UK Defence Export Orders Stay Ahead of Ten Year Average

Collated from a UKTI DSO survey of UK defence companies together with ‘rest of the world’ competitor data and released in compliance with a formal code of practice as ‘Official Statistics’ this morning UK defence exports for 2015 are shown to have been worth £7.7 billion, down by £800 million on the equivalent figure for 2014. Security based exports were up by £600 million to £4bn from the equivalent £3.4bn in 2014.

Nevertheless, over a five year period UK defence exports continue to be above trend and in viewing these figures it is important to recognise that year to year fluctuations are not unusual. Sikes in 2007 and in 2013 were to an extent offset by poor years recorded in 2008 and in the context of an increasingly competitive global market, the UK’s defence export total of £7.7 billion last year is a reasonable achievement, particularly given the limited number of large platform orders.

The UK remains the third largest exporter of defence equipment behind the US and France and over the past year, as witnessed in the 2015 Security and Defence Review [SDSR 2015] the Government have shown a new determination to assist UK defence exports through recognition of the importance and value that they bring to the economy. Defence exports will play an increasingly larger role within the Governments’ prosperity agenda and the encouragement and support that innovation based industry/military partnerships such as the Defence Growth Partnership working together with UKTI Defence and Security Organisation and the MOD good will come from this.

In comparing and contrasting the UK defence figures today it is worth noting that UK defence export figures represent new orders, whilst those covering the rest of the world usually represents contracts signed. The UK has been assessed to be the third highest placed global defence exporter in 2015 and to have successfully retained its ten-year average position as the second largest global exporter of defence equipment.

Of orders included the largest was a multi-million pound deal signed with the Royal Saudi Air Force for a further 22 Hawk ‘Advanced Jet Trainers’ in December 2015. At 85%, the air domain continues to represent the largest level of UK defence related exports and the outlook here in my view remains very strong.

While the UK’s share of the global defence export market in 2015 was at 12%, down from 16% in 2014, UKTI DSO estimate that on a rolling 10 year average the UK’s average market share is 19%. If so this would be consistent with the long term trend.  By region, defence export destinations continue to be dominated by the Middle East (68%) and North America (18%).  UK defence exports to Europe and the Asia-Pacific were slightly down on 2014, the figures included a large win in Norway and wins in the Asia-Pacific region included Thales to supply missiles to the Malaysian and Thai armed forces and the Devon based company Supacat providing 82 Extenda vehicles to Australia.

The Middle East and Asia-Pacific continue to be seen as important growth markets in 2016; together with activity in Latin America and Africa also likely to be active. Defence export markets are always challenging and the UK defence sector companies face constant challenges from key defence competitors such as the USA, France, Russia and Germany. Other emerging defence export competitors include the Republic of Korea, Turkey, Canada and Brazil.

Security export in 2015 showed significant growth over those of 2014 (£3.4 billion which represents an increase of 18% sales increase. This was the largest year on year increase since 2010 and enabled the UK to close the gap on the 5th highest exporter of security equipment – Germany with £4.04 billion of sales in 2015. The UK’s share of the global security export market was 5.3%, an improvement on the 2014 figure of 4.5%.UKTI DSO have also said that there has been an increase in global demand for physical security products, this being largely due to the rise of so-called IS/Daesh and need of various countries to enhance Counter-Terrorism activities.

Key UK security competitors are China, USA, India, Japan and Germany. The enclosed chart if it comes out on your copy may be useful in respect of UK defence exports.

CHW (London – 26th July 2016)

Howard Wheeldon FRAeS

hwheeldon@wheeldonstrategic.com

Tel: 07710-779785

UK Defence (257) – Ringing The Ministerial Changes

With Secretary of State for Defence, Michael Fallon having thankfully been left in the position he has held for exactly two years, it was with little surprise although a considerable amount of personal disappointment that I learned on Saturday that Minister of State for Defence Procurement (MinDP) Philip Dunne has been moved from Defence to Health.  

