Ministry of Defence (MOD) direct spending with industry supports 115,000 jobs throughout the UK. Our investment in training benefits both defence and the wider UK economy. The armed forces are one of the largest apprenticeship providers with over 20,000 personnel on our apprenticeship programme. Each year several thousand people leave the armed forces and help to fill skilled professional or technical jobs in the private sector. The UK is the second largest exporter of defence equipment, with recent successes including the Department for International Trade-led Type 26 campaign. In 2016-17 we invested £1.6 billion in research and development, the majority of which is spent with UK businesses.
The 2015 strategic defence and security review, introduced a new national security objective to promote UK prosperity. We have subsequently launched the defence innovation initiative and published strategies for shipbuilding and future combat air. We have refreshed our defence industrial policy with a new emphasis on supporting growth and competitiveness. Last March, I invited my right hon. Friend the Member for Ludlow (Mr Dunne) to review opportunities for “Growing the Contribution of Defence to UK Prosperity”. His report, published in July, represents a major piece of work, which has been welcomed by both Government and industry. It contained over 40 substantive recommendations. Some of these are already being incorporated into the Department’s overall defence prosperity programme. We will continue to review our response to the outstanding recommendations, but I wanted to take this opportunity to update Parliament on the progress made since the publication of the Dunne review. I am delighted that my right hon. Friend has agreed to work with the Department to review the response to his report in due course.
We have designed our approach to prosperity to ensure that, while growing our contribution to the economy, we do not put at risk our objective of delivering defence capability at the best value for money. We have grouped the recommendations from the Dunne review and the defence industrial policy Refresh into four major areas of work set out below:
Embedding prosperity into the Department’s policy, process and culture
We intend to ensure that people across the Department understand our prosperity objectives and have access to the training and guidance needed to deliver these in a consistent and coherent way. Each of our main budget areas and frontline commands has now nominated a senior-level “Prosperity Champion” to help embed change, share lessons learned and identify best practice. We have put additional central resources into this area and we are working jointly with industry to develop common training material and case studies. We are publishing a defence prosperity guide which will help staff across the Department, civilian and military, understand their role in growing defence’s contribution to UK prosperity. We are striving to make it easier to do business with Defence, something we recognise is especially important for small and medium-sized enterprises (SMEs). We are working with prime suppliers to increase their engagement with smaller businesses, improving how we advertise both direct and sub-contracted opportunities, and have held a defence suppliers forum SME conference to understand barriers to working in the defence supply chain. Beyond this, we are working to simplify our tendering process, and will publish our SME action plan this month.
Quantifying the defence contribution to the UK economy
Defence has a complex and diverse supply chain, spanning companies of all sizes and spread throughout the UK. The Dunne review highlighted the difficulty of measuring the economic benefit of defence and the need for better data to inform our decision-making processes. It recommended the development of a common MOD/industry approach and format for collecting data on the defence supply chain. In response, we have been working together with the Defence Growth Partnership and the Department for Business Energy and Industrial Strategy (BEIS) on a proposal for a new joint economic data hub within the UK Defence Solutions Centre (UKDSC) at Farnborough. The UKDSC has world-class expertise in managing data on export markets and will apply these skills to collect and aggregate economic data from across the sector. The Government will provide guidance and support from defence economists together with advice from the Office of National Statistics. The output from this work will be overseen by an independent advisory board to ensure that both the Government and industry have confidence in its quality and impartiality. The review also highlighted the need for greater academic research into the economic value of defence. We recognise that the academic base in this area is small in comparison to the scale and importance of the UK’s spending on defence. We are working with academic institutions to look at how we can encourage greater debate and engagement in this area of public policy, including the potential for sponsoring an international conference later this year.
