Budget Industrial Strategy and Defence Review

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The Chancellor delivered his budget on Wednesday with a welcome commitment to a comprehensive industrial strategy at a time when uncertainty around Brexit among the manufacturing sector is rife. Previewing many of the headlines from the Industrial Strategy white paper, due to be published on Monday, the Government’s support for innovation and new technology and a pledge to deliver an implementation plan ahead of Brexit will go some way to reassure companies as plans to leave the EU are thrashed out. EEF also welcomes the Government's National Productivity Fund and an extension of the R&D tax credit. You can read the take of EEF’s expert economists here.

 

However, as far as investment in defence and security is concerned, the budget was notable only for the absence of any reference to the Armed Forces at all. Amid growing concerns about the challenge MOD faces to deliver the programme set out in the 2015 Strategic Defence and Security Review (SDSR), recent calls from Parliamentarians, former defence ministers and military chiefs, and senior industry representatives, for a budget to match have so far gone unheard. This will only increase concerns that the National Security Capability Review, currently underway in Whitehall, will mandate a reduction in scope of the 2015 plan in order to stay within MOD’s budget envelope. That review, until now expected to be published before Christmas, is rumoured to have slipped into next year in order that Gavin Williamson, the new Defence Secretary, can put his own stamp upon it.

 

NDI hosts 2017 Annual Conference

 

Over 150 members, delegates and guests from across industry and government joined NDI at the Alderley Edge Conference Centre in Cheshire this week for our Annual Conference, once again proving to be a huge success. Speakers from AIG, BAE Systems, Raytheon UK and the Royal United Services Institute covered issues as diverse as cyber security, Brexit and the National Shipbuilding Strategy. Former Defence Secretary and Patron of NDI, Lord Hutton of Furness opened proceedings. The hugely popular ‘meet the buyer’ section of the conference saw 370+ one-to-one appointments arranged between NDI members and some of the UK’s leading defence prime contractors. The event coincided with the NDI National Dinner, when 160 guests joined Terry Scuoler, outgoing CEO of EEF for his last official engagement in charge of the organisation. Stephen Phipson, currently head of the Defence and Security Organisation in the Department for International Trade, will succeed Terry from the 1st December.

 

UK F-35 order may be reduced

 

MOD’s SDSR commitment to buy all 138 F-35B jets for the Royal Air Force and the Fleet Air Arm was this week thrown into doubt. Giving evidence to the House of Commons Defence Select Committee as part of their own review into the ongoing National Security Capability Review. Lieutenant General Mark Poffley, Deputy Chief of the Defence Staff (Military Capability) at MOD, told MPs that he was “sympathetic” to the idea that the size of the order could shrink. Julian Lewis MP quizzed by committee chair, Julian Lewis MP, on the ‘inevitable uncertainty’ of reductions beyond the 48 so far on order, General Poffley commented ‘that’s the reality of the world we are living in’ Appearing alongside General Poffley, MOD’s most senior official, Permanent Under Secretary Stephen Lovegrove, also revealed that the cost of the first tranche of 48 could rise from £9bn in 2025 to £13bn in 2048.

 

MBDA warns on the Brexit threat to industrial cooperation

 

Olivier Martin, Secretary General of MBDA, this week warned that the European Union must ensure Britain’s withdrawal does not weaken defence cooperation at a time when critical mass in the sector relies on close cross-border work. Speaking at a conference in Paris, Mr Martin said that ‘it is absolutely fundamental — whatever the conditions for Britain leaving the European Union — that the European Union in its negotiations with Britain in the coming months find an intelligent means to ensure, at least for defence, that Brexit … does not have any impact and that we can work as we did before.’ MBDA and other companies will be affected if, post-Brexit, the EU took a strict view of what constituted a European company.

 

Parliamentary Questions:

 

  • Asked, on military aircraft procurement, what representations MOD has received from business organisations on the content of Defence Industrial policy, the Minister replying said that MOD has consulted industry closely in its work to refresh defence industrial policy. This included a workshop with representatives from a cross-section of industrial and academic organisations, an online consultation through Gov.UK, and discussions hosted by defence trade associations, the Defence Growth Partnership and at meetings of the Defence Suppliers Forum. MOD has also received individual representations from companies and business organisations. The Minister said that it attaches great importance to this consultation in developing effective and relevant policy, and will seek similarly close and constructive dialogue with business organisations in its implementation.

 

Other news:

 

MOD announce £18m support contract for Royal Navy radar systems (MOD)

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