Friday, 1 October 2010

The British defence industry

The letter from Liam Fox to the Prime Minister that was leaked on Wednesday has really set the cat amongst the pigeons. The country's finances are in a mess, cuts are having to be made, and this includes to the MOD's budget. The only problem is: what to cut? The Strategic Defence and Security Review (SDSR) was meant to come up with some of the answers, and some people within the MOD are understandably concerned about the results.

Of course, long-term strategy has to be at the forefront of the SDSR. The decisions made will shape the armed forces for a decade or more, long after we are meant to have left Afghanistan to its own devices. Therefore the varying long-term risks have to be enumerated and decisions made, an almost impossible task to do with any accuracy (after all, who could have foreseen the Falklands or Afghanistan wars? The causes are easy to see with hindsight, but few, if any, people were saying they were a possibility before the trigger events started them off).

In reality this is an ongoing process that was started with Option for Change, if not before. Yet at a time when our boys and girls are fighting foreign wars, cuts to the military are an exceptionally hot potato.

One frequently-said comment is that we are to protectionist of our own industry, buying expensive locally-designed and built products rather than better ones from abroad. BAE are often castigated for delivering poor equipment late and over-budget; sometimes this criticism is valid, at others they are convenient fall-guys for mistakes made by others, especially the MOD.

For these reason, the following article on the brilliant ThinkDefence website is well worth a read. In it, the defence capabilities and industries of several front-rank countries are compared, and the results are not quite what the critics of MOD spending are saying.

The results show three ranks of countries. The first, such as the US and Russia, buy nationally-developed weaponry. The second rank, such as Britain, France and Germany, have some multinational and internationally-developed weapons systems. The third rank, such as Canada and Australia, buy most of their equipment from abroad.

Our position is about where it would be expected - we have a vigorous defence industry, yet there are some areas in which we do not compete and buy foreign systems. We are not as protectionist as France, and do not specialise like Germany. Critics who say that we need to buy more equipment from abroad may have a point, but they also need to look at the other consequences, in terms of jobs, security and long-term costs. We are far from the only country whose defence projects go over budget.

The defence industry is a convenient scapegoat, yet one that employs thousands of highly-skilled people in the country, often in areas of high unemployment. Can we afford to fully open our markets when our competitors refuse to open theirs? Is the short-term gain to the MOD worth the long-term pain of having a weakened indigenous industry? Or is treating defence procurement as a job-creation scheme a stupid way of spending our limited government finances?

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