RETROSPECT AND PROSPECT: TRENDS IN COST AND THEIR IMPLICATIONS FOR UK AEROSPACE

This paper, intended to stimulate debate, suggests that we are at a turning point in the history of the UK military aerospace industry. It argues that there is urgent need for a fresh vision as to how the UK military aerospace industry can both prosper and make its maximum contribution to the defence of Britain. Further, the resulting plans and policies must emphasise the robustness of defence capabilities in a future in which the only thing we can be certain is that it will be very different from the present – especially whenever defence most matters.     

The future of the defence firm: the case of the UK aerospace industry

The focus of this paper is the future of the defence firm within the context of the UK aerospace industry and its supply chain. The analysis considers aerospace markets and the aerospace industry in the UK before assessing the future of the defence/aerospace firm as a case study. The paper concludes that its future in terms of the strategic and important aerospace industry is uncertain. The corporate governance of the defence firm will have to change to reflect the hollowing‐out of the firm as the industry experiences significantly less vertical integration. The emphasis of the future defence/aerospace firm will be on ‘buy’ and not necessarily ‘make’. There will also be fewer independent defence aerospace firms as horizontal integration will occur across air, land and sea platforms as well as civil and defence aerospace firms. Indeed, conglomerate integration may even occur with cost pressures and market forces ensuring that merger activity goes beyond defence and aerospace into wider manufacturing industries and, in some cases, service industries in global markets.     

The UK defence electronics industry: adjusting to change

The electronics industry provides components and capabilities that are critical to modern defence requirements. It is anticipated that the effectiveness of both weapons systems and the command and control network that supports military operations will become increasingly dependent upon the electronics sub‐systems they employ in the future. With the ascendancy of ‘network centric warfare’, it seems certain that defence electronics will continue to grow in importance in the future, enabling far‐reaching advances in military capability and efficiency. Yet little is known about the structure, conduct, performance and competitiveness of the UK defence electronics sector as it prepares to meet the challenges ahead. This paper reports the findings of a study commissioned in 2002 by Intellect, the UK defence electronics trade association, and supported by the Department of Trade and Industry. The UK defence electronics industry is found to be a high technology, R&D‐intensive and decreasing cost industry, which is competitive in world defence markets. The UK industry faces major competitive threats in the future from established US and European firms and from potential new entrants from China, India, Israel, Singapore, South Korea and Turkey. The future competitiveness of the UK defence electronics industry will depend on maintaining both technical advantage and open access to the large US market.     

Chains,networks and shifting paradigms: the UK defence industry supply system

Industrial supply chains have emerged as the focus of much economic and business research over the previous decade and defence is no exception. This paper reviews contributions made to the body of knowledge in this field with particular attention given to primary research undertaken on the UK defence industrial supply system. In doing so, the author assesses the quantity and quality of knowledge available to researchers, analysts and policy makers. There have been a number of valuable contributions to the literature and this paper reveals a subject that is extremely complicated, dynamic and yet under‐researched. It is suggested that it may well be this complexity and dynamism, coupled with difficulty in accessing data, that has inhibited research development in this field. Defence industry supply systems are repeatedly referred to as ‘chains’; however, primary research consistently suggests this is a misnomer – the author concludes that future analysis of the UK defence sector must embrace directly the economics of networks if understanding of the same is to progress and industrial ‘invisibility’ is to be avoided.     

‘I have seen the future and it works’: The US defence industry transformation – lessons for the UK defence industrial base

The US has embarked upon a major transformation of its approach to defence industrial base planning. Although bureaucratic and industrial inertia, as well as budgetary constraints, may delay transformation, its effects will lead to radical changes in the US defence industrial base with new entrants and new combinations of players. The UK, with more modest defence ambitions, capabilities and budget, will seek to keep in touch with the US. However, a commercially‐led drive to embed UK industry even more deeply in the US defence market could be the last step in creating a largely US–UK North Atlantic relationship, with much of Europe very much a subsidiary business concern. This contains a risk that the UK will become increasingly dependent on the US for design and integration of major systems and national defence industrial capability focused on a limited number of niche technologies.     

Turkey’s strategic choice: buy or make weapons?

Turkey has been investing in its national defence industrial base since the 1980s. As with other developing countries, Turkey’s motivations for investing in national defence industries can be boiled down to the pursuit of defence autarky, economic benefits and international prestige. However, after 40 years of investment, Turkey is unable to reach the primary goals of defence industrialisation. We argue that three factors are important to understanding Turkey’s persistence in these primary goals. First, Turkey believes that there is an overall improvement in its defence industrial capabilities and the goal of autarky is still reachable. Second, increased defence exports support the belief that Turkish defence industries have become sustainable and the trend will continue in the future. The third reason, perhaps most important of all, has to do with the domestic political gains of defence industrialisation: the AKP uses defence industry and indigenous weapon systems for prestige and, therefore, garners broader support.     

