Defence Industry: Scotland

I beg to move,

That this House has considered the diversification of the defence industry in Scotland.

It is a pleasure to serve under your chairship, Mr Hollobone. I am glad that this debate was selected because it is an opportunity to raise the important and seldom discussed topic of the defence industry in Scotland.

We are rightly proud of our history of shipbuilding. I represent a constituency just south of the River Clyde, and I do not need to tell anyone in this chamber that the legacy of shipbuilding and the remaining cranes dotted along the Clyde are a great symbol of national identity and pride, not just for those who live near to or in Glasgow, but across Scotland. That pride is not limited to those of us north of the border, either. The industry holds significance for the entire UK. Shipbuilding rightly continues to be an important part of the defence industry in Scotland, but as the demand and requirements of national defence change and future threats emerge, we must look at areas of future growth for Scottish industry, to ensure that, alongside shipbuilding, Scotland has a diverse pool of defence industries that will be sustainable in future.

In 1981, 68% of the workers in defence-related industries worked in shipbuilding, while 26% worked in the aerospace industry and about 6% worked in the armaments industry. In 2017, the picture was similar: shipbuilding accounted for about the same proportion of 68%, while the aerospace industry in Scotland had gained a slightly greater share of 28% and the armaments industry had about 4% of the workforce. Of the £1.6 billion that the Ministry of Defence spent with industry in 2016-17, 57% was spent on shipbuilding and repair, with the nearest spending block making up just 11.8%, which was spent on computer services.

The defence sector in Scotland is significantly reliant on shipbuilding, and although shipbuilding is a major benefit to our economy, high reliance on a single sector exposes the wider industry to risk from changes in the market and the evolving nature of the threats that we face, and to the risk of mismanagement by the UK Government.

I thank my hon. Friend for securing this important debate. We need a strong domestic defence industry, as well as the sovereign capability to build defence equipment in Scotland and across the UK, to ensure that we are not overly reliant on orders from overseas. Does he agree that, unfortunately, this Government have chosen to neglect our home-grown industries in favour of buying off-the-shelf from abroad?

I completely agree with my hon. Friend, and later in my speech I will make the point that making short-term decisions without looking at the whole picture is inherently flawed.

The hon. Gentleman is making an excellent speech. Does he agree that one of the UK Government’s strangest decisions is to tender internationally for fleet support ships? If it were decided that they should be built in the UK, that could benefit shipbuilding not just in Scotland, but across the UK.

I absolutely agree with the hon. Gentleman. I will touch on that point later in my remarks.

Although we must continue to support shipbuilding, the UK and Scottish Governments must focus on diversifying and deepening the defence industry in Scotland to ensure that there will always be a base for the high-skill and high-value roles associated with the industry—that is eminently achievable. Scotland is well placed to be a home for a variety of new industries. With strong universities and a history of manufacturing and design excellence, we are ideally placed to take advantage of the large demands of the UK’s defence. This debate gives Members the opportunity to discuss future high-growth areas and draw attention to the advantages of increasing diversity in the defence industry. For my part, I will touch on two high-growth areas: space and land vehicles.

Glasgow in particular has become a pioneering centre for the deployment of microsatellites, producing more satellites than any other city outside the United States. As future defence concerns rely increasingly on the gathering and analysis of information, significant space assets will be vital to the day-to-day operations of the armed forces in both military and non-military operations.

The space sector has huge potential for future growth. Year-on-year growth in the sector has been five times greater than in the wider economy since 1999, and the sector has tripled in value since 2000. Each new job in the space sector adds £140,000 of added value per employee, and the overall sector receives 36% of turnover from exports.

The high-quality satellites that are built in Glasgow are superb, and will be launched from my part of the world. Does the hon. Gentleman agree that Britain has a great business opportunity to build a lot of satellites for allied countries for their own defence, and that if we get going now, we can steal on a march on the world?

The hon. Gentleman is absolutely right. As a satellite hub, companies in Glasgow have produced huge volumes of satellites. Two companies, Alba Orbital and Spire Global, have between them put around 100 satellites in orbit, and Spire Global makes one new satellite per week. The recent go-ahead for the spaceport in Sutherland, as well as Glasgow’s growing microsatellite industry, perfectly places Scotland to take advantage of new investment and infrastructure.

Investment from the MOD will be a major factor in the successful development of space and satellite technologies. Any investment will naturally lead to a build-up of skills and will spill over into the civilian sector. I would therefore be grateful if the Minister indicated the role that the upcoming strategic defence and security review will have in supporting the development and expansion of the space industry in Scotland, and what representations he will make to ensure that that vital high-growth sector is not overlooked. The industry is highly competitive and, as the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) said, it is vital that the UK takes a lead.

I thank my hon. Friend for the speech that he is making, which is very helpful. The British space industry has not only been successful here, but has played a huge part in the European project Galileo. Does he share my regret that the European Commission, in a fit of pique, has decided to kick us out of the project, to which we have made not only a financial contribution, but an enormous industrial contribution? Europe should really be holding that up as an example of competing in the world.

My right hon. Friend will not be surprised to know that we have different views on Britain’s membership of the European Union. I largely consider that we are kicking ourselves out of the EU and should accept the consequences of that, although I regret the impact that it will have on projects such as Galileo.

Further to the space sector, the construction of advanced land vehicles offers an excellent opportunity for the expansion of the defence industry in Scotland. Glasgow now hosts an armoured vehicle centre of excellence, which was set up by defence company Thales. The centre aims to provide the MOD with an excellent new resource for the development of armoured vehicles.

