The Prime Minister’s statement of 25 July 2007, Official Report, column 83WS, announced a machinery of Government change moving responsibility for defence trade promotion from the Defence Export Services Organisation (DESO) to UK Trade and Investment (UKTI). Today I am announcing the arrangements under which this transfer will take place.

This statement is made in close consultation with my colleagues the Secretary of State for Defence, and the Secretary of State for Foreign and Commonwealth Affairs.

We fully recognise how important continued export success is to the health of this strategic sector of the economy. Defence equipment manufacture is highly important to the United Kingdom. The combination of expertise within both DESO and UKTI offers a major opportunity to enhance the way HM Government offer support to this successful industry. The ability to offer a complete package for prospective customer Governments, who often seek specialist assistance, will help the industry develop a compelling market proposition that positions the UK uniquely in the world.

The new organisation will build on the sector’s recent work which has produced a code setting out common standards of good business practice. We will work together to promote strong standards of business conduct and corporate governance in the sector.

The new organisation will be the UKTI Defence and Security Group. This is a working name. The group will be a UKTI business unit with expertise in defence services and products, operating under the UKTI brand and to UKTI strategic objectives. Ministerial responsibility will rest with the Minister of State for Trade and Investment. The group will be accountable to the UKTI board and its head will report to UKTI’s chief executive. Its head will be selected through open competition.

UKTI Defence and Security Group will have continued links to the MOD, in support of defence objectives. This will involve the active engagement of Defence Ministers, and the loan from the MOD to UKTI (via the Department of Business Enterprise and Regulatory Reform (BERR)) of armed forces and relevant civilian personnel to the group. Certain other civilian personnel will transfer from the MOD to UKTI (via BERR), and staff employed locally at overseas missions will transfer from MOD employment to UKTI (via the Foreign and Commonwealth Office).

The current export licensing function within the Defence Export Services Organisation will be retained within the MOD and so be separate from export support activities. And within BERR the separation between BERR export licence functions and trade promotion in UKTI will continue.

In line with the Prime Minister’s statement, no changes are envisaged to existing and planned agreements between the MOD and other Governments.

An implementation plan is in place. As a machinery of government change, the guiding principle is that business planning assumptions, and staffing and resources, will be taken on at their current levels from DESO by UKTI. This transfer to UKTI will take place on 1 April 2008.