In this issue...
Print articleDefence
On the defence
The production of world-class products, a successful export industry, a diversification of companies and overseas acquisitions has made the UK Defence Industry a truly successful and global one.
Major General Alan Sharman CBE, Director General of the Defence Manufacturersâ Association
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Major General Alan Sharman CBE |
The UK?s Defence Industry is the second-largest in the world, after the US, in terms of turnover and employment. Privately owned, it?s one of the countries largest industrial sectors, employing around 350,000 people. Its output accounts for some 50% of the aerospace and shipbuilding sectors and 40% of electronics manufacturing in the UK. Total UK Defence Industry turnover is around $20 billion, 60% of which is business for the UK Ministry of Defence and 40% for exports.
World-class products
The UK Defence Industry has a powerful capability in all aspects of defence supply, can provide a full inventory of equipment and services and operates at the forefront of high technology and production. It produces world-class products including warships, helicopters, aero engines, aircraft, armoured fighting vehicles and field artillery. It has a world lead in some areas of aerospace (STOVL aircraft), electronic warfare, sensors, airborne decoys, fighter pilot ejection systems, submarine escape equipment, anti-mine warfare and chemical/biological warfare (CBW) defence technology. To sum up; there are few important high-technology Western defence programmes that do not have some level of UK contractor participation.
| The UK was one of the first in Europe to fully privatise governmentowned defence production |
Specific examples of UK?s contribution to key defence technologies abound. Among the most important have been the original development of radar and the jet engine, the Harrier ?jump jet? aircraft, chemical agents? detection (from the joint work of Industry and Porton Down) and Chobham Armour, which is now a feature of the protection of the tanks of all the major NATO countries. UK Industry has also been a key partner in many major European collaborative projects, among the more notable being Tornado and Jaguar combat aircraft, Puma helicopter, the Milan ATGW, the counter battery radar system (COBRA) and, currently, Eurofighter (Typhoon) and the ships Air Defence system PAAMS ? to be fitted to the Royal Navy?s new Type 45 Destroyer.
Efficient and competitive
The UK Defence Industry today is highly efficient and competitive. This has been driven, in part, by the procurement policies over the years, of the UK Ministry of Defence. The UK was one of the first in Europe to fully privatise government-owned defence production. The last of these, the Royal Ordnance factory in Leeds, was privatised in the late 1980s and today, even the Defence Research Organisation has been privatised to become a major research company in its own right (QinetiQ). Dockyard repair has long been run by private operators and there are plans to privatise Army and Defence Aviation in-house repair workshops in the very near future.
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Lord Willy Bach, UK Minister for Defence Procurement, visits the Rolls Royce stand at Defendory 2004 in Athens |
Since the 1980s the MOD has exposed the industry to stiff, international competition for UK defence programmes. All opportunities are widely advertised. ?Value for money? is the key criterion in procurement decisions and processes are relatively transparent. A consequence of this ?open market? policy is that the UK has bought a large amount of excellent equipment over many years from its allies, mainly the US, including: C130 Aircraft, AWACS, MLRS, M107 and M109 Guns, Apache Helicopters, AMRAAM and Javelin missiles and much more. In addition, a US-owned company, KBR, has the contract for the management of Devonport Naval Dockyard and its submarine support activity. The French-owned company, Thales, is now the second-largest defence contractor in the UK. In addition, UK companies have a major presence or have made acquisitions in many other countries. The UK Industry is now truly global.
Public and private partnerships
The Defence Industry has changed dramatically in recent years because of changes in technology, privatisation, globalisation and the dramatic reduction in UK defence spending since the end of the Cold War (from 5% to 2.5% of GDP). Equally significant is the extent of the engagement of the industry in a very wide range of activities previously undertaken by the UK MOD or the Armed Forces in-house.