Thales is currently bidding for the MOD’s multi role vehicle-protected programme which, if successful, would see 50 highly skilled engineering design and manufacturing jobs brought to the Glasgow site, and the possibility of 30 additional jobs created over the programme’s lifetime. Thales has said that if it is selected for the MRV-P and as the UK design authority and integrator for the Boxer and its variants, 100 new jobs could be created directly, while 180 jobs could be created through supply chains and around 200 further jobs could be supported indirectly.

Such programmes are vital for expanding the diversity of the defence industry in Scotland and introducing new skills, as well as deepening the existing skills base. A great example is my constituent Stewart Macpherson, an employee at Thales Glasgow who has been chosen as one of the top 30 electronics engineers under 30 in the UK.

Encouraging and supporting new skills and professionals is a great benefit of defence investment, so I should be grateful for an update from the Minister on the progress towards reaching a decision on the MRV-P programme. I appreciate, however, that he may only be able to reveal certain information as some might be commercially sensitive.

I again thank the hon. Gentleman for mentioning Thales, which is based in my constituency. Does he agree that if Thales is successful in obtaining the contract, the economic benefits for the whole Glasgow area—including for my constituents and his—would be considerable?

I absolutely agree. Recently, when I visited the site, I was pleased to see how many of my constituents are employed there.

I am disappointed about the previous actions of both the UK Government and, to a certain extent, the Scottish Government. The recent failure by the UK Government to support the construction of the fleet solid support vessels, as mentioned in this debate and many other times in this place, shows completely misplaced priorities. Ill thought-out changes to Government tendering rules redefined the vessels, meaning that the ships will not fall under article 346 of the treaty on the functioning of the European Union. That opens UK shipyards to subsidised international competition and puts jobs and the potential investment in shipyards such as Rosyth at risk.

What is more, that situation was wholly avoidable, with the decision being made completely unilaterally, yet possibly writing off highly skilled, highly paid jobs that could return £2.3 billion in revenue to the Treasury while providing sustainable employment and an increasing skills base. I therefore urge the Government to think again about that, and to follow the Labour party’s lead by advocating that such ships are built in the UK. The case of the fleet solid support ships signals a Government who are far more interested in achieving in-year cost reductions than in looking at the whole picture.

The hon. Gentleman is making a powerful speech about the British defence industry. Does he agree that we built two world-class aircraft carriers in Rosyth, employing a lot of my constituents and I am sure some of his, and that the Government should offer some of our expertise and the build facility to our allies around the world who have expressed interest in aircraft carrier technology, so that we can continue to build our expertise and keep the engineering specialities developed in Rosyth and in Scotland?

I thank the hon. Gentleman for his point, which was well made. I am sure that the Minister will respond in his remarks.

Is it not the case that the solid support ships would be ideal for the Rosyth site to maintain its workforce until aircraft carrier refits are necessary? Does that not show that the Government have not learned the lesson of the gap in work at Barrow, which then required a reconstruction of the workforce at huge cost? Surely the Government are saving pennies now but costing pounds later.

My right hon. Friend is absolutely right. To be frank, I find it amazing that the red, white and blue Conservative party of Great Britain does not see the merit of building such ships in Britain, creating so much benefit for years to come.

In the context of this debate, we must also look at the Scottish Government’s role. Recently, the First Minister set out her plans for a new independence referendum. We must therefore consider the impact of that policy on long-term investment. Scotland’s shipyards rely on the pipeline of complex warships to be constructed for the Ministry of Defence—at least one remaining aircraft carrier, five offshore patrol vehicles and eight frigates—but if Scotland were to become independent before the next Holyrood election, as the SNP plans, the MOD has indicated that Scotland could be excluded from producing UK warships under article 346, or a similar rule if the UK has left the EU. Without those contracts, the shipyards would need to find alternative sources of demand in order to remain open, and I hope that the SNP will elaborate on that in any contribution today.

The MOD spends about £1.6 billion a year directly on Scottish industry, with £900 million spent directly on shipbuilding. The Growth Commission report stated that the entire defence budget for an independent Scotland would be £3 billion, plus £450 million to be used over five years to set up the apparatus of an entire independent state, of which a defence force is just one part. From that combined pool, therefore, the SNP proposes to find at least £900 million a year just to keep the shipyards open, while also setting up a new defence force, equipping it, and ensuring that its IT and support systems work properly. That is before we get on to the implications of importing the necessary components required for advanced manufacturing under a new currency.

That is £450 million to set up a new state in five years, including a defence force, but in less than five years it has cost the Scottish Government £200 million to set up a Scottish social security system and £178 million to set up an IT system to allocate payments to farmers. When we consider the complexity required to set up a new modern military force with all the support and complex IT architecture necessary, we realise that the figures do not add up. Scotland is being let down by both its Governments.

On top of that are the billions that it would cost to convert our currency from pounds to something else. It is just a fairy tale, is it not?

There are so many different layers to this. Going into the day-to-day costs in pounds sterling is bad enough, but adding the uncertainty of trying to set up a whole new currency from scratch takes us into the realm of fantasy.

We have a good opportunity, through smart industrial policy, to build a healthy, thriving and contributory defence industry in Scotland. The Labour party has put smart industrial policy at the heart of our policy proposals for the next election, whenever it comes. However, it is disappointing that both the UK and Scottish Governments cannot do the same.