UK DEFENCE – FOR DEFENCE EQUIPMENT TECHNOLOGY GREEN PAPER – READ ‘DEFENCE INDUSTRIAL FUDGE’
By Howard Wheeldon, Senior Strategist at BGC Partners

Apart from what has already been sanctioned for procurement by the MoD or equipment that might still need to be ordered on the basis of urgent operational requirement for Afghanistan the UK government will likely attempt to scale down procurement of defence equipment over the next few years. Despite the very apparent need we do not sense that even allowing for defence inflation that the government has any intention of raising the bar for defence spend post 2015. This makes the timing of the Defence & Security Review and Equipment Technology’ Green Paper all the more worrying and it reasons why some in the defence industrial base have already decided the Green Paper proposals are a complete waste of effort and time.

The Green Paper is merely a discussion paper that invites all parties concerned in the defence equipment build and procurement arena to put forward views for discussion. Even so having been so badly let down by the last government following publication of the brilliant ‘Defence Industrial Strategy’ [this was the Paul Drayson blueprint published in December 2005 as a White Paper and that was designed to bring about a more coordinated approach for MoD procurement and working between the various parties involved, a greater emphasis on through life support and export] despite the various ministerial promises that DIS would be pursued by the Brown government it never was. Indeed, to the UK defence industrial base the fact that the long promised ‘son’ of DIS failed to ever appear was seen at the time as being nothing short of being shot in the back. No wonder then that there is such a shortage of trust.

Ever since the Tory led Coalition Government landed in Westminster in May of last year the modus operandi for defence has centred on putting the needs of our forces involvement in Afghanistan together with bringing defence spend back into line with budget. Rightly although there has been little issue raised about the first of these priorities there are plenty of open concerns about the second. The individual issues contained within the UK Governments Strategic Defence and Security Review last October have already been covered sufficiently by me on previous occasions (some views are included above – note also that the delayed UK Defence (20) covering some additional aspects is still to follow) and I will not dwell further here.

Essentially as it plays out this horrible £38bn black hole in the UK defence budget bill the hope in government is that the various elements of proposed cost and capability reduction both in terms of manpower and equipment will eventually mean defence expenditure being constrained within the budget. In the meantime the problem of balancing the books is clearly being demonstrated in the unfolding events that surround the ongoing PR11 debate.

The government has also made plain a view that in terms of future procurement open competition that the promotion of open markets within the defence and security arena and desire wherever possible to buy off the shelf are of foremost importance and very high priority. Thereby hangs yet another likely intractable problem for the UK defence industrial base that may be described as another big nail placed in the coffin. Not surprisingly there is an increasing belief that the government may through the Equipment and Technology Green Paper now be talking to the UK defence industrial base with a rather forked tongue. For instance on the basis of quantity requirement alone how on earth can the UK defence industrial base possibly compete for off-the-shelf equipment that is already in production in the US? Then there is the question of who funds research and development and research and technology in the US? The answer is that on a typical cost plus research based contract the US government does meanin