Britain has a long-standing problem with an ineffective defence procurement culture. This has seen vast sums of money wasted and many of the benefits of technology development lost. The UK government wants to put an end to this mismanagement.
On 23 March 2021, the British government issued a new Defence and Security Industrial Strategy (DSIS). According to the government, “Building on the outcomes of the Integrated Review and the Defence in a Competitive Age Command Paper, the Defence and Security Industrial Strategy (DSIS) provides the framework for government to work with industry to achieve those ambitions; driving innovation and improvements in productivity to ensure that the UK continues to have competitive, innovative and world-class defence and security industries that underpin our national security and drive prosperity and growth across the UK.”
The official description of the origins and aims of the DSIS states that, “This new strategy is the result of a cross-Government review, led by the Ministry of Defence but with input and expertise from other government departments. It sets out a package of policy, process and legislative change across key areas of acquisition and procurement, productivity and resilience, technology and innovation, and international collaboration, exports and foreign investment. The DSIS positions the UK’s defence and security industries as strategic capabilities in their own right, and sets out specific approaches to the particular capability and technology segments that are most important to the UK’s national security.”
The DSIS would seem to suggest that the British government is finally taking the strategic and economic contribution of the British defence industry very seriously indeed. Unfortunately, it is very easy to be cynical about government recognition of the importance of the defence industry. Previous experience has indicated that government and the defence procurement bureaucracy have been less than supportive of the industry, often viewing it as obstacle rather than an asset. Then there is the sad fact that the British government has proven itself to be less that effective in terms of managing defence programmes to deliver the desired capability on time and on cost.
To be fair, government is not the only source of mismanagement in defence procurement. Industry must take some of the blame, as must the end user. Frankly, Britain has a long-standing problem with an ineffective defence procurement culture. Added to this is the impact of programme cancellations on political grounds. This has seen vast sums of money wasted and many of the benefits of technology development lost. As if that were not enough, these programme cancellations have also weakened the national defence industry. If the DSIS delivers a strategy that can sustain the defence industry and critical capabilities that will be a change for the better. However, eventually somebody is going to have tackle reforming the procurement system, as this will remain a failure point in the industrial strategy.
The Years of Decline
It could be argued that the first time that Britain truly had modern defence industrial policy was the establishment of the Ministry of Supply (MoS) in 1939 to supply equipment to British forces. The MoS was in charge of state-owned ordnance factories, its own factories and Army research establishments. Post-1945, the MoS took charge of the Ministry of Aircraft Production covering the aircraft industry and all aviation-related research establishments. It headed up missile programmes and was also responsible for British nuclear weapons programme. The MoS was closed in 1959 and many of its function were eventually absorbed into the Ministry of Defence (MoD).
The problem was that post-1945 Britain had far more defence commitments than it could actually afford. It had immense financial problems and really needed to rationalise its defence industry to focus on areas that were critical to national defence. The 1957 Defence Review was the starting point for a series of efforts that continued through the 1960s, to match military commitments to actual resources and to save money. As a part of that, numerous defence programmes were cut and defence industrial capabilities lost. It was defence rationalisation but it was surgery with an axe rather than a scalpel!
Making things worse in those defence procurement programmes that did go ahead, were the numerous incidents of mismanagement leading to cost overruns and reduced capability. There was also the impact of nationalisation across the aircraft and shipbuilding industries in the 1970s. This might have made sense in terms of ideology, but in reality was another pointless and costly move.
There would have been more cuts if the 1981 Defence Review had come into effect but the 1982 Falklands Conflict put a stop to that. The real problem was that there appeared to be no integrated strategy covering what procurement requirements were and how they could best be met. Everything was done on a case-by-case basis and inefficiencies were rife.
Despite all of these negatives, the defence industry was still a force to be reckoned with. There was the British Army Equipment Exhibition (BAEE) held at Aldershot and the Royal Navy Equipment Exhibition (RNEE) held at Whale Island, Portsmouth, running in alternate years and, of course, the Farnborough Airshow. Attending one of these events in the mid to late-1980s, the number of British defence companies on show and the diversity of their capabilities was extraordinary.
