Following the publication of its new Defence Strategy, the UK Government has now released its Defence Industrial Strategy, titled 'Making Defence an Engine for Growth'.
This is undoubtedly the most significant defence policy reform in decades, and something many of us have argued for. In 2023, I wrote a paper for Prospect on defence procurement in which I concluded,
“Without a thriving defence industry, the UK puts at risk its freedom to act in defence of the country’s interests at home and abroad. And the armed forces risk losing their technological advantage over actual and potential enemies. Achieving these aims requires a commitment to sustain and strengthen national defence design, manufacturing and support capabilities in a partnership between the MoD and industry. The UK by default.”
At the Westminster launch of the paper, the then shadow minister said a future Labour Government would prioritise sovereign capacity in defence procurement. So, how does the new strategy match up?
There is to be a 10-year Defence Investment Plan, although we will have to wait a few months for the details. This is vital, as defence industrial capacity cannot be switched on and off quickly. The sector needs certainty, and the commitment to increase defence spending to 2.6% of GDP by 2027, with a trajectory towards 3% in the next parliament, and 5% by 2035, is also vital to the strategy.
The priority outcomes all tick the right boxes:
1. Making Defence an Engine for Growth
2. Backing UK-based businesses
3. Positioning the UK at the leading edge of defence innovation
4. Developing a resilient UK industrial base
5. Transforming procurement and acquisition systems
6. Forging new and enduring partnerships
The strategy promises £250 million of public funds for the creation of five new “Defence Growth Deals” in the UK. Investment will initially be provided in Plymouth, South Yorkshire, Scotland, Wales and Northern Ireland. Ministry of Defence spending already provides more than 11,000 jobs in Scotland, and the UK Government hopes these growth deals will 'unleash potential' from businesses and research institutions in Scotland. This is in addition to the £10 billion deal, which will see warships for the Norwegian navy built in Glasgow, and possibly more from Denmark.
In structural terms, they have established a new partnership with the industry, through the Defence Industrial Joint Council, with a welcome involvement of trade unions and other stakeholders, beyond the usual suspects. This places a strong emphasis on people and skills, something that was previously lacking in strategies.
The details of procurement reform are less clear. The Procurement Act enables many of the recommendations outlined in my 2023 paper, including direct awards and the consideration of social value in procurement. This is something the Scottish Government needs to act on. The Scottish procurement legislation predates Brexit and is in urgent need of reform. However, it remains to be seen whether the segmented approach to procurement and the tighter timescales will be successfully implemented. There is more work to be done here. I would also have liked to see more on Fair Work and other local procurement benefits.
There is also a bit of spin on the concept of ‘military Keynesianism’. I think we should be cautious about this, as jobs and other economic spin-offs are simply a welcome by-product. Different forms of public spending deliver higher economic multipliers. Increasing defence spending is necessary given the threat from Russia and Trump's foreign policy. It therefore makes sense to maximise the economic benefits from this necessity, rather than suggesting it is the best way to drive growth.
Overall, this new strategy is moving in the right direction, but there is still more work to be done.
