Defence Industrial Strategy

Statement

The following Statement was made in the House of Commons on Monday 8 September.

“With permission, Madam Deputy Speaker, I wish to make a Statement on the defence industrial strategy. Today we fulfil another manifesto commitment by publishing our plan to strengthen our security and grow our economy. It is a plan to back British-based industry, create British jobs and drive British innovation.

Before I set out the detail of the strategy, I would like to place on the record my thanks to my right honourable friend the Member for Liverpool Garston, Maria Eagle, for her work in developing the strategy. I also extend a warm welcome to my honourable friend the Member for North East Derbyshire, Louise Sandher-Jones, who has joined the Ministry of Defence team.

This is a plan supported by £773 million of investment—a plan to make defence an engine for economic growth in every nation and region of our country. The men and women who serve our nation are rightly respected across the world for their dedication and professionalism, yet as we know from the war in Ukraine, when a country is forced to fight, its armed forces are only as strong as the industry that stands behind them. The UK has one of the most advanced, innovative defence industrial bases the world over, but we are in a new era of threat, which demands a new era of UK defence.

Our strategic defence review set out our vision to make Britain safer—secure at home and strong abroad. Through our defence industrial strategy, we will ensure that we have an industry to deliver that vision. All the pledges made today can only be met because this Labour Government have committed the largest sustained increase in defence spending since the end of the Cold War: 2.6% of GDP by 2027, and 3.5% by 2035, alongside our NATO allies. But with the promise to invest more comes the responsibility to invest better. By implementing our strategy, we will ensure that workers and businesses across the UK feel the benefit of the defence dividend.

In opposition, the now Defence Secretary told the House:

‘Labour’s determination to see British investment directed first to British industry is fundamental’.—[Official Report, Commons, 23/3/21; col. 798.]

Today, ambition in opposition becomes action in government. Using every lever available to the Government, our strategy will prioritise British-based businesses. We will make it easier for British-based firms to do business with the Ministry of Defence. We will launch an office of small business growth to support small and medium-sized enterprises in accessing MoD contracts, and we will give greater clarity by sharing our five-year acquisition pipeline, allowing businesses to invest with confidence.

The £10 billion frigate contract signed with Norway last week was the biggest warship deal in our history—a demonstration that when we export defence capabilities, we not only strengthen our security abroad, but create high-skilled jobs at home. Through our strategy, we will back British businesses to go out and win—win more contracts and create more jobs. The new office of defence exports brings responsibility for defence exports back into the Ministry of Defence and creates a government-to-government exports structure that reflects what our allies and industry need.

Sustaining sovereign capabilities is the cornerstone of national security, so our strategy sets out the requirement to onshore key assets. We will maintain the advantages afforded by open international competition, but in a way that improves value for the British taxpayer. For the first time ever, we will introduce an offset policy, designed in consultation with industry. It will mean that when we buy from our allies, the UK economy will be strengthened in return through new jobs and novel technologies.

Our defence industrial base represents a commitment to innovation and excellence. Today, it supports over 460,000 jobs and over 24,000 apprenticeships across the UK, the vast majority of which are unionised. As a trade union member, I know that good, well-paid and unionised jobs are good not only for defence but for growth. The defence industry is a source of not only prosperity but pride; it proves that we are still a nation of makers. When I speak with defence workers, I see their deep sense of purpose in what they do. They are right to feel that way; their efforts keep our nation safe. Through our strategy, more people will be afforded the opportunities and rewards of working in this industry.

To ensure that the benefits of the defence dividend are shared across every nation and region of the UK, we are investing £250 million in defence growth deals. Our deals will build on inherent strengths in defence communities by improving skills and infrastructure. The first phase will be launched in Plymouth, where we will focus on advanced marine technologies and autonomous systems, and in South Yorkshire, where we will build on our recent investment in defence and steel. Further locations in Scotland, Wales and Northern Ireland will be announced, because there is not only a defence dividend from our uplift in defence spending, but a union dividend, strengthening our United Kingdom.