No more high level visits to Gulf States to assist our industry selling defence equipment to countries with which Britain has long and well established relationship ties and no more having to cope with industry and military alike looking to government to do more. On behalf of all the many friends that you have deservedly made across all aspects of defence, let me say a very big thank you to Philip Dunne for the excellent work that you have done, for our military, for our industry, for our people and for exports. Let me also say that we wish you all the very best in the more ‘sedate’ if no less politically charged world of the NHS where you are now to be Minister of State in the Department of Health.

Ordinarily one lives with the idea that a minister will only be in any one position for two or maybe three years at most and in that regard, having s been at the MOD for a total of four years, three of which as an Under-Secretary of State for Defence and one year as Minister of State Defence Procurement, we have done very well. .

Very well-liked and respected those of us that have had the pleasure of knowing and working with him appreciate that while he quickly proved an ability to fight the Government corner he was a very good listener. Moreover from the outset Philip Dunne, MP for Ludlow, understood the concerns that were often raised and he went out of his way to almost always leave a matter better than he found it if he could. Not many ministers manage to do that. He will be sorely missed by military and industry colleagues. 

As I write this, unless I have missed it, Mr. Dunne’s replacement at the MOD has yet to be announced. Whoever it is it is unlikely that they will have had any specific knowledge of defence apart from perhaps in their own constituency. Whatever, the person concerned will have a lot to learn in a very short time as there is much going on in defence right now. Indeed, I was rather looking forward to Mr. Dunne winding up the Trident replacement debate in the House of Commons this afternoon. It is also worth mentioning here that amongst junior ministers Penny Mordaunt, the MP for Portsmouth North, has also been moved from Defence to that of Work and Pensions.

As the political face of defence, at least as far as industry is concerned, the relationship, bonds and ties established with the military, industry, defence exports and potential customers for UK defence products highlights the huge importance of ensuring the right person s placed in this particular government slot. Whilst the Secretary of State Defence plays the more senior role the ability to meet with and negotiate deals with foreign governments and administrations, the ability to cope with diverse cultures make the role that Philip Dunne has left behind very different from the rest. Mr. Dunne has worked tirelessly in respect of export support particularly in the Gulf Region and the many excellent relationships he has personally established with potential foreign customers has been invaluable. I would go so far as saying that no Defence Minister has worked so hard in support of defence exports than Philip Dunne has and I do not give such praise without deep knowledge. He has also ensured that following procurement decisions made in SDSR 2015 there would be no unnecessary delays. 

Philip Dunne had arrived in defence following a Cameron reshuffle that witnessed departures of Peter Luff and Gerald Howarth. He was a relatively new and unknown quantity and at the time, I remember observing whether, being close to Prime Minister David Cameron and given the sense of mistrust between the former and then Secretary of State for Defence, Philip Hammond, whether there were perhaps other reasons behind the appointment.

Philip Dunne had played no part in the dangerous and seriously damaging SDSR 2010 or within the ‘National Security Through Strategy’ strategy paper that followed in February 2012. He was though left to pick up the pieces from that mess and suffice to say that having reached a low point around the time of Mr. Dunne’s defence portfolio appointment, this probably marked an interesting turning point for UK defence. 

With SDSR 2010 and the unfortunate follow on strategy attempt played lip service to issues of sovereignty, skills, training and defence exports, it was Philip Dunne who began a process of listening to the calls of industry and military. Whilst it was too late to reverse permanent damage, particular that done to the Royal Navy through the premature and unnecessary withdrawal of the excellent Type 22 ships and that of HMS Ark Royal, and the damage done to air power through the withdrawal of Harrier GR9’s and cuts to the Tornado GR4 force publication of the more better planned and coordinated SDSR 2015 strategy document last year in which the Government set out a different agenda showed that the Government had listened. The military will get some of the much needed new capability it needs from 2019 and importantly, the strategy showed a very different attitude from government in respect of engagement and exports. Enter innovation and the prosperity agenda and recognition I hope that the Government has finally got the message on the importance of defence to the national economy in terms of jobs, engineering and other skills and the importance of supporting exports. Let us hope that HMG means what it says. 

