the case in the UK for domestic sales, the customer for UK defence exports is Governments. DESO’s vital role is to provide the essential Government to Government link, without which much export business would simply not happen. Further, and of equal importance, DESO’s existence within the MoD is also key. UK defence export success relies heavily on foreign Governments’ respect for and access to the quality of after-sales support and training available to our own Armed Forces. No substitute for DESO functions in other Government departments will be able to provide this direct link.

The decision as we said above, also has implications for DSEI and Farnborough and the considerable DESO involvement and/or support for these vital trade shows. They include, almost uniquely, export control compliance, end-use certification, offset obligations, Armed Forces interoperability, long-
term financing, disposal sales (of surplus UK military equipment), sometimes production
sharing deals between UK MoD and foreign customers, etc. The lack of a single focus in Government experienced in dealing with these issues will be very damaging.

The larger PLCs such as BAE and VT can ride this one out with added marketing teams. But, the smaller SMEs rely on DESO for vital market information and help with compliance; this will hurt them badly.

SBAC Comment

The SBAC issued a Statement echoing the concerns. Defence exports make an important contribution to our economy and the wider diplomatic and foreign policy goals of the UK Government. In 2005 total exports of defence equipment and services was worth in excess of £5bn and supported 65,000 high value jobs.

The recent decision to disband the Defence Export Services Organisation and re-allocate its responsibilities to UK Trade & Investment (UKT&I) and the Ministry of Defence is a source of considerable concern to industry. The lack of any formal consultation was a great disappointment and has brought into question the Government’s strat

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