Budgets Brexit and Shipbuilding

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UK Defence: addressing a funding challenge bigger than twice the size of Wales

 

A PWC assessment released on 21st August has estimated the magnitude of the MOD funding gap at £30bn over the next ten years, a 50% increase on the previously reported high of £20Bn, and twice the size of the Government’s annual budget for Wales. Roland Sonnenberg, who heads defence consultancy at PWC, told The Telegraph that “UK defence is entering a difficult period; perhaps one of the most challenging periods in a generation, at a time when ambition within our armed forces shows no sign of abating.” The Telegraph report also cited the failure of MOD to implement a 2015 plan to cut civilian numbers by 30% by the end of the decade as a major contributory factor; the latest civilian manning figures show that in the intervening two years numbers have barely dropped.

 

PWC are one of the largest suppliers of external consultancy to MOD. Mr Sonnenberg’s report concludes that, while MOD has the option of addressing this by delaying or cancelling projects and programmes, or reducing current capabilities or future scope to live within its means, the tension between the cost of defending the UK and its interests versus the budget is particularly acute given the Government’s commitment to an ambitious investment programme. There is scope to balance priorities if real awareness and appetite exists. Programmes can be retained, capability restored and scope maintained if MOD recognises its problems early enough and are minded to resolve them.

 

UK gears up for launch of National Shipbuilding Strategy and the Type 31 frigate programme

 

Defense News reported on 25 August that MOD is widely expected to launch a competition early next month for a design for a new class of light frigates for the Royal Navy. Industry executives in the shipbuilding sector will be briefed on the broad outline of the Type 31 programme on 7th September. The launch of programme fits with the intention in the 2015 Strategic Defence and Security Review to build a fleet of at least five such vessels. The report cites sources that the first in class will be required to enter service by 2023, though speculate that the timeline, if confirmed, would be daunting. Certainly, such speed in delivery would be unprecedented in recent procurement history.

 

The Type 31 procurement will be the centrepiece of the Government’s widely anticipated National Shipbuilding Strategy. This may be published simultaneously next week, though MOD has remained tight-lipped on precisely when it should be expected. An independent report on the strategy prepared for the Government in 2016 recommended a model whereby the ships would be block built, with a contract for each module competed between shipyards around the UK. The Financial Times reported on 28 August that this recommendation was likely to be carried through into the official strategy. The Government will hope this will provide a means of delivering economies through competitive tendering. However, the report concludes that success will depend on the size of the MOD budget and requirement; the fear being that the Royal Navy does not require the number of ships necessary to achieve the economies of scale being sought.

 

ARES Group reports on the impact of Brexit on European armament industry

 

The Armament Industry European Research (ARES) Group this week published a report on what it sees as some the tangible potential consequences of Brexit for the European armament industry. Written by a group of experts from France, Germany, Italy, and the UK, the report covers issues such as British access to EU funds, the impact of Brexit on European institutions as well as bilateral or multilateral European defence programmes, and negotiations on UK-EU defence company agreements, and analyses how they might play out under different scenarios. The aim of the paper is to provide a modicum of clarity on this debate, which may seem uncharted in places, and inscrutable at times.

Other News:

 

UK and Japan increase defence ties due to North Korean threat (UK Defence Journal)

 

MOD names boss of £41bn programme to build new Trident submarines (The Telegraph)

 

Saab and MOD sign Tactical Engagement Simulation contract extension (defense-aerospace.com)

 

 

 

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