A new round of spending cuts could hit UK defence manufacturers after the general election, in what has been dubbed a second Strategic Defence Review, a City analyst has told The Engineer.
The first defence review, undertaken by the government in 1998 resulted in the reduction in the number of destroyers and frigates from 35 to 32 and a similar reduction in minesweepers. There were also cuts in the number of military personnel. The analyst said an indication that the government was looking at cuts was its move to seek further savings from the Defence Logistics Organisation, set up under the SDR to streamline procurement for the armed forces.
‘Internal planning for the cuts has been going on for around six months and is being driven by the Treasury, which had been expecting tougher efficiency savings from the DLO,’ he said.Budget cuts and cost savings could lead to pressure on manufacturers in the defence supply chain. Alan Sharman, director- general of the Defence Manufacturers’ Association, said many decisions had still to be made on existing equipment contracts as a result of the 1998 SDR.
A spokesman for the MoD dismissed suggestions of a second SDR but said there will be a spending review similar to that of last year. The MoD said in September that it was normal to consider cuts in order to stay within budget.
The warning comes in the week Defence Secretary Geoff Hoon announced what he called ‘the next phase of warship support modernisation’ to tackle ‘overcapacity’ at Devonport, Rosyth and Portsmouth dockyards.
‘The initiative forms a key element of the DLO’s drive to cut costs by 20% over the next five years whilst maintaining or improving outputs,’ said Hoon.
Unions demand safeguards
Seven unions representing nearly 10,000 workers at MoD naval bases this week urged Hoon to drop the plans which would see maintenance work contracted out to private companies.Proposals to reduce the yards’ overcapacity and safeguard as many jobs as possible have been put forward by unions including the Transport and General Workers’ Union and the Institution of Professionals, Managers and Specialists. Union officials will meet in London today to discuss the next stage of their campaign.
They warned that ‘transfer of all naval base and warship repair facilities to one or two private companies poses a strategic risk to the repair and maintenance of the naval fleet’, creating a ‘Railtrack’ of the nation’s defence.
Jack Dromey, TGWU national officer, said the unions’ plan for the dockyards would avoid ‘unnecessary privatisation and mass redundancies. Ministers must listen to reason,’ he warned.
The unions want to see the creation of a new Defence Warship Repair Agency ‘so that efficiency savings can be channelled into the defence budget rather rather than turned into dividend payments for shareholders,’ said IPMS national officer David Luxton.
The naval bases involved include Faslane on the Clyde managed by Babcock International, employing 2,780 civilians with 1,120 Royal Navy personnel, Devonport dockyard in Plymouth, managed by DML, with 1,368 civilians and 1,021 Navy personnel, and Portsmouth, managed by FSL, with 1,290 civilians and 1,010 Navy personnel.
Although an MoD spokesman said it was too early to say how many jobs might be lost, he did say that about 1,500 civilians working at Faslane might transfer to Babcock under a public-private-partnership. But the figures involved might be much smaller, ‘perhaps in the tens’, he said.
Armed forces minister John Spellar this week also signed a partnering arrangement between Vickers Defence Systems and the Army Base Repair Organisation, also aimed at delivering greater savings to the DLO.