UK industry awaits coalition's defence decisions
While debate rages over the government’s defence review, analysts are concerned the focus on Afghanistan will have the biggest impact on the UK’s defence industry.
The ongoing debate over the government’s defence review is thought to be so fierce that, with less than two weeks until the decisions are announced, it seems almost everything is still up for grabs.
Future military technology, existing manufacturing contracts and tens of thousands of UK engineering jobs are all at risk from the chancellor’s axe under the Strategic Defence and Security Review (SDSR).
Few are prepared to venture a guess as to where in the industry the cuts will hit hardest
But some are concerned that Britain’s defence industry faces a particular threat due to a political focus on Afghanistan, which could push ministers away from investment in equipment to maintain long-term military capability.
The damage to the defence sector will clearly relate to the size of cuts made by the Ministry of Defence (MoD). The union Unite this week made a prediction that cuts of 26 per cent could lead to more than 55,000 job losses – one-sixth of defence the industry’s UK workforce.
This figure was based on the reversal of figures in a 2009 report by Oxford Economics, which found that every £100m invested in defence would result in the creation of 1,315 jobs, 726 in the defence industry and 589 in the supply chain.
One of the report’s authors, Oxford Economics’ Pete Collings, told The Engineer that Unite’s estimate appeared to be correct. ‘However,’ he said, ‘if cuts do occur on this scale, the industry and its supply chain may alter their operations, which could preserve some of the jobs at risk.’
There’s also a chance the cuts won’t be so high. Prof Malcolm Chalmers, analyst for the Royal United Services Institute, said: ’We’re talking about a 10 per cent cut in real terms over the next four years and that will feel like a bit more because the forward programme had been assuming real growth. So it will feel like a real reduction of something in the order of 17, 18 or 19 per cent.’
Even at this late stage, few are prepared to venture a guess as to where in the industry the cuts will hit hardest. But one aspect of policy is brought up repeatedly.
‘There’s one area of risk that I call “things that aren’t being used in Afghanistan at the moment”,’ said Ian Godden, chairman of industry body ADS, speaking to The Engineer last month.
‘Under the theory of politicians looking four years ahead and seeing what they’ve got to do for an election, they know that they need to ensure that the current military campaigns are successful and we understand that entirely. But a risk of that is that areas that we all know will be needed for a balanced military capability in the future.’
The result of this could be a ringfencing of personnel and related equipment, making it more likely that programmes such as the two proposed aircraft carriers and the Joint Strike Fighter planes could suffer, said Chalmers.
But this could also benefit some parts of the industry, he added. ‘If you have something that focuses on the sort of capability you have in Afghanistan there will be some parts of manufacturing that will do better,’ he said, highlighting helicopters and UAVs in particular.
While Babcock Marine has begun construction of the first of two aircraft carriers in Rosyth in Scotland, the second has become a point of particular contention, with some arguing it would cost more in cancellation fees to scrap the second one than to build it.
Newspaper reports suggest that the second carrier will be built but kept in port, and that navy chiefs will have to sacrifice almost half their warships in order to secure government backing for the carriers. The official Downing Street line remains that nothing is decided until everything is decided.
The carriers decision will also have a knock-on effect on the number of planes the UK purchases. ‘My impression is that there’s a consensus that there will be a reduction in fast jet numbers,’ said Chalmers. ’And the way to make savings in the next four years is to withdraw either the Tornado or Harrier fleet or both.’
Despite the severe threat posed by the cuts, there could be some positives for engineering. ‘Technology is on the radar screen where it perhaps wasn’t two or three years ago,’ said Godden, who noted that the defence industrial policy review due to follow the SDSR now includes the word technology in its full title.
However, the MoD’s technology budget has already been cut 23 per cent over the last few years, he said. ‘So we’re going to judge it on the reality of the outcome not the intentions and statements.’
Whatever the outcome of the SDSR, the initial damage will be done to the workforce and the small companies that supply the country’s defence sector. ‘This is potentially going to reshape the industrial landscape,’ said Godden.
‘The international companies will just take their money and invest elsewhere. They’re less fearful of this. But there are 300 SMEs out there and 300,000 UK jobs. That’s what’s going to be damaged.’