A Troubled Future? UK defence procurement and export

Foreign Affairs & Security
Sunday, January 12, 2014
Chris Williams

In September this year, having just finished an MA in Strategic Studies, I thought about some sort of civilian career in defence.  A friend of mine who works in the industry kindly got me into the London DSEI exhibition – the World’s premier defence exhibition to which companies and countries’ governments flock every two years. 


For someone who spent 4 years studying defence at university, it was quite an eye opener.  In fact it was difficult not to go up to every stall and ask politely if I could have a go on their tank.  But after a short while I got stuck into the seminars – the real opportunity to find out what each side wanted.  Various companies made their ‘be on board with us for the future’ presentations, with some discussing quite specific areas of technology.  The most revealing however were the talks from governments. 


The MoD led by Philip Dunne, the Minister for Defence Equipment, Support and Technology, made a clear statement that British defence spending has got to come down, and that to make up for this UK-based defence companies must consider ‘exportability’ to be a primary element of the equipment they produce when bidding for MoD contracts (on the basis that when the number of units goes up, the unit cost goes down, and tax revenues go up).  The government would do its part to represent these companies amongst allied nations in Europe and elsewhere.  It was also made clear that SMEs would be a central part of defence contracting.  Contracts would be broken up where possible to encourage companies with smaller capabilities to supply specific elements (computer systems, guidance mechanisms, etc.) and that larger companies would see the benefits of allying with them for large scale contracts.


Everyone seemed very enthusiastic about this (even if privately some companies were skeptical), but one must wonder quite how likely this is to work in the near future.


One thing one could not ignore at the Exhibition (and indeed in the media) was the focus on unmanned systems – aerial, ground, surface naval and under-surface.  Some drones hung from the ceiling, menacingly bearing down upon visitors, whilst others were displayed in CGI-type films as part of integrated warfare solutions.  Much talk was made about how in the future autonomous drones would make up a huge part of air forces, and Air Chief Marshal Sir Andrew Pulford spoke (amongst other matters) about how vital unmanned systems would be to the RAF of the future (although the acceptable level of autonomy has not quite been decided yet).


Nevertheless it cannot be denied that much of this lies quite a long way in the future.  Many of the drones we hear about – the Taranis, the Telemos and the Barracuda to name but a few – are concepts.  They are remarkably capable concepts with a lot of joint investment, but no air force has yet taken them up as a definite operational capability of the future.  Decision-making and R&D has been slow, and why should other countries leap enthusiastically at these concepts when the host countries of their producers have not yet used them and demonstrated trust in their capabilities?  The US is undoubtedly ahead, and the UK’s purchasing of the Watchkeeper tactical ISTAR drone from Thales shows we are getting there, but there is still a long way to go before these top of the range concepts can be marketed like the Typhoon fighter.  Even then the UK has a challenge as the defence industry is, by character, a buyers’ market.  The Indian decision to buy fighters from Dassault instead of BAE and now the UAE’s rejection of the fighter are clear examples there.


And one must also ask how far the MoD is prepared (and able) to go to get the exports up in other parts of the world – particularly with the Bribery Act in force.  Since so many other countries are experiencing economic woes, will we see the return of disastrous shady deals in which the UK promises to underwrite foreign countries’ loans to ensure a deal goes through – only to be stung when the loan is not repaid due to regime collapse, economic difficulty or good old fashioned untrustworthiness?  Export Credit Guarantees are by no means a thing of the past, and the ability to actually turn a profit for Britain as well as the defence company involved with ECGs in operation has a chequered history to say the least.


These are not absolute criticisms of the Coalition’s policy.  One would hope that they have learnt from the mistakes of the past, and as an intention the policy is quite a good one.  The aim that equipment provided to the UK Armed Forces be married to export is a good one, as it gives foreign buyers confidence that Britain’s active forces have confidence in it – the only challenge to this may be Britain’s occasional preference to buy foreign equipment off the shelf such as the Rivet SIGINT aircraft and the naval ScanEagle drone from America, and some logistical ships from Korean shipyards.  Most however comes from UK-based companies (even though a third of the parts are made abroad) and once equipment is in service companies (supported by the MoD) can show off not only that but also the through-life care they can provide.  If NATO Smart Defence and EDA cooperation on specific areas of defence actually come to something, opportunities for exportability across Europe may begin to mount effectively.


One stronger criticism may relate more to the UAE’s rejection of Typhoon in that although individual deals supposedly have no reflection on overall strategic relationships, it is clear that the UAE wanted such a large deal to go hand in hand with a much closer military alliance.  As David Blair from the Telegraph has discussed, “the main purpose of buying Typhoons would have been to bind Britain into guaranteeing the UAE’s security.  But governments across the Middle East have re-assessed their view of Britain since the Syria vote, questioning London’s resolve.  France was prepared to use force against Syria.  In addition, France has the key advantage of a permanent military base in the UAE.” 


This situation is probably less relevant to the failed deal with India (that was likely more to do with the high price of each Typhoon leading to a reduction in expendability in a military situation), but if the Gulf states are one of the UK Defence Industries’ targets, the inability to tie defence products in with strategic planning may create continual problems for this policy.  It may lead the Foreign Office to consider more carefully before leaping into agreements such as the lifting of sanctions on Iran without at least making some token resistance in deference to potential buyers in the region who value anti-Iranian restrictions and so forth.  Nevertheless one would hope that Britain would not compromise strategic planning too much in favour of defence exports.  It will probably take until NATO and EDA programmes really get going for strategic and export agreements to compliment one another more effectively, thus reducing some strain on the MoD’s ability to procure sufficient high technology for its future forces.


Going back to the UAE briefly, although the Typhoon pitch was unsuccessful, the UK aerospace sector did get a good boost from the UAE’s decision to order £5bn worth of Airbus civil airliners, and if Britain’s defence exports drift further from the strategic alliances Britain is prepared to make, the sector may rely more upon civil products (many large defence companies also provide civilian technology as well) for its profits – not that this helps the MoD’s budget since it would not lead to more units and lower unit costs.


It is all a matter of time, and the size of the UK defence industry after 2 or 3 years will go a long way to detecting how well the industry can survive in a slow-acting market – particularly after BAE’s closure of its Portsmouth shipyard and the expected lull after the Type 26 Frigates have been built. 


Chris Williams has an MA in Strategic Studies.