Just in terms of major defence electronics companies, you had Ferranti, Marconi, MEL, Plessey, Racal and Thorn-EMI amongst others. The problem was that by this time, Britain had a Cold War defence industry, when the Cold War ended and defence expenditure was reduced that inevitably meant a new wave of industrial rationalisation. There were too many companies chasing too few orders.
A happened elsewhere in the US and Western Europe, bit by bit old established names in the defence industry would disappear as they were described as “legacy companies” and absorbed within larger organisations. The British Government saw this process of industrial consolidation as a positive development. What they did not do was look to keep sovereign capability in key areas. Of that list of defence electronics companies shown above, the majority would end up as part of Leonardo, headquartered in Italy, or Thales, headquartered in France.
The Industrial Landscape
Industrial consolidation was inevitable. What was potentially avoidable was the loss of British capability in a number of key areas. The decline of the British automotive industry is a case in point. There were a number of factors involved in this and defence was not one of them. The end of this decline did impact on defence, leading to the virtual disappearance of the British truck industry. Moving up the scale in terms of value and sophistication comes armoured vehicles; at one stage you could look to Alvis, GKN and Vickers as onshore suppliers of capability. Now these are all part of Rheinmetall BAE Systems Land (RBSL), a joint venture company announced in 2019, that will provide armoured vehicle design, development and support.
On the other hand, while these first-line manufacturers might have disappeared, other companies have developed to meet defence requirements. Pearson Engineering is best known for its combat engineering equipment, but it is also involved in supporting the CHALLENGER 2 tank fleet. Their Defence Manufacturing Services activity, ironically based at the Armstrong Works in Newcastle upon Tyne, purchased in 2013 and reopened in 2015, was where Vickers had built generations of British tanks, offers a complete range of services from MRO and support to manufacturing, assembly, integration and test (M-AIT). Perhaps future generations of British Army armour could yet leave the gates of the Armstrong Works?
As stated earlier, it is easy to be cynical about the new DSIS, yet the right noises are being made. The foreword to the DSIS states that, “We must not only ensure that our forces have the right kit and equipment, but that we maintain capabilities onshore to produce and support critical elements for our national security, and ensure that our supply chains are sustainable and resilient. Through targeted investments we can deliver not only the right equipment but can bolster the Union, deliver on levelling up and enhance the skills and prosperity of the United Kingdom.” It also notes that, ”In addition to MoD and Armed Forces personnel, Defence alone already supports over 200,000 jobs directly and indirectly and tens of thousands of apprentices.”
More concretely, the DSIS promises a “substantial injection of new funding, including at least £6.6Bn in Defence Research & Development over the next four years, [that] directly generates growth and development of new technology, created and commercialised in the UK for strategic advantage.” This positive development leads to even more positive developments: “Companies, informed by government’s clear statements of its national security needs, plans and technology priorities, and understanding better how government evaluates industry’s offers, have the confidence to invest themselves in developing new technology, products and services and improving productivity.”
DSIS will create an environment where “the government works more closely with industry to develop the equipment capability it needs, considers the export and international collaboration opportunities earlier, and supports industry more effectively (including where appropriate by entering government-to-government commercial agreements) to increase export market share still further, achieving economies of scale, sustaining the skills base… beginning the cycle again by encouraging further reinvestment in R&D, skills and equipment, driving productivity and competitiveness even further.” Along with this comes regulatory reform to simplify processes and increase efficiency, again lots of positive messages.
If DSIS delivers what it promises it could transform the defence industrial environment in the UK, while making a major contribution to the British economy and the development of its technology base. DSIS seems to offer a “win-win” situation to all of those involved, and historically, the relationship between the British government and the British defence industry has never led to a “win-win” situation for any of those involved!
To make all of this work, the politicians, the MoD, the procurement bureaucracy, the military and the defence industry must all work together. There has to be an open, honest and collaborative relationship amongst stakeholders whose relationships currently can most often be described as adversarial. Get that right and DSIS has a chance! Equally as important is that all of those involved manage to somehow develop effective programme management tools and practices. All too often, this has been the downfall of British defence programmes. DSIS has so much to offer, if it works…