Impact of Dual Challenge of Libya and Defence Cuts on UK Industry Set Out
(Source: ADS; issued July 5, 2011)
Ian Godden, Chairman of A|D|S, the UK’s aerospace, defence and security trade organisation today (Tuesday) addressed a joint Royal United Services Institute (RUSI) and Defence Industries Council (DIC) event “The Libya Dimension – Implications for UK Defence Policy and Support from Industry”. Also speaking at the event at RUSI in Whitehall, London were Con Coughlin, Executive Foreign Editor at The Daily Telegraph and Professor Gwyn Prins, Director, Mackinder Programme for the Study of Long Wave Events at the London School of Economics.

On industry’s role in Libya Mr Godden said:

“Like most others, the UK’s intervention in Libya came as a surprise to the defence industry. In terms of support to the Armed Forces all I need to say is that UK Trade and Investment’s Defence and Security Organisation made it clear that industry’s response to this crisis has been ‘phenomenal’. The question we need to ask ourselves now is would the Government have been able to commit to such an urgent and unexpected humanitarian and military mission if it did not have a UK-based defence industry to support the Armed Forces?”

Mr Godden addressed the impact of last year’s Strategic Defence and Security Review on industry to date by saying:

“The impact has varied across industry, and has been relatively muted to date as there are still decisions that the Government has yet to take. There is an expectation of greater job losses in the next 2 to 3 years and broader uncertainty has not gone away. Industry needs a clear signal from Government as to what its priorities are and how they will translate into requirements. This will guide industry’s own investment decisions. To date there has been a signal but no clear programme that flows into a plan of action. The sooner, clearer and more affordable the Government’s programme is, the more effectively industry can continue to support our Armed Forces and national security more widely. Industry is hoping to get more certainty from the Defence and Security Equipment, Support and Technology White Paper due in the autumn.”

Mr Godden laid out the industry’s needs from the forthcoming White Paper on defence
and security:

“Our own priorities for the White Paper can be boiled down to three. First, reform of the MOD and the introduction of a balanced budget. Second, support for exports and finally Government recognition of the importance of technology and, in line with this, continued funding of research and technology in the UK.”

On reform of MoD Mr Godden said:

“Last week Lord Levene set out the key reforms to the structure of the MOD. Industry welcomes these changes as we believe that they will lead to a leaner and fitter partner that is better able to make the critical decisions. MoD must possess the skills and resource to be an intelligent customer, buying in independent help from industry where appropriate. It must also take full advantage of the opportunities for savings and increased competition that outsourcing offers to have non-fighting tasks undertaken by the private sector including support in-theatre.

“Industry recognises that Government wants and needs to balance its books. We fully support the MoD in its drive to develop a balanced and affordable equipment programme, but this has to be based on realistic cost forecasts. This is urgent: the sooner this is achieved the better and industry will be able to plan its own investment to support the Armed Forces and the needs for Future Force 2020 and beyond. While we remain in a moratorium with uncertainty over when there will be headroom for future spending, capability is drifting away from the UK, damaging our strategic and economic interests.

“The concern is that in trying to achieve better value for money, we have detected that MoD’s attitude to industry seems to be moving back to an arm’s length approach based on buying off the shelf. This is founded on the fundamental misconception that buying off the shelf is cheaper because the upfront costs may appear to be less. In fact, through life the costs will often be much greater and operational freedom is lost. Industry believes that to be successful MoD must use all the tools in the procurement bag, including long-term partnering, and must engage industry as early as possible in the procurement process and in all lines of development.”

On support for exports Mr Godden continued:

“The UK defence industry is the largest exporter of defence and security equipment to the US, and the largest in the EU. In 2010, exports were worth £7.2 billion to the UK economy. Industry welcomes the Government’s drive on defence exports. We also welcome the fact that a number of senior Ministers have taken to leading government-to-government contacts which will facilitate bilateral commercial links in many markets. Government policy and practice needs to be coherent in supporting this effort across all relevant Departments and agencies. In particular I question if support for buying off the shelf and the fall in technology investment by the MoD in recent years sit comfortably with the new exports support policy. If UK Government cannot endorse the equipment made by its own defence industry, this is a signal to other countries that they too should stop buying from UK PLC.

“I come to the larger issue of the savings that have to be made and how they should be prioritised. Cuts in the Armed Forces should be sensitive to the need to sustain the ability to deliver international training and support that is part of the UK’s wider strategic relationships and aids pursuit of business opportunities that bring economic benefit. Cuts in UKTI and the Foreign Office should also be geared to minimise impact on industry seeking growth opportunities in new markets.”

On technology investment Mr Godden also said:

“The Government should recognise that both military capability and export performance are closely related to expenditure on research and development in earlier years. When budgets are tight, it is vital to protect spending on technology and to ensure that it is spent in ways that will be pulled through to the market to provide improved capability for our own Armed Forces and potential for export. Efficient exploitation of science & technology will be achieved through generating confidence in industry to invest alongside Government. To attract this global investment, technology roadmaps between Government, academia and industry are needed to make the most of limited resources. Government should use its spending to promote innovation at all levels of the supply chain including SMEs. It should work with prime contractors to ensure that schemes like the promising Centre for Defence Enterprise lead to new products and services.”

ADS Group Limited (A|D|S) is the trade organisation advancing UK AeroSpace, Defence and Security industries, with Farnborough International Limited as a wholly-owned subsidiary. A|D|S also encompasses the British Aviation Group (BAG). It has been formed through the merger of the Association of Police and Public Security Suppliers (APPSS), the Defence Manufacturers Association (DMA) and the Society of British Aerospace Companies (SBAC).


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