If British defence industry shrinks any more, the special relationship could be doomed

The new Conservative party’s pre-election manifesto included a commitment “to seek value for money in defence procurement, recognising the important contribution that the UK defence industry makes to our prosperity”. It also reminded us that Britain is currently meeting NATO’s target of spending 2% of gross domestic product on defence.

However, given what some see as inevitable post-election austerity cuts, the defence industry has good reason to worry. If austerity starts to eat into it, there will be real and pressing implications for the “special relationship” with the US.

We recently produced a study of the available evidence concerning the economic and strategic value of the UK’s defence industry. The study tested the basic premise that the UK’s domestic defence industry can contribute positively to the UK, not merely in terms of security benefits, but also in terms of economic benefits through increased employment, taxes, exports and spin-off effects.

Our most striking finding was that the UK’s Ministry of Defence does not consider wider employment or economic factors in its “value-for-money” assessments. In other words, when choosing to buy a particular item of military hardware or technology, the potential economic benefit of buying it from a domestic rather than a foreign supplier is not being factored into the equation.

An implication of this is that the MoD has not released key items of data relating to the UK’s defence industry – meaning that independent analysts, think tanks and industry bodies are unable to make the calculations for themselves.

Cut deep

The study found evidence that in addition to economic benefits a thriving domestic defence industry provides significant strategic and security benefits. In order to meet its stated aspiration to “build a secure and resilient UK and to help shape a stable world”, the UK needs to be able to choose when, where and whether to engage in military action. Without a thriving domestic defence industry, the UK jeopardises that. It puts at risk its freedom of action as well as its technological superiority over other countries.

If the UK is to act as and when it chooses, there are political and security implications to defence procurement that significantly restrict what can be acquired and from whom.

Some things, such as nuclear warheads, will always need to be procured within the UK because international law prevents their export. Similarly, there are some areas that, although they could potentially be bought from another state, would leave the UK too vulnerable to the supplier nation. These include cryptography, some areas of C4ISTAR and cyber security.

In these areas, the UK needs a domestic defence industrial base capable of providing a secure supply chain to equip and maintain the armed forces. Without access to a secure supply chain the UK’s armed forces will inevitably be limited in terms of the scope and scale of operations they can conduct.

These points must be taken in the context of the post-election review of public expenditure and forthcoming Strategic Defence and Security Review, which might well foist greater cuts on the defence budget – which is not currently protected.

Commentators have suggested that these cuts might be substantial. If so, then deep cuts to the MoD’s equipment and equipment support budget – currently estimated at £163bn over the next decade – are likely.

The implications for the UK would be significant. Cuts to the defence budget or greater reliance on “off the shelf” imports are likely to mean missing out on the economic benefits of buying key items of defence equipment from British suppliers. The exchequer would lose tax revenue, the country would miss out on key spin-offs, and people would miss out on pay packets to spend across the country.

Beyond this, though, these cuts could seriously limit the UK’s ability to act on the world stage.

Ready to act?

Without the secure and nimble supply line that domestic defence industries can provide, the UK might be seriously restricted in where, when and how it can act.

Buying equipment “off the shelf” from other nations relies on the assumption that both the supplying firm and the government of the country where it is based will remain willing to support the UK’s armed forces – and this problem does not necessarily disappear once the kit is obtained.

That one of yours, Dave?EPA/Rowan Griffiths

For example, having acquired the Apache AH MK1 from the US and built it under licence from Boeing, the British Army does not have access to source codes that allow it to fly. The MoD may not allow similar situations to arise in all areas of UK defence procurement, but the concern here is that “off the shelf” purchases may erode national operational freedom or industrial advantages over the long term.

Defence spending cuts would also harm the UK’s worldwide credibility, reputation and standing. The special relationship with the US, for example, is in large part a defence relationship. The US and UK have co-operated closely in military operations from Iraq and Afghanistan to, most recently, Yemen. But military alliances and co-operation cannot be one-sided: they rely on both actors bringing something to the party.

As is reflected in misgivings voiced by the Pentagon, the special relationship rests in large part on Britain’s own military superiority, technological heft and willingness to invest in national defence. As we found in our own research, that depends on a credible defence budget and a thriving domestic defence industry. Without this, the UK’s strategic relationship with the US is under threat, and so is its role on the global stage.

Benedict Wilkinson has received funding from the ESRC. He is an Associate Fellow of the Royal United Services Institute.

Matthew Uttley does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.