To UK Industry, Fox Offers Support, and a Warning

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Posted by Bradley Peniston | July 20th, 2010

By ANDREW CHUTER, FARNBOROUGH, UK – British Defence Secretary Liam Fox has promised that the new defense industrial strategy, promised for publication next year, will set out key policies on protecting key industry capabilities.


British Defense Secretary Liam Fox meets military personnel during a visit to the Farnborough International Airshow on July 20. (AFP photo by Ben Stansall)

Speaking at the Farnborough air show on July 20, Fox said the new strategy will set out the Conservative-led coalition’s “sovereign requirements and how we will protect the associated industrial capabilities.”

“I recognize that there are some areas where sovereignty of action for our Armed Forces requires particular industrial capabilities to be protected, as a matter of national security,” said Fox.

However, he said the government intended to continue to use open competition on the global market for many of its major acquisitions.

The new strategy would also spell out priorities and policies in the exports arena and supporting small and medium-sized companies in the sector.

He said the SME sector would play a central role in the defense industrial strategy.

Fox said the government intended to consult widely on the industrial strategy and intended to roll out further details on this later this week.

The defence secretary said that in 2009, Britain secured 7.2 billion pounds ($11 billion) of new export business in the sector — a 70 percent increase over 2008.

He called the defense industry “a special strategic asset…It is a key part of our international security relationships,” he said.

The Labour administration published Britain’s first defense industrial strategy in 2005 but failed to update it in 2008 as they promised.

The defence secretary brought four defence ministers; the newly appointed Chief of the Defence Staff, Gen. Sir David Richards; the Chief of the Air Staff, Air Marshal Sir Steven Dalton; and others to Farnborough in what may have been an unprecedented show of support for industry at the show. 


But if Fox was at the show to support Britain’s defense sector, he also had a message for the industry leaders listening to his speech. He warned that industry had to help the government reduce costs, including cutting prices.

“Industry’s long-term prosperity rests on offering better value for money to the British taxpayer,” he said. “Without cost containment in the current programs we have no option but to either cut the programs currently underway or curtail investment in future programs.”

Fox said the government intended to maintain an equipment program that will be affordable in the long-term and sustainable year by year.

“We will reform our acquisition processes and provide our suppliers with increased clarity and predictability including a 10-year planning horizon agreed with the Treasury, audited by the National Audit Office every year,” he said.

In return, he said, the government demanded that it could demonstrate value for money on defense expenditure.

“So we expect to see the benefits of Government support to industry in our own acquisition,” he said.

[buglerbilly]

British Defence Secretary challenges industry to "think differently"


Secretary of State for Defence, Dr Liam Fox.

Dr. Liam Fox Expresses Commitment to Ensuring Appropriate Defenses

06:30 GMT, July 21, 2010 Defence Secretary Liam Fox said he is committed to ensuring that the UK has appropriate defences for the threats we face, during a speech at the Farnborough International Air Show today, Tuesday 20 July 2010. Dr Fox said he was committed to two things. Firstly to play his part in improving the country's fiscal position and he said his second commitment is: "To ensure that in this rapidly changing and dangerous world, and in this tough fiscal climate, the UK has appropriate defences for the threats we face."

He added: "I am determined to ensure the UK retains robust and well equipped Armed Forces capable of intervening abroad where necessary to protect our security and interests at home.

"That would mean, when the national interest demands, maritime-enabled power projection, the capacity to control air-space to guarantee freedom of manoeuvre and the ability to deploy land power with the logistical strength to sustain it."

However, Dr Fox said: "The current Defence programme is entirely unaffordable, especially if we try to do what we need to do in the future while simultaneously doing everything we have done in the past."

Dr Fox said these are the unavoidable realities which govern the Strategic Defence and Security Review adding: "The fiscal realities will unavoidably limit the amount of money the Government has available for Defence procurement in the years ahead.

"So in this austere climate, to ensure this process is not detrimental either to our national security or to the prospects of one of our most profitable and successful industries, the Government is looking to find new ways of encouraging business. So there is a deal here to be struck.

"The British Government will support the UK Defence Industry as a strategic asset; we will support the drive for exports with an active and innovative programme of Defence Diplomacy.

"We will ensure that our licensing system works efficiently while ensuring responsible exports.

"We will develop innovative training and exercise support in conjunction with industry.

"We will ensure that our own requirements for new equipment are designed from their inception with exportability in mind.

"We will continue to ensure a dedicated focal point for Government support to exports, and let me pay tribute to the achievements the UKTI Defence and Security Organisation.

"We will reform our acquisition processes and provide our suppliers with increased clarity and predictability including a 10-year planning horizon agreed with the Treasury, audited by the NAO every year.

"And I am pleased to confirm that a new Defence Industrial Strategy will be published after the SDSR has concluded."

Dr Fox said that as part of the Strategic Defence and Security Review work there are three things that must be understood between the government and industry: "First, without cost containment in the current programmes we have no option but to either cut the programmes currently underway or curtail investment in future programmes.

"Second, we must reduce fleet numbers that provide any one capability because we cannot afford the luxury of multiple supply chains and the associated training and infrastructure costs.