As some of my longer term readers well know, I have been engaged supporting defence exports for the best part of thirty years both when I was working in the ‘City’ and as an independent since 2012. In doing so I have been to several counties to provide support to UK government export teams and I have had the pleasure of meeting many ministers too. Imagine my horror when in 2007 having already slashed much of its previous strength Gordon Brown or should I better say, Shriti Vadera, pushed the once fine Defence Export Services Organisation (DESO) from MOD responsibility to that of UKTI in the hope that it would wither on the vine. Our French and US competitors could not believe the crassness of such a decision and which would make life much easier for them. Now, following efforts made by Philip Dunne and others it does seem that although it is too late to turn the clock back the combination of the MOD Defence Export Support Group, UKTI DSO and the Defence Growth Partnership progress is again being made. Newly in post, I am very much looking forward to observing how Huw Walters and Peter Watkins play their part in fast jet and complex weapons export sales for which they have responsibility.      

Every cloud has a silver lining though and the change of Prime Minister and the major reshuffle of government that followed has led to some others disappearing as well. One of these is Oliver Letwin, long time confident of David Cameron in the Cabinet Office and a man who many of us regard has been the enemy of defence!      

CHW (London – 18th July 2016)

Howard Wheeldon FRAeS

hwheeldon@wheeldonstrategic.com

18th July 2016

Of Welcome UK Defence Procurement, Farnborough and New Pilot at No 10

I had not, as mentioned in my final pre Royal International Air Tattoo (RIAT) commentary piece last Wednesday, intended to write again until after the week long Farnborough International Airshow had finished. Cheered and boosted by what was an absolutely brilliant RIAT event, the best that I can ever recall in the many that I have attended, I find that that other very significant events that have taken place over the past few hours require that that I should make some minimal comment.

For a change, the two main events that have occurred today are both extremely positive. One involves confirmation by HM Government of serious and much needed UK defence capability acquisition and the other, the ruthlessly efficient manner that the Tory Party has chosen its new leader and that in my view, will not only lead to there being a new Prime Minister in No 10 Downing Street by late Wednesday afternoon, but also removal of much uncertainty that could have prevailed throughout the remaining summer months. 

First a word on important defence acquisition that the Current Government chose to hold back so that it could be announced today at Farnborough International. Although I had known of the likelihood of such an announcement for the past three weeks it was, in these somewhat uncertain political times in the UK, with great relief that when the outgoing Prime Minister David Cameron, accompanied by Secretary of State for Defence, Michael Fallon, confirmed Monday that deals to acquire nine Boeing P-8 Poseidon Maritime Patrol Aircraft (MPA) together with a separate $2.3bn deal to secure 50 Apache AH 64E attack helicopters from Boeing had been agreed and signed.  Both deals had taken a very long time and an enormous amount of hard work on the part of the MOD plus other sections of the UK Government and Boeing to achieve. All those involved in the various sections of Government, both in the UK and also in the US, and particularly those within Boeing Defence UK, are deserving of much praise for their patience, determination and hard work. For UK defence Monday was a very good day.

For the record the new P-8 Poseidon aircraft will be based at RAF Lossiemouth in Scotland and these will play a vital role in protecting the UK’s nuclear deterrent together with the UK’s two new aircraft carriers and other ISR requirements. Able to locate and track hostile submarines, and enhance the wider UK maritime Search and Rescue (SAR) capability the P-8, which I have had the pleasure of seeing in-build at two Boeing facilities in the US and have also had the very recent pleasure of spending time looking at the detailed capability we are acquiring with our own Royal Air Force ‘Seedcorn’ crews at the US Navy base at Jacksonville, Florida, all that I am left to say on this is that in my view the UK will be getting will not only be the capability it needs but also that with 400 personnel involved and who will be based at RAF Lossiemouth that this will eventually bring additional economic benefits to Scotland and the wider UK. The procurement announcement of P-8 Poseidon for the Royal Air Force this morning is also very timely in that it coincided almost exactly with the timing of handover of duties as Chief of the Air Staff by Air Chief Marshal Sir Andrew Pulford to Air Chief Marshal Sir Stephen Hillier.   

