Like many of this Government’s major policy statements, it was behind schedule, but on September 8, the Defence Industrial Strategy was finally published. Subtitled ‘Making Defence an Engine for Growth’, it was unveiled at Defence and Security Equipment International 2025, the biennial defence industry conference in London, where an array of ministers and senior military officers converged over major speeches and policy announcements.
It was the Government’s misfortune that this crucial document, billed as a ‘step change’ which would create a ‘better, more integrated, more innovative and more resilient defence sector’, was quickly drowned out by events. President Isaac Herzog of Israel’s visit to London was controversial; concerns about Peter Mandelson’s relationship with the late convicted sex offender Jeffrey Epstein were growing until he was recalled as ambassador to the United States on September 11; and the murder of American conservative activist Charlie Kirk fuelled debate over freedom of speech and political polarisation.
Nevertheless, the strategy deserves scrutiny, both for its stated intentions and the extent to which it is being implemented. It is good that the Government recognises the strength and importance of Britain’s defence sector, which is one of the most advanced in the world. Its willingness to engage with industry is welcome, especially at a time when defence expenditure is rising (though not by enough).
As a believer in the extraordinary power of free markets, I find the phrase ‘industrial strategy’ brings me out in a rash, and the history of such documents is not inspiring. Except in circumstances of total war, government is exceptionally bad at planning and managing sectors of industry: it is too slow-moving, too risk-averse and lacks focus. The current administration in particular has a strangely cart-before-horse approach. It explicitly sees defence procurement primarily as ‘an engine for growth, backing British jobs, British industry and British innovation’.
These should be benefits, not objectives. The purpose of defence procurement is to provide the best available equipment for the armed forces, not to sustain employment. Putting the emphasis on the economic benefits will inevitably cause decisions to be guided by the wrong considerations. It was the factor of domestic employment that in 2010 caused the Ministry of Defence to choose General Dynamics’ offering of what would become the Ajax armoured fighting vehicle over the already-available Swedish CV-90, a decision recently criticised as ‘ridiculous’ and ‘over priced’ by former defence secretary Ben Wallace.
What is worse is the way that the Government is already falling down on its would-be dirigisme. Outsourcing giant Serco Group has a contract to provide support services for the Royal Navy’s three major bases at Devonport, Portsmouth and Clyde, including the acquisition of 24 new vessels including tug and pilot boats and barges. It recently transpired that this part of the contract, worth around £200 million, has been awarded to Dutch-based Damen Shipyards rather than any of the UK’s shipbuilding concerns. (This is especially embarrassing as Damen is currently being prosecuted for bribery, forgery and money-laundering and investigated for violating sanctions against Russia.)
It has also been announced that the Royal Navy’s three new Fleet Solid Support ships will largely be built in Spain. The contract was awarded to a consortium led by Spanish marine engineering firm Navantia but included Harland and Wolff, and the mid-section of the first ship was scheduled to be constructed at the company’s Belfast shipyard. But Harland and Wolff went into administration last October and was eventually bought by Navantia. Upgrades to its facilities now mean it is ‘not ready’ to undertake the initial work on the Fleet Solid Support ships.
Harland and Wolff had been facing major financial difficulties, but one of the fatal blows was the Government’s refusal, shortly after it took office last July, to provide a £200m loan guarantee to help the company restructure its debts. The then Business and Trade Secretary, Jonathan Reynolds, decided there was too great a risk of losing taxpayers’ money.
Note that Harland and Wolff was not asking for £200m, but for a last-resort guarantee against a loan. There was a chance, however large or small, that it would have cost the Government not a penny. Its refusal contributed to Harland and Wolff passing into foreign control (and indeed, Navantia is owned by the Spanish government). Yet the same month, the Government gave Tata Steel a £500m grant – not a guarantee or even a loan but a subsidy – to help it build a new electric arc furnace at its Port Talbot steelworks. It has also committed £2.5 billion for ‘investment’ in the steel industry.
An interventionist strategy which prioritises ‘British jobs and British industry’ is pursuing the wrong target. But the worst of all worlds is a wrong-headed policy which also fails even to fulfil its own objectives. The Fleet Solid Support ships and the role of Damen Shipyards are not small issues on their own, but together they hint at a more widespread incoherence. Ministers say one thing, yet the outcome is often another. Do they see the inconsistency between words and deeds, and hope that no one else does? Or have they turned a Nelsonian blind eye to reality?
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