ADS analysis indicates that the defence industry workforce could grow by 50,000 people by 2035, when defence spending increases to 3% of GDP. To ensure that the UK can take full advantage, we must ensure that we have the workers with the right skills to fulfil those roles, so I am today announcing the biggest ever investment in defence skills: £182 million of new government funding to establish five defence technical excellence colleges, so that we can promote to over 800,000 school pupils the benefits of a career in the defence industry; and our new defence skills passport, which will make it easier and faster for veterans and workers in other industries to move into the defence sector.

Over the past few years, defence firms have expressed growing concerns about attending jobs fairs. The harassment and intimidation to which they have been subjected has forced companies to cancel events on university campuses. The campaign to boycott and target defence firms misunderstands the purpose of deterrence. We know the full measure of freedom and security in Britain because of what our defence industry does. The strategy will help the industry to attract the talent it needs by creating a dedicated presence on the UCAS website, a new defence apprenticeship and graduate clearing system, and a defence university alliance to strengthen careers in the sector.

The war in Ukraine reminds us that innovation is the central pillar of deterrence. To ensure that we meet our objectives of better capability and increased growth, we are committed to spending at least 10% of our equipment budget on novel technologies. The newly established UK Defence Innovation is backed by £400 million of ring-fenced investment and has the authority to reallocate funding and resources, ensuring a focus on priorities and value for money. Today’s strategy outlines how we will employ UKDI to rapidly produce technologies that give our Armed Forces an advantage. We will set out the first of the innovation challenges that we want industry to go after, as well as how we will better support firms in testing their innovations.

This Government inherited what the Public Accounts Committee described as a ‘broken procurement system’. For too long, defence has been burdened by waste, delay and complexity, yet today we know that whoever gets technology to its front-line forces the fastest, wins. We have proved that we can do it for Ukraine; now we must do it for Britain. Our segmented approach to procurement sets ambitious targets to drastically reduce the timescales to get new projects on contract. As part of the biggest shake-up to the Ministry of Defence in over 50 years, we have created the role of national armaments director, and because we want UK firms to win not just at home but abroad, we will improve our export licensing system with a new digital platform, better training for staff, and reformed procedures, including allowing exporters to apply for licences during the bidding process.

Unlike previous strategies, our one is funded. It is also the culmination of months of detailed work and close engagement with industry, academia and trade unions. Throughout the process, our aim has been to produce a strategy with the defence sector, rather than to it. With a clear plan backed by historic investment, our Government, alongside industry, will now deliver for Britain. I commend this Statement to the House”.

My Lords, I place on record my support for the enormous amount of work that has clearly gone into the production of this industrial strategy. It is very evident that those at the Ministry of Defence have put their thinking caps on, done the hard work and constructed a plan based around defence’s current and future requirements. There is therefore much to be applauded. The six priority outcomes are absolutely aiming in the right direction and the commitment to strengthening the MoD’s links with SMEs is particularly welcome.

A strong industrial base is vital for the future of our Armed Forces and our defensive resilience as a whole. The need has never been more evident than today, when we have seen a Russian incursion into a NATO ally’s airspace and the largest attack in Ukraine by Russia to date. This escalation is deeply troubling and underlines the importance of swiftly putting Britain into war-fighting readiness.

This is a solid piece of work, but the caveat is this: the solid piece of work crumbles if the bricks are not cemented together. That cement is implementation at a wartime pace. What matters now is that the words on these pages are translated into missiles, drones, equipment and ships. Critical to this is procurement. The chilling reality is that procurement has essentially dried up. There have been promising words in the SDR, but we have yet to see the major procurement contracts that the MoD has promised.

Procurement is the lifeblood of a successful industrial strategy. For example, I ask the Minister: how will the Government ensure that the Typhoon factory in Warton remains open and thriving? We have heard that the Government will be opening up six new munitions factories, but they must have orders. When will they be placed?

I understand that the promised defence investment plan will detail much of the procurement endeavour, but when? The defence industry has been waiting with bated breath since July of last year, and industry must have greater certainty. I implore the Minister to do everything in his power to ensure that the defence investment plan is published as soon as possible. In that connection, will the UK’s defence orders be joining a queue or with they be prioritised over orders for export?