The fifty latest generation AH-64E Apache Helicopters that will now be acquired for the British Army are a significant enhancement on the existing fleet of AH-64D Apache helicopters currently in use with the British Army. To be eventually flown by Army Air Corps pilots from the Joint Helicopter Command, they will continue to give the British Army the edge over any future adversaries. The AH 64E model of the Apache helicopter can also carry more weapons and is I believe more fuel efficient than predecessor capability, allowing the aircraft to also operate in more demanding conditions for longer.

Boeing also announced a long term partnering agreement initiative which will include 2,000 new jobs being created in the UK, an intent to build a new P-8 Poseidon operational support and training base facility at RAF Lossiemouth, to increase the amount of capital investment in the UK and to ensure that UK suppliers receive additional bidding opportunities on Boeing programmes plus enhanced support to improve competitiveness. Boeing will also sign the Aerospace Growth Partnership Supply Chain Competitive charter and make the UK its base for defence exports in Europe and the Middle East. In addition Boeing has confirmed that it will increase its contribution to the security, policing, cyber, information technology and space sectors in the UK, including joining the Security and Resilience Growth Partnership and that the company intends to establish a presence in the fast growing UK space sector during this year. Specific initiatives confirmed include working with QinetiQ and other partners to demonstrate a world leading enhancement to the QinetiQ 5 metre wind tunnel and new joint projects with Rolls-Royce on propulsion systems.  

Farnborough International

This being my 25th Farnborough International it was when I finally arrived good to be back although it is unfortunate that I have to report that the logistical arrangements that allow visitors to this very important trade show event were badly let down by there being no available bus transport available at the rail station. The bus queue stretched for miles and there was not a single bus in sight. Many chose to walk the mile long journey and I am told that the traffic in much of the area was gridlocked. Much to my surprise on final arrival ‘A’ Gate to collect my pass I found that I was then able to walk into the show without being questioned at all, there being absolutely no security check whatsoever.

To make matters worse and due to a very heavy rain storm that led those in authority to decide to temporarily disrupt power supplies to the stands and chalets the show was then closed a whole two hours earlier than it might otherwise have done. Not surprisingly, in still pouring rain, visitors who were forced to leave found that as closure took place much earlier than planned there was too little bus transport available. This is not what visitors or exhibitors to an international trade show event expect. All day the road within the showground were blocked solid with cars and golf carts carrying people and the smell of diesel and other fumes was positively horrible. I note that Farnborough International management had told us over the past year that they had invested in making the show even better than it had been in the past. Well, as I walked around all that I can say is that I found little if any evidence that much had changed from two years ago. Certainly, if there has been investment at Farnborough over the past two years today’s unfortunate events expose that this has not been in the antiquated infrastructure.   

New Pilot at Number 10

I am of course grateful that timing of the momentous events late Monday morning and that as a consequence will lead to Theresa May going to Buckingham Palace to kiss hands with Her Majesty the Queen and being asked to form a new Government did at least allow Mr. Cameron to continue with plans made late last week for him to come to Farnborough and announce the two defence deals mentioned above.

Say what you will about David Cameron but the conclusion must be that he was master of his own destiny. Mr. Cameron’s brilliant House of Commons performances will, just as those of his former Foreign Secretary and former Tory Leader Lord Hague of Richmond are, will be much missed but although press and media would have continued to hound him had he not done so, his decision to call a referendum on our European Union membership was his real downfall.

Theresa May is the right person for the job of being the next Prime Minister and I wish her well. I welcome her appointment even more because it removes so much of the dangerous uncertainty that could have caused so much further damage and loss of confidence through the summer months. Brexit is, as she says, Brexit and she has no alternative but to get on with that particular job as a priority whilst at the same time making decisions that will affect all of our futures. She must also instil confidence in a nation of doubters with a message that we can work our way through untested waters and achieve a new middle way.

As I say, I wish her very well and I just have a feeling that she has all that it takes to prove doubters that they are wrong.

CHW (London 11th July 2016)

Howard Wheeldon FRAeS

hwheeldon@wheeldonstrategic.com

Tel: 07710-779785

UK Defence (246) – Political and Defence Comment Post Brexit

“Always remember that one enemy counterbalances six friends. Always remember that an enemy may one day need to be your friend”.

