We need investment to secure the future of Britain’s defence industrial base
In an era of shifting geo-political alliances Britain needs a secure and agile supply-chain, writes former Royal Navy chief Lord West
Global security is crucially important to the wealth and safety of our people. And it is only ‘hard power’ which helps us and our allies maintain that peace and stability. This hard power results from strong military forces supporting the impressive ‘soft power’ which as a nation we also project.
A crucial part of our military capability is the defence industrial base. We must maintain and develop a highly-skilled workforce and technical capability. As a bonus, it provides well-paid jobs and technical spin off for other UK industries. Indeed, our defence industry forms a vital national hub generating science, technology and skills within UK Ltd. It encourages innovation and research. Over half of the employees in UK defence companies are involved in R&D.
A robust defence industrial base enables us to maintain a secure, assured and agile supply-chain which can operate within shifting geo-political alliances, or in war as attrition starts to mount.
The defence industry is a significant domestic industrial sector that directly employs some 165,000 people. Indirectly it further generates approximately 115,000 jobs in the defence supply chain and supports some 100,000 induced jobs in the UK economy. The industry’s turnover is approximately £25bn and it returns approximately £9.5bn in gross value added to the UK economy. Overseas defence sales are an important part of the sector.
The cost of ordering onshore needs to be properly, holistically calculated as the MoD fails to take into consideration the wider picture of employment, industrial and economic factors in its value-for-money assessments of procurement alternatives. It is not just a comparison of unit cost.
This sits in stark contrast to the situation in France and the US, where major projects entail a cross-departmental approach that focuses on cost and value to the nation as a whole. Here mechanisms are in place to measure the cross-government impact of defence contracts going overseas.
Alas, in the UK we have had problems with procurement for many years. One of the greatest of which is with large long-term defence contracts where political interference frequently leads to delays and significant cost escalation; let alone the loss of skilled workers and not to mention leaving our forces bereft of the equipment they need.
There are three examples where this has happened in recent years. First, the ASTUTE programme. The time-delay between the construction of the Vanguard-class submarines and the beginning of the ASTUTE programme meant that key skills and submarine-building experience were lost. The yard inevitably started to make workers redundant. Highly skilled designers, draughtsmen and shipyard workers moved away into foreign yards or other industries. Not surprisingly as the ASTUTE programme ramped up, it was beset with problems and additional costs running into billions. These costs would have been avoided if the John Major administration had not procrastinated about the ASTUTE order for over four years.
The next concerns the new aircraft carriers. I am talking about the decision by the Brown administration (in view of the financial crisis in December 2008) to slow production, delaying the first ship until May 2016 and the second by two years. This alone added £1,560m to the cost. Furthermore, the decision by the Cameron administration to fit ‘cats and traps’, then not to fit them, added some £400m.
Third, there was the regrettable stalling of the Type 26 frigate programme. Shortage of money caused the MoD to delay it with the Clyde yard laying off workers and no new apprentices recruited. To fill the gap in building, a succession of offshore patrol vessels were built as the MoD had contracted to pay the yard a fixed rate just to remain open.
There is no doubt that time-in-build has a direct relationship to cost. Too often, financial profiling in the MoD and the Treasury makes it expedient to delay or slow down work. This is madness and results in cost overruns and, more urgently, the loss of highly skilled workers.
At end of the day, one cannot maintain a defence industrial base without adequate spending on defence. Shipbuilding and other parts of the defence industry need a guaranteed drumbeat of orders and then productivity goes up as companies can invest, innovate and drive down costs.
Admiral Lord West is a Labour peer and former security minister. He was First Sea Lord from 2002 to 2006