NDI Director reflects on MODs new Industrial Policy

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The MOD’s refreshed industrial policy, published today, refines the Government’s approach to military procurement and equipment support, bringing it closer in spirit to the UK’s third National Security Objective – ‘to promote our prosperity’ – first established in the 2015 Security and Defence Review (SDSR). This is positive progress from MOD and good news for industry. EEF and NDI both welcome its publication.

 

Together we have been vociferous in demanding recognition that the virtuous circle of national security and economic prosperity go in hand, each the guarantee of the other. In setting out an intent to invest more of our defence budget here in the UK, the Government now has the opportunity to capitalise on a sector that makes a real difference to our national wealth, turning over £23Bn a year, recording an annual average of more than £8Bn in exports and growing 10% during this decade to date. This supports more than 140,000 jobs, or 1 in every 200, right across the country. Completing the circle, investment today provides UK industry with both the confidence and the means to plan for the future, developing the next generation of defence technologies needed to fight the wars of tomorrow. This is the nation’s best possible insurance policy.

 

I particularly welcome MOD’s new commitment to take better account of the full economic impact of their investment decisions when determining best ‘value for money’. No taxpayer should advocate uneconomical investment decisions in order to sustain otherwise unproductive industrial activity. But is right that advantage to the UK Exchequer, through revenue, exports, and employment will now be factored into MOD buying decisions, delivering a better economic outcome overall. This also protects against the long-term risk that, through lack of investment, the UK might fall away from the top table of nations with access to cutting-edge military technology. We can’t afford to assume that we will always have this by virtue of the benevolence of our Allies. We are a choice partner today only because UK industry brings technology, skills and experience to the table through our technological expertise. It is precisely this ‘value-added’ that means that 15% of every F-35 combat jet will be British-made. Such examples will only last as long as we ensure the technical means to do so remain in the UK.

 

This isn’t just relevant to decisions about prime contractors. Even when equipment is, by necessity, sourced from an overseas supplier, the UK supply chain is usually well positioned to add real value and content and the MOD’s acknowledgement that is needs to both strengthen and better understand its supplier base is welcome. This must be a determining factor in MOD procurement decisions. Here it is imperative that MOD, as the customer, uses its leverage to incentivise contractors to do more in the UK. This will help overcome the challenge to compete against established foreign supply chains.

 

The National Shipbuilding Strategy, published in September, provided a model for the future. Warships guaranteed to be designed and built in Britain, but exploiting the full capabilities of all of our shipyards to ensure that the Royal Navy gets the best kit at the best price. This model points a way to the future. For instance, a Combat Air Sector Strategy that set out the RAF’s ambitions for its next generation of fast jets and how the skills and infrastructure vital to national security will be sustained, must now be considered. Typhoon for instance, supports 40,000 jobs in the UK, not just at BAE Systems and Rolls-Royce, but throughout a long supply chain that touches every region of the country.

 

Of course, setting out a policy is the easy part. The task for MOD now is to put the policy into practice, which in the current climate might be easier said than done. The promises made to our Armed Forces in the SDSR have been called into question as MOD finds itself under new pressure to close the funding gap, rumoured to run into tens of billions of pounds, that has opened between aspiration and implementation. The MOD must not use this as an excuse to take chances with our national security in the long-term. Equally, the Treasury must recognise that National Security cannot be achieved on the cheap. A poor outcome to the National Security Capability Review (NSCR), currently underway in the Cabinet Office and expected to be published earlier next year, cannot be allowed to undermine today’s policy refresh before it has a chance to be implemented. Short-term decisions about how MOD invests in its equipment and capabilities do not promote our prosperity. They create an illusion of value that take risks with our ability to ensure that our Armed Forces are properly equipped not only for today, but in the years and decades to come. A fully-funded defence procurement plan must therefore emerge from the NSCR that suppliers can be confident will be delivered, encouraging long-term and sustained industry investment in skills and infrastructure here in the UK.

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