Those words, said by the late merchant banker Siegmund Warburg over fifty years ago, have been ringing in my ears this past weekend and probably both relevant and appropriate to what we are observing unfolding in British and European politics today. Another particularly favourite quote to remind here is “intelligence is no barrier to stupidity” a situation that I observe that our political masters would do well to remember. 

Unusually for a paper under the UK Defence category heading I have chosen to split this particular commentary providing views on both political and defence.

First then let me touch on political events that have opened up over the weekend:

These are momentous days and I was reassured by the wise and sensible words from Chancellor of the Exchequer George Osborne this morning and so should all of you be. It is not as bad as it may easily look and be in no doubt that the Treasury and Bank of England have got the awkward situation that we have found ourselves in hand. My words, not his but what Osborne said this morning should be enough to reassure global markets. Yes, the political upheaval of deciding to leave the EU has cast a shadow on global markets but when all is said and done it has just added another small chapter to an extremely large number of other deeper concerns. Yes, it is also true that we are all forced to move forward from here in what will undoubtedly be a period of uncertainty and gradual change but at least we do so from a position of reasonable financial strength compared to others. Remember the words above from Warburg and translate that to meaning we need ‘them’ just as much as ‘they’ need us. Tolerance, patience, hard work and effort will ensure that both they (the EU) and we can and will achieve all of what we want and that we continue to move forward as allies and friends. 

With no precedent for the levels of fall-out that we have witnessed from the EU referendum/plebiscite decision from a political situation we are to an extent left wallowing in the dark. The next five or six weeks up to the summer recess will be particularly tough and on top of all this there was supposed to be a decision announced by the Government on Heathrow Airport, the possibility that the House of Commons would debate Trident replacement and then, to cap it all, Chilcot and which may well be only one of the three important events mentioned that will still occur. 

The Prime Minister, David Cameron has announced that he will go before the Conservative Party conference in Birmingham and we can be sure that the internal fight to succeed him will create more uncertainty. I doubt that whoever emerges will call a General Election so, just as Gordon Brown had been, we will have an unelected prime minister until he or she eventually does. Let us at least hope that whoever does emerge is a real leader, one that can bring to the fore tolerance that underlies British society.

Meanwhile we find that the Labour Party is once again in turmoil with no fewer than twelve (at the last count) members of the Shadow cabinet resigning following the sacking of one of the most universally respected Labour front bench team, Mr. Hillary Benn. What happens next here is anyone’s guess but until this unhappy situation is sorted out Labour will in my view remain unelectable.  

Back in the real world and having fought a battle and then lost Mr. Cameron is right to go. His ultimate departure will mark the third and I hope, last time that a Conservative Prime Minister has fallen due to a long standing split the party has on the EU. But there are three months to go before Mr. Cameron departs and these are months that will be crucial in laying the foundations for not only how we negotiate with our European friends but in recreating the framework of stability required. I thus live in hope that we will not be left with either a lame-duck Prime Minister or Government in the months that follow and whilst I accept that it cannot all be business as usual most of it will. The Chancellor’s words earlier this morning are reassuring on that score.   

At the other end of the spectrum we find the Scottish Nationalists calling for another independence referendum not to mention ridiculous petitions calling for a second EU referendum on the issue. What will be will be but this is far from being our finest hour. Only Westminster has the powers to allow another referendum to take place in Scotland and it was certainly not helpful to hear the German Chancellor suggesting that Scotland, presumably as along as it adopted the Euro currency, would be welcome to join the EU.

It is no use me harping on about the real dangers that this referendum/plebiscite vote has left in its wake such as the potential breaking up of the United Kingdom. I will regret that if it occurs as much as anyone else but what will be will be. For now like everyone else I crave stability, harmony and common sense judgement rather than the uncertainty and political instability that is currently staring us in the face. Mr. Cameron still has a big job to do over the next three months. 

Markets dislike uncertainty and while there is neither precedent nor rules that govern how a country departs the EU, other than to confirm who presses the starting gun, if we are to leave the EU it is surely in the interests of the UK and each and every member of the EU that we attempt to do this as friends in an orderly and proper fashion. If we are still strong at anything it is diplomacy and I am sure that carefully constructed and agreed over time we and ‘they’ can achieve all the objectives that are required to ensure we move forward with mutual respect and consent on matters to do with trade and borders. 

