The defence industry shouldn’t expect a gold rush
Despite all their talk, Labour’s promises won’t mean a gold rush for the defence industry, writes Eliot Wilson
Last week, as reported in this paper, the defence secretary, John Healey, told an audience of investors at the London Stock Exchange that “UK defence is open for business”. He announced the creation of a Defence Tech Scaler initiative to bring together innovative businesses of all sizes from across the UK to supply the ministry of defence. He also promised “radically faster targets for procurement” for major equipment, upgrades for communications and weapons systems and purchases of off-the-shelf items like drones and software.
I’m starting to feel sorry for John Healey. The 65-year-old MP for Rawmarsh and Conisbrough shadowed defence for four years in opposition and is a straightforward, conscientious and personable minister; but increasingly he finds himself unveiling optimistic, jargon-laden policy-lite which he cannot possibly believe.
Healey’s promises ignore reality
Healey is right to identify procurement as needing urgent and drastic reform. The ministry of defence seems constitutionally incapable of acquiring any equipment, large or small, which is not over budget and behind schedule; and all too often the equipment is inadequate or riddled with faults. Say “Bowman” or “Ajax” to a British soldier and wait for the shudder.
The hopefully imminent appointment of a new (and well-paid) national armaments director as part of Healey’s reform of the ministry of defence is a welcome step. But Healey’s rhetoric last week simply ignores reality. He told his audience that major programmes like aircraft, armoured vehicles and warships “will go from an average of six to two years to get on contract”.
Cutting the time to get on contract would help. But that is not always where the most grotesque delays lie. Lockheed Martin was chosen to build the F-35 Lighting strike aircraft in 2001, and it reached full operating capability with the Royal Air Force in 2019. BAE Systems became prime contractors for the Type 45 destroyer in 1999, and the first ship, HMS Daring, entered service in 2010.
The most cautionary of cautionary tales is the Army’s Boxer armoured fighting vehicle. It began as a Franco-German project in 1993, which the UK joined in 1996. France dropped out in 1999 and Britain followed suit in 2003 to pursue its own Future Rapid Effect System. In 2018, the UK government rejoined the Boxer programme, and awarded a £2.3bn contract to ARTEC, a partnership between KNDS Deutschland and Rheinmetall, the next year. 27 vehicles are expected to be in service by the end of this year, but full operating capability will probably not be achieved until 2032.
That is 39 years after the project began – a time when we were still in the grip of the Cold War, halfway between the Falklands and Saddam Hussein’s invasion of Kuwait. It was another world.
Defence companies should not expect a gold rush
These are not isolated failures. To Boxer, Ajax, the F-35 and the Type 42, you could add the Queen Elizabeth-class aircraft carriers and the Dreadnought-class nuclear submarines. Meanwhile the Nimrod MRA4 maritime patrol aircraft was cancelled without entering service, nine years behind schedule and £789m over budget.
For some companies, a major procurement contract is a golden egg that keeps laying as officials come and go, ministerial minds are changed and policy alters. They might also see profit in Starmer’s pledge to increase defence spending by £13.4bn a year – but that extra funding will not see a shopping spree. Most of it will be swallowed up by current capability gaps, with a deficit between commitments and budget in the MoD Equipment Plan of at least £17bn. Companies should not expect a gold rush.
Healey revealed that the MoD had signed £50m-worth of Enterprise Agreements with tech firms like Adarga, Hadean, Oxford Dynamics and Whitespace. There are huge opportunities for the private sector here, and Healey means well. But as I said earlier this month, businesses crave stability, and the mess of the MoD – 18 defence procurement ministers since 1997 – might make new entrants think twice. Even the major players like BAE Systems and General Dynamics cannot be sure that dysfunction will always favour them and bleed the taxpayer.
The watchword of the private sector should be caveat venditor, let the seller beware. Healey has a lot of work to do before procurement is anywhere near acceptable, but he also has to convince businesses that they are sitting across the table from rational, reliable actors – who can admit what the problems really are.
Eliot Wilson is a CityAM columnist and contributing editor at Defence On The Brink