Sustaining an internationally competitive and productive defence sector for the UK
The UK has a world-leading defence sector, but if we are to sustain capability and continue to achieve export success in increasingly competitive markets, the Government and industry need to work together to drive innovation and improvements in productivity and efficiency. The Government have invested in a range of supply chain development initiatives across different sectors and helped established facilities such as the high value manufacturing catapult network. I am today committing £500,000 from the defence innovation fund for a pilot project to develop, test and validate how defence can make better use of this infrastructure in the design, manufacture and support of future equipment and to help create more resilient and efficient supply chains. There are benefits both to the defence customer and to industry from taking this forward and part of the pilot will involve trialling the approach on a number of our acquisition programmes.
We understand it can be particularly challenging for smaller companies to access the expertise and resources to bring their good ideas to market. Working with industry, BEIS has already established a successful national aerospace technology exploitation programme (NATEP) for civil aerospace. Drawing on the experience from this programme we have reached agreement with BEIS and Invest Northern Ireland (Invest NI) to pilot a new defence technology exploitation programme (DTEP) in Northern Ireland. It is expected that research and development investment, as a result of the pilot programme, will be approximately £1.2 million, which in addition to supporting innovation within Northern Ireland’s vibrant defence SMEs, will help to develop stronger links and new routes to market through primes and upper tier companies across the UK. Alongside this initiative, the MOD’S defence and security accelerator is creating a post in Northern Ireland to help companies access its programmes.
We want to increase the opportunities for innovative and competitive UK companies and ensure that they have a fair opportunity to bid for supply chain work in defence contracts; we also want to strengthen our understanding of the nature and resilience of UK supply chains. To help achieve this, we are working in partnership with industry to pilot a new approach to supply chain planning.
Growing exports and inward investment
Working closely with the Department for International Trade (DIT), we are seeking to broaden the UK’s defence export base, generate greater value from our overseas procurements, and improve access. In order to help us maximise future export opportunities, we are working with the DIT Defence and Security Organisation and UKDSC to start a phased roll-out of the UKDSC’s analysis of overseas export markets with our global network of defence attachés.
Post EU exit, we will maintain our strong links with partners both in Europe and globally, to create the right conditions for the UK’s world-leading defence industry. We have much to offer international partnerships, including extensive operational experience and high-end capabilities. We also have a long history of European co-operation through capabilities such as Typhoon, A400M and Meteor.
We are working across Government to develop new ways of working with industry that help unlock value for the UK economy and for business. This includes reinvigorating our existing defence and security industrial engagement policy (DSIEP) and building on our successful strategic prosperity partnerships with companies like Boeing and Lockheed Martin.
The Defence Electronics and Components Agency (DECA) at Sealand in north Wales is recognised as a centre of excellence for defence electronics activity in the region. It is also at the heart of the innovative joint venture formed between the MOD, BAE Systems and Northrop Grumman called Sealand Support Services Ltd (SSSL), which last month was awarded a further £500 million of work from the US Department of Defense on the F-35 programme. We are pleased that Welsh Government continue to identify the potential of an advanced manufacturing research institute alongside DECA to create exciting new opportunities for the region, and commit to working alongside them to deliver this ambitious project.
In Scotland, the MOD is basing its fleet of P8-A maritime patrol aircraft at RAF Lossiemouth and once fully operational some 470 additional RAF personnel are expected to be based at the site. Work has commenced on a brand new £100 million strategic facility, co-funded by MOD and Boeing, which is being constructed by a local firm sustaining up to 200 local jobs at its peak. The facility will support the UK P8 fleet and is expected to create over 400 new jobs involved in the operation and support of this advanced maritime patrol capability. It will also have the capability to support the P8 fleets of other countries, which has the potential to bring further prosperity benefits to the region in the future.
I have set out the progress we have made in growing the defence contribution to the UK economy—and where we plan to do more. This substantial programme of work is being undertaken jointly with other Government Departments and industry; it supports delivery of the Government’s industrial strategy and ensures that while growing our contribution to the economy, we do not put at risk our objective of delivering defence capability at the best value for money.