UK Defence

In moving from macro political to defence let me express some of my concerns as to what are the likely impacts from the decision taken by the electorate last Thursday to leave the EU. While the Secretary of State for Defence has already confirmed that as far as he is concerned it is business as usual in defence the first of my concerns all but stares one in the face. It is that if there is to be a new Prime Minister by October we are bound to question whether this will be used as an excuse by the Treasury not to sign anything off. The Farnborough International Air Show two weeks’ from now will be interesting in this regard. Confirmation announcements, most likely from the Prime Minister himself, continue to be anticipated in respect of P-8 Maritime Patrol Aircraft capability and on Apache Helicopters. 

The second impact also stares one in the face and it is simply recognising that if we are to have a new Prime Minister then it must surely go without saying that most probably there will also be a new Secretary of State for Defence appointed. If so and if there was to be a change this would come at a crucial time for UK defence. The prospect of having a new Secretary of State for Defence at a time when the department continues to be under great pressure to further reduce defence cost, albeit that as a result of SDSR 2015 it is both expectant and readying itself for the promise of greater investment on the part of Government, makes me somewhat uneasy. Experience and stability in defence really matters. 

On a similar theme the potential of change means that those of us engaged in advocating strong defence and of championing the defence industrial base and in particular, the need to retain and grow sovereign based skills, to invest in research and development and innovation and that put much effort into persuading government to better recognise the importance of defence, industry and defence exports within the prosperity agenda may, with genuine regret, also need to anticipate that the present Minister of Defence Procurement, the MP for Ludlow Mr. Philip Dunne who has worked so tirelessly in support of the procurement and through real engagement, has pushed UK defence exports up the agenda will likely be moved on.  

Next in terms of issues is one of equal significance. It is that political and military interactions throughout Europe will undoubtedly be impacted by the “out” vote. Yes, the special relationship with the US will of course be unchanged and as the US Secretary of State, John Kerry will no doubt confirm when he arrives in London shortly, the US will in the future continue to interact with the UK just as it does now. But the perception of change and how this plays out on defence is not just about questioning how we interact with our US and European based NATO allies but importantly, on how the UK is now perceived by our European colleagues in terms of trust.

The reality is that despite the rhetoric there is bound to be a change in how we interact with our US and European allies from here on. They are almost bound to see us in a different light and the truth is that if I was sitting in the Pentagon right now I would be extremely annoyed that the UK has inadvertently changed the rules that have governed political stability in Europe for so long. We must all work hard to ensure that NATO is made all the stronger for it by recognising the rising level of threats against us and by spending more on defence.   

From a security position even though I doubt that, apart from the expression of resentment from certain NATO members, there will be any direct impact in respect of our existing or future NATO role,, it would be surprising to me if the upcoming NATO Summit that is due to be held in Warsaw, Poland early in July is unaffected by the changed position that the UK has taken on future EU membership. Again, while the regrettable Brexit decision will be unlikely to change anything within NATO itself it will undoubtedly cast a shadow if the belief is allowed to emerge that that the UK, the largest European based contributor to NATO, may because of additional economic pressures caused by its decision to leave the EU be forced to further cut resources devoted to the role that NATO plays in European defence and security.

In addition I would have to say that the notional idea agreed at the Wales Summit two years ago that all [NATO] member states work toward spending 2% of GDP on defence has been blown out of the water.

And so to the issue of Trident replacement. While the present Government has been fully committed to ‘Successor’ it has so far failed to put the ‘required’ vote to the House of Commons. I had anticipated that HMG might well choose to do so immediately after the referendum/plebiscite vote in order not just to cement the necessity that we get on with moving the programme to modernise our Trident nuclear deterrent capability forward but also to appease the Governments own back benchers. That thought was however based on the greater probability that the ‘remain’ vote would win out last Thursday. For now I am unsure of what they will do and I worry too that the Treasury/Cabinet Office could further confuse the issue by putting even more obstacles to progress in the way. 