"Third, too often in the past we have simply replaced old platforms with an upgraded version of the same sort of equipment.

"If we continue to spend money on the next generation of what we already have, we will never give ourselves the opportunity to reshape expenditure plans to take into account the need to invest in the technology that is necessary to maintain our advantage in the constant battle for the upper hand in national security.

"So we will all need to think differently – and this is part of my challenge to you today.

"We need to make a conceptual leap and develop new capabilities that help us stay ahead of our opponents – particularly when faced with asymmetrical threats.

"We need to think carefully about what the 21st century battle space requires."

(The full speech by Dr. Liam Fox can be viewed here: http://tinyurl.com/34ouapz)

[buglerbilly]

BAE, Rolls-Royce Face U.K. Defense Talks as Government Seeks Cost-Savings

By Kitty Donaldson - Jul 21, 2010

The U.K. Defense Ministry is to hold cost-saving discussions with 11 of its top suppliers, including BAE Systems Plc, Rolls-Royce Plc and QinetiQ Group Plc, as the government seeks to narrow the record budget deficit.

Senior ministry officials will also meet this summer with Lockheed Martin Corp., Finmecannica SpA, Thales SA and others, the minister in charge of defense procurement, Peter Luff, said in an interview in London yesterday. The immediate aim is to save more than 100 million pounds ($150 million) before making deeper spending cuts.

The U.K. is reviewing its defense capabilities for the first time since 1998 and the ministry wants suppliers to work with it to cut costs. It will also talk to Serco Group Plc, MBDA, Babcock International Group, Hewlett-Packard Co. and European Aeronautic, Defence and Space Co.

“It’s partly an attempt to focus the defense contractors’ minds on how serious this challenge is,” Luff said. “We are going to have a ‘Dragon’s Den’ later on in the summer to test these ideas.”

The minister was referring to the BBC television program, in which prospective entrepreneurs pitch ideas to five multimillionaires willing to invest their own cash.

‘Tell Us How’

“You are a big supplier to our department, you sell the ministry lots of things,” Luff said, “Tell us how together we can do things better, tell us how we can save money.”

Some companies supplying equipment to the U.K. armed forces are likely to find out as early as October whether their programs will go ahead after the review, though others may not know until next year, Luff said, speaking before a speech to the Soldiers, Sailors, Airmen and Families Association tonight.

The defense ministry will publish its Strategic Defense and Security Review once Chancellor of the Exchequer George Osborne outlines the cuts he’ll be making to individual departments’ budgets, known as the Comprehensive Spending Review, on Oct. 20.

“The SDSR will define what we need and the CSR will tell us how much money we have to do that and then we will decide how we do it,” Luff said. The defense review “is likely to give green lights, amber lights and red lights to various programs.”

There’ll then be informal discussions with suppliers, followed by a formal consultation with industry, before the ministry publishes draft legislation early next year.

Asked at what point contractors and manufacturers will be clear about which weapons and equipment programs will be saved, cut or downgraded, Luff said it would depend on individual programs.

“Clarity will emerge step-by-step in the process,” he said. “There will be decisions in the SDSR which give some people all the certainty they need,” though other companies may need to wait for the consultations or the draft bill “before it is clear what will happen” to their contracts.

Luff said there will be winners and losers, with small and medium-sized businesses possibly doing well, as they can be “agile,” providing “innovative solutions.”

“The bigger contractors may experience difficulties, but there may be exceptions to that,” Luff said.

To contact the reporter on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net.

[buglerbilly]

A reminder of the value of Defence Exports to the UK............

Industry Welcomes Government Defence Export Figures

(Source: ADS; issued July 23, 2010)

Over £7 billion in defence sales by UK in 2009 confirmed by UKTI DSO

A|D|S, the UK's AeroSpace, Defence and Security trade organisation today (Thursday) welcomed the news from the Government's UK Trade and Investment Defence and Security Organisation (UKTI DSO) that the UK has retained its position as number two in the world in defence exports in 2009. The UK ranks number one in Europe and is behind only the US globally.

UKTI DSO revealed that the UK achieved over £7 billion of new defence exports orders in 2009, close to the long-term target for the UK of 20 per cent of the global export market.

Ian Godden, Chairman of A|D|S, said:

"As the Government seeks to rebalance the economy towards industries that represent high-technology manufacturing and services with strong export potential the defence sector is delivering on these priorities. It also has further room for strong growth in exports as the country recovers from recession.

"The defence industry is proud to support our armed forces directly and to work closely with our partners overseas. It also employs over 300,000 people across the whole of the UK and contributes over £35 billion to the economy each year. As we are demonstrating this week at the Farnborough International Airshow our industry offers solutions to the country's needs. We look forward to working in partnership with the Government to deliver further benefits in the future to meet the nation's requirements in terms of jobs and increased wealth."

A|D|S is the trade organisation advancing UK AeroSpace, Defence and Security industries with Farnborough International Limited as a wholly-owned subsidiary. A|D|S also encompasses the British Aviation Group (BAG). It is formed from the merger of the Association of Police and Public Security Suppliers (APPSS), the Defence Manufacturers Association (DMA) and the Society of British Aerospace Companies (SBAC).

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