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IS THIS THE END OF THE UK DEFENCE INDUSTRIAL BASE?

IS THIS THE END OF THE UK DEFENCE INDUSTRIAL BASE?

13 May 04. In spite of Government papers and statements about the continuing benefits and need of the UK Defence Industrial base to save money on domestic procurement through overseas sales and for the need to ‘project force.’ If the U.S. decides following the Iraq debacle to pull out of the role of the World’s Policeman, then it is up to the EU to take up some of the slack and develop its defence capability and therefore its defence industries. Ron de Frees of Northrop Grumman told BATTLESPACE this week that Northrop saw the U.S. and the EU as being the two major defence markets of the next decade. So one asks oneself, why are the UK Government and BAE determined to either get out of the business or sell to a competitor at a time when the prognosis for growth in its home market is huge. The UK defence industrial base is huge and well developed ahead of the bulk of its European competitors but, like the automotive industry, it looks like, this government is determined to ditch a multi-billion dollar industry with a huge R&D resource at a time when the country could benefit from UK involvement. The prize will then be handed to US competitors who have sent this growth potential and a desperate for a foot in the door, and it looks like good old Blighty will oblige with all our R&D and IPR going abroad. Scotland already has a lower IP ownership than a third world country and the UK is rapidly going that way. Is it not ‘cool’ for Tony and his cronies to get their hands dirty in industry? The debacle of Marconi, partly caused by Tony’s broken promise to have ‘a computer in every home and classroom’ and to ‘wire up Britain’, came at a time when people as foolish as Lord Simpson and John mayo thought they had an inside track to government and geared their company up for a bonanza which never happened!

We have been expressing concern at these policies for some time, on April 12th (BATTLESPACE UPDATE Vol.6 ISSUE 15, April 18th 2004). We covered the worrying decline of the aerospace industry. Nick Cook highlighted concerns for the aerospace industry writing in the FT.

For smaller companies in Britain’s aerospace industry, these are worrying times. Up to half the UK’s aerospace component manufacturers could be overcome by bankruptcy and business failure within two years because of growing competition from low-cost suppliers in countries such as China, India and the Czech Republic, according to a study to be published this week.

The research identifies 15 countries in Asia, Eastern Europe and South America that are winning orders from UK prime contractors and their main subcontractors at the expense of small and medium-sized British companies.

These so-called “Tier 3 and 4” suppliers represent the last link in a UK supply chain that, in spite of consolidation over 30 years, is still able to design, develop and build civil and combat aircraft.

Without the SMEs – mainly companies that machine and forge critical components – Britain would no longer retain that end-to-end capability.

“Our research shows that the prime contractors and Tier 1 suppliers are using and obtaining significant benefits from low-cost suppliers,” says Bert Hunter, managing director of Bravura Consulting and author of the report, A Study into the Loss of UK Aerospace Jobs to Low Factor Cost Countries. “The key drivers for this are market access requirements and continued cost reduction pressures.”

The report’s conclusions, published in this week’s Jane’s Defence Weekly, are seen as another contributor to a “perfect storm” of present and impending troubles – flat defence spending, concerns over possible cuts in the UK’s order for Eurofighters, the weak dollar, uncertain financial markets and cost reduction pressures. Some analysts believe it could break over the British aerospace industry before the year ends.

Compounding these worrie

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