THE FUTURE OF UK DEFENCE RESEARCH

Developments within the UK in the Ministry of Defence’s policy on defence equipment acquisition demand changes in the scale and allocation of the Ministry’s budget for defence research. To facilitate the national debate on those changes, this paper reviews the key questions about UK defence research which the Ministry must resolve in order to implement its new Defence Technology Strategy.     

Globalisation in the defence industry: An exploration of the paradigm for us and European defence firms and the implications for being global players

This paper explores some of the key issues associated with the restructuring of the defence industry. A comparison is made between the US and the European Defence Industrial Bases in terms of the drivers for change and the paradigms within which change has taken place. Having shown that some very important differences exist, the paper then explores the approaches that have been adopted for industry consolidation and references them to the academic literature on mergers and acquisitions (M&As) and strategic alliances (SAs). Given that most of the key defence players recognise the need to be global players, the paper presents an argument that the European firms’ experience of operating with a wide range of forms of corporate alliance will serve them in good stead for operating on a global defence scale. US firms, in contrast, have focused largely on M&A activity.     

South Africa's threat environment: a guide for the National Planning Commission

Abstract

The mandate of South Africa's recently appointed National Planning Commission includes addressing ‘defence and security matters’. This article seeks to outline the central elements of the threat environment facing South Africa in the foreseeable future. It is argued that South Africa faces no meaningful existential threat from conventional military forces but that its security forces will need to be prepared to address possible raids and attacks by conventional military forces both on home soil and on vital interests beyond the nation's borders. Other threats highlighted include the threats posed by potential insurgencies, by terrorism, and by crime, social unrest and banditry. Also addressed is the danger of so-called hybrid threats, in which two or more of the single threat types outlined here are combined. Finally, the article challenges the National Planning Commission to rethink South Africa's policy on peace operations in the light of the need to ensure the safety and security of the nation's citizenry.     

When ties do not bind: the failure of institutional binding in NATO Russia relations

Russia and NATO have failed to establish binding institutional arrangements and they are now locked in increasingly dangerous security competition. A closer look at two issue areas where their efforts at binding have failed—NATO enlargement and missile defence—shows that Russia and NATO find themselves facing a ‘catch 22’. They need binding arrangements to overcome the relative gains problems that inhibit security cooperation, yet their concerns about relative gains prevent them from establishing these arrangements in the first place. To overcome this dilemma, NATO and Russia have to craft binding arrangements that seriously address each side’s concerns about relative gains. Less formal and institutionalized binding arrangements may better serve this goal. Such arrangements will not put an immediate end to security competition, but they will help them build a higher level of trust, allowing them to gradually develop deeper and more comprehensive binding arrangements.     

Research communication

A UK House of Commons Defence Committee (HCDC) Report on the Gulf War recommended that the UK should be self‐sufficient in supporting its Armed Forces in times of crisis and not even rely on its Allies. This recommendation is at odds with UK Government policy which rejects any formal strategy of support for the defence industrial base preferring international open competition as its procurement philosophy. This paper examines the various factors ranging from the supply of raw materials, production capacity, stockpiling, international joint ventures, and competition through to the effects on the technological update of weapon systems resulting from this philosophy. It draws conclusions supporting the HCDC recommendation and calls for joint MOD‐Industry action to address the issues involved and thereby reduce the risks to the Defence of the Realm.     

British and German initiatives for defence cooperation: the Joint Expeditionary Force and the Framework Nations Concept

At NATO’s 2014 Wales Summit, the UK and Germany unveiled two new initiatives for European defence cooperation, known, respectively, as the Joint Expeditionary Force (JEF) and the Framework Nations Concept (FNC). Both were the result of economic pressures and the need to exercise intra-alliance leadership, but they represented very different approaches to cooperation. The JEF was to be a UK-led contingency force for short-notice operations, selectively incorporating forces from allies and partners. The FNC sought to coordinate capability development between groups of allies, centred on larger framework nations, to develop coherent capability-clusters available to meet NATO’s force requirements. The common denominator and novelty of the initiatives was the building of forces and capabilities multinationally by having major states act as framework nations for groups of smaller allies. The UK and Germany have ownership and continue to provide leadership to these initiatives. This is one key reason why they continue to evolve to accommodate changing circumstances and are likely to endure.     

Constraining missile defence†

Assessing missile defence through the prism of offence–defence theory requires primarily an examination of legal and structural constraints on future development. New weapons technology is frequently cited as having the most critical impact on the offence–defence balance. Yet, the method for assessing the introduction of a new weapons technology tends to neglect projected maturity and instead focus excessively on the initial rudimentary capabilities. It is argued here that the North Atlantic Treaty Organisation’s (NATO’s) missile defence is set to incrementally become more advanced in terms of quality, quantity and mobility, which is supported by a strategy that is increasingly favouring offence. As the system gradually enhances the offensive advantage vis-à-vis Russia, NATO categorically rejects any legal or structural constraints on future deployments.     