Trident renewal is absolutely crucial in my view and also in the view of the majority of members of the House of Commons. On that view and despite Emily Thornbury (Labour Shadow Defence) saying on Saturday that she would now 9following Brexit) need to rewrite parts of her ‘Defence Review I for one would wish to see no further delay made in putting the Successor issue to the House of Commons for what I hope will be the final debate.

I sincerely hope that Prime Minister decides not to delay the Trident debate any further. Lame duck or not, given that at worst a larger number of Labour MP’s would likely abstain, it seems pretty clear that Mr. Cameron would come out on top by choosing to have the vote now.  

Russia will of course be delighted that Britain has chosen to break away from the EU pack not least because it knows full well that even if the UK possessed leverage, power and desire to increase spending on defence right now it will, within two years or so, almost certainly be constrained from so doing within a potentially weakened economic environment.

For Poland, the Balkan States and others in the region that feel or that actually are being directly threatened by Russia the decision by Britain to stand outside the EU weakens the organisation as a whole and does nothing but harm to the individual parts. In the process of this NATO is in my view also partially weakened by the decision of the UK to leave the European Union.

The EU has in recent years set out to revive the proposal that was first put forward in 1950 by the French to set up a European Army and to appoint a European Minister of Defence.

Arguably, even though Britain has long made it clear that it would not participate in a European Army, I suggest that by walking away from Europe the dream that the partners have of creating a defence force of its own may have been blown out of the water as well. Why? Simply because while the UK may have reduced the level of individual specialist capabilities that is has over recent years, the UK remains the only European member of NATO that still has a significant ISTAR (Intelligence, Surveillance, Target Acquisition and Reconnaissance) capability as well as mission capable strategic lift capability.

Look at it this way, of all NATO member states in Europe only Britain could lend Raytheon Astor Sentinel R1 Airborne Stand-off Radar Aircraft and Boeing C-17 strategic heavy-lift capability to France two years ago when it was urgently required by France in its Mali mission

Nevertheless, without Britain as a member of the EU to argue against the idea of creating a European Army could damage the status quo of NATO. Indeed, one may naturally be concerned as to the soon to be silent impact of the UK’s intended departure as a member of the EU.

It was the European Political Strategy Centre (EPSC) which is the in-house think-tank of the European Commission that last year highlighted that a divided Europe fails. As a whole between 2005 and 2014 spending on defence in Europe declined by 9% whilst that in the US over that same period declined by just 0.4%. Note that Russia all but doubled it expenditure on defence over that period whilst China increased its expenditure on defence by a massive 167%. These are messages that should not be lost in the EU and neither must they be allowed to be lost in the UK or by its NATO allies. 

In the aftermath of the Brexit result I conclude that some extreme dangers for UK defence have resurfaced. While I will stop short of suggesting that Brexit has blown a complete hole in SDSR 2015 the likelihood that growth will slow on the back of reduced confidence is almost bound to result the Chancellor of the Exchequer calling for more tightening.

While UK defence may appear to be ring fenced the reality is that it will not escape the hands of a Treasury determined to cut the cost of it. This, when the dust has settled I am bound to fear that there will be even more pressure exerted to delay and to further push capability programmes back. Be prepared that while I am sure that most of us know and agree the importance of reversing the huge damage done to UK defence by what occurred in SDSR 2010 that by voting to leave the EU and that by causing uncertainty in the impact that this will initially have on the UK economy and the ability to reduce the unacceptable level of deficit there is almost bound to be further pressure placed on defence to cut costs.

I suppose that the bottom line is that if the economic view that reasoned opposition to Brexit is proved correct – lower growth impacting on lower than anticipated taxation receipts, higher costs of funding the already massive level of UK debt, further delay to reducing the government deficit, lower value of sterling raising the cost of imports and that because we produce far too little of what we consume we are forced to buy, potentially higher interest rates, reduced business and consumer confidence – we must anticipate that whoever the new Prime Minister’s Chancellor of the Exchequer is will need to further reduce public sector costs. Ring-fenced or not, Defence then becomes a too easy touch.         

CHW (London – 27th June 2016)

Howard Wheeldon FRAeS

hwheeldon@wheeldonstrategic.com

Tel: 07710-779785