Parliament returns to business but defence budget concerns remain

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Queen’s Speech 2017


Despite the paired down nature of Wednesday’s Queen’s Speech, which set out the Government’s legislative plans for the next two years, there was some evidence for cautious optimism for UK defence. This is nevertheless tempered by the concerns about MOD’s overheated budget. As expected, a recommitment to defence spending at a minimum 2% of GDP was made and, more broadly, industry will warmly welcome the commitment to strengthen the economy with a modern industrial strategy, with help for exports and investment in infrastructure, as set out in January’s green paper. The imperative now is to see the definitive plans for how the Government expects to deliver the strategy. Meanwhile NDI continues to press MOD to ensure that its own updated industrial policy is equally ambitious.


Brexit will of course be the preoccupation of the Government’s legislative programme and there were signs in the Queen’s Speech that the concerns of manufacturers are beginning to be heard. However, as Terry Scuoler, CEO of EEF made clear “We need to hear more from the Prime Minister that she is pressing for tariff-free trade, minimising uncertainty over customs and that companies will be able to employ the people with the range of skills they need, from the UK, Europe or elsewhere. We need to know, quickly, how the benefits of the single market and customs union are going to be maintained during the complex period of untangling ourselves from EU membership and coming up with some form of trade agreement. Many questions still remain unanswered, however, and there must be a much closer partnership with industry if we’re to avoid economic chaos when we leave the EU.”


MOD recommits to SMEs and innovation


NDI joined Harriett Baldwin, Minister for Defence Procurement, on a visit to Edinburgh on 22 June for the latest iteration of the Defence Suppliers Forum SME sub-committee. There she met Scottish SMEs and spoke of the MOD’s ongoing commitment to defence as a vehicle for growth and innovation. While these promises are not new, it is reassuring to hear that, post-election, the Government remains committed to funding the £800m Innovation Initiative, the Defence and Security Accelerator and the commitment to spending 25% of the defence equipment budget with SMEs by 2020. NDI will continue to press MOD on its success in delivering these, which must not become hostage to short-term measures aimed at bringing the budget back under control. Only a long-term strategy will ensure a vibrant and competitive domestic industrial base is available now and in the future in support of our national security.


MOD announces first equipment and infrastructure contracts following general election, but budget concerns remain


Keen to show early intent following the general election, MOD has this week announced two new contract awards; a £260 million contract to Leonardo for secure Identify Friend or Foe technology for the Royal Navy's Type-45 Destroyers, and a £135m contract to further upgrade RAF Marham ahead of the station receiving F-35 in 2018, a joint venture between Galliford Try and Lagan Construction Ltd. Nevertheless, it was the anticipated squeeze on defence spending that again made the headlines this week. On Monday The Telegraph reported that Boeing has received a $411m order for 38 Apache helicopters, 12 less than the 50 MOD said in 2016 that it intended to order. While it is not unusual for equipment to be ordered in batches – and the Department, in public at least, remains committed to fulfilling the order at a later date – it is evidence of the scrutiny that MOD now finds itself under given mounting concerns that a cash crisis will force spending delays and cutbacks that, ultimately, could lead to commitments in the 2015 Strategic Defence and Security Review being unfulfilled.



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