India–Africa defence cooperation against the backdrop of the ‘Make in India’ initiative

Although India is a major importer of defence equipment, it has also been manufacturing defence equipment for some of its needs. The Government of India’s ambitious ‘Make in India’ initiative for the defence sector aims to achieve self reliance in defence equipment production. This essay explores the opportunities for bilateral arms trade between India and Africa, as a new facet of India-Africa defence cooperation. It covers India’s arms export policy, policy reforms in India’s defence sector, and the opportunities for Indian and African defence markets.     

Defence Procurement Policy: The Way Ahead

Abstract

The Defence Procurement Executive is the single largest customer of British industry and controls some 127 000 contracts. As Chief of Defence Procurement, Dr McIntosh explains the effects of expanding market forces on defence contracts and the suppliers, before continuing to outline the prospects for future competitive contracts in view of the recent cuts in defence budgets.     

Iron Cannot Fight 1 – The Role of Technology in Current Russian Military Theory

Contemporary Russian military theory is dominated by three schools of thought: the ‘traditionalists’, the ‘modernists’ and the ‘revolutionaries’. On the role of technology in future warfare, the traditionalists argue for both high tech and massive forces at the same time. The modernists are ready to trade manpower for technology, whereas the revolutionaries give technology full priority. Both the traditionalists and the modernists believe Russia, because of the country's technological lag and limited resources, should respond asymmetrically to the Western technology challenge. The revolutionaries, on the other hand, maintain that Russia must respond in kind. If not, the country will no longer be able to defend its sovereignty. The currently ongoing radical reform of the Russian military is a partial victory for the modernists, but which model or mix of models that will dominate in the future is first of all dependent on the Russian military's purchasing power and the state of the domestic defence industry.     

Rhetoric versus reality: Canadian defence planning in a time of austerity

As Canada's military mission in Afghanistan winds down and the country faces several years of fiscal austerity, all of Canada's major political parties are agreed that Canadian defence budgets must stay level or be cut. This comes at a time when the defence department is slated to replace the Canadian Forces’ (CF) major equipment fleets. Canada's defence establishment thus faces some critical decisions. One option is to try to maintain its expeditionary capabilities across all three services: army, navy and air force. Absent substantial new infusions of funds, however, this approach is likely to lead to an overall and largely chaotic reduction of capabilities. Another option is to make some difficult choices as to which expeditionary capabilities to maintain as part of a strategic review of Canada's future military needs. Such an option would ensure that Canada has at least some military capacities which can reliably be devoted to the most demanding international operations, while maintaining those capabilities required for domestic duties and North American defence. Pursuing this option would accord with the new North Atlantic Treaty Organization Strategic Concept and the call for “Smart Defense” within the Alliance. This article assesses the arguments for and against the option of specialising Canada's future defence capabilities and explores scenarios as to what a future CF may look like.     

UK firms’ experience and perceptions of defence offsets: Survey results 1

Offsets are a growing feature of international trade in defence equipment. This article assesses the economics of offsets and outlines UK offsets policy. There is a lack of empirical work in the field and the article presents the results of a survey of UK firms’ experience of their involvement in offsets against UK imports of defence equipment. There is also a case study of the AWACS offset programme and an evaluation of policy implications.     

The 1950 ‘Ambassador's agreement’ on USAF bases in the UK and British fears of US atomic unilateralism

The article explores the 1950 ‘Ambassador's Agreement’ (named after US Ambassador Lewis Douglas) about establishing long-term US air bases in the UK. During the discussions British representatives expressed resentment of American pressure and were concerned about the expense that developing the bases for American purposes might entail. There were even fears that Washington might use the airfields to launch an atomic bomb attack on the USSR without regard to the views of the UK government. The British consented to providing the bases because they wanted to enmesh the US further in UK and Western European defence. For their part American negotiators had wanted to further US atomic strategy without delay. Although the agreement imposed no restriction on the use of the airfields, some US officials believed that in a crisis the UK government might try to prevent them being used for atomic bombing missions.     

Transforming the Spanish military

The article analyses the Spanish military transformation. This process started in 2004 as a means to adapt the force structure, organization and capabilities of the Spanish military to meet present and future threats in compliance with NATO’s initiatives, thus ensuring the continuity of the equipment modernization, professionalization and the adjustment of the country’s defence architecture to the post-cold war environment. A decade later, although transformation is still a priority for the Ministry of Defence, limited political will, a lack of strategic guidance, poor resource management and the effects of the economic crisis are compromising its development. This article describes the Spanish military transformation and assesses its value in adapting the country’s armed forces to the current and prospective security environment.