This has extended far beyond the provision of peacetime transport, in barracks catering, grass cutting or even maintenance of rear-area repair facilities. Today UK contractors are deployed in Kosovo, Afghanistan and Iraq in combat zones. Tank transporters, currently deployed in Southern Iraq, were procured by the UK MOD under a leasing arrangement and are being manned by company employees enlisted as Sponsored Reserves. Public Private Partnerships (PPP) and Private Finance Initiatives (PFI) are being increasingly used by the MOD to save money, improve efficiency and release scarce, uniformed manpower for military roles.
| The UK is the secondlargest defence exporter in the world after the US |
The Royal Navy?s latest offshore patrol vessels (OPVs) are leased, albeit manned by Navy personnel. The UK is at the forefront of these innovative developments. But other nations are likely to follow suit as they aspire to maintain military capability while facing increasing pressure on their defence budgets.
Industry diversity
All this has led, in the UK, to an ever-increasing diversity in the nature of companies that make up the Defence Industry. For example, the founding members of the DMA (in 1976) were mainly manufacturers engaged in mechanical disciplines of engineering. Today there are also IT and software houses, facilities managers, infrastructure providers, construction companies, support agencies, consultants, electronics companies, training specialists, hospital trusts and even lawyers in membership. Many companies, large and small, that would not previously have seen themselves as defence contractors, are now involved. Together, they provide the full range of products and services needed to sustain modern fighting forces on intervention, peace enforcement, peacekeeping and security operations. Today, these forces also include Police and other Emergency Services involved in post-operations activities.
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Lord Willy Bach, UK Minister for Defence Procurement, visits the Rolls Royce stand at Defendory 2004 in Athens |
Export success
The UK is the second-largest defence exporter in the world after the US, regularly gaining over 20% of the available world market to a total value of £5 billion per annum. As at home, there is export success in every field of defence supply and activity. Major UK markets are the Gulf Region, Far East, Australasia, the US (where we gain 50% of what the US does import) and Europe. This is the more commendable given that UK government imposes extremely strict controls on all defence exports; controls recently reinforced by the new Export Control Act 2004.
Exports represent some 40% of turnover for the Industry overall while for some UK defence contractors the figure is much higher. Success in defence exporting, where the customers are mainly governments, requires a judicious mixture of innovation, patience and determination. Exporters need to understand UK export controls, customer?s requirements and procedures and be willing to enter into offset and partnering arrangements with indigenous companies. But the rewards are usually worthwhile since governments spend big and pay on time.
Innovation for future success
The UK Defence Industry faces some uncertainties arising from transatlantic politics. The UK is a strong and committed member of the European Union and commercial business is, increasingly, with Europe. At present, however, this is not the case for defence. Here, the UK favours a policy of co-operation within NATO, with the US as partner of choice.
There is a far greater degree of joint research, two-way defence industrial investment and joint operational activity between the UK and the US than between the UK and its EU partners. This, coupled with the offset benefits that the UK Industry gains from the UK MOD?s purchase of US equipment, means that it is closely bound to US Industry. Many US companies (including Lockheed Martin, Boeing and Raytheon) have made major investments in UK Defence Industry. UK companies, in turn, invest heavily in the US; the sixthlargest defence contractor in the US is BAE SYSTEMS.
Counterbalancing this is the rationalisation of UK companies with European partners in joint venture companies such as MBDA and Augusta Westland and significant European acquisitions, such as Sweden?s Hagglunds by Alvis plc (since acquired, in turn, by BAE SYSTEMS). There are strong pressures from within the EU to rationalise defence procurement in Europe and further consolidate European defence industries. The Commission has recently made proposals to open up the defence procurement market in Europe and increase competition. The UK Industry has welcomed this, believing that the UK MOD already operates the most open market in Europe and that a more ?level playing field? would increase the industry?s opportunities.
In the final analysis, industrial strength and security of supply will be best served by the opening up of defence markets on both sides of the Atlantic and by an increased investment in defence procurement by all the European nations. UK companies will then have added incentive to make the right investment decisions and build on their innovative capacity to deliver high-quality, value for money equipment and services to the Armed Forces of the UK and all its allies.
Defence Manufacturers? Association
The Defence Manufacturers? Association (DMA) represents the interests of some 550 companies in the UK defence and public-security sectors of industry. Members range from major prime contractors to SMEs and include manufacturers and service providers active in Naval, Land, Air and Homeland Security environments. Although a private organisation, it is respected and accepted by the UK government as an important voice for representation of the UK Defence Industry. It incorporates the Association of Police and Public Security Suppliers (APPSS).
For more information visit www.thedma.org.uk