UK set to become ‘minor player’ in defence export market

Britain is set to become a net importer of defence equipment for the first time since the civil war in the mid-17th century, according to a new report, underlining long held concerns about the country’s declining manufacturing base.

Analysis by the research firm IHS Markit forecast that from 2024 Britain would become a “minor player” in the global defence export market owing to what it described as “planning and investment failures in its domestic defence industry”, exacerbated by Brexit.

“Based on existing orders and import backlog the UK is now set to become a net defence importer at a system level by 2024 for the first time since the English civil war,” said report author Ben Moores.

The report said the UK’s defence industrial policy was to acquire capability “at the lowest possible cost, often regardless of potential domestic partnership or offset work”.

“This policy led to the end of the vehicle industry over the past decade and is now set to see the UK’s aviation sector lose large segments through lack of domestic offset from foreign manufacturers. Brexit will accelerate this trend.”

UK defence companies including BAE Systems and Babcock International have traditionally been among some of the largest manufacturers of aircraft, warships and tanks.

BAE Systems has a lead role on the Eurofighter Typhoon programme and Britain has sold 72 jets to Saudi Arabia, one of the UK’s largest defence exports customers. Another potential order, for an additional 48 jets, has not yet been finalised. Longer-term, however, concerns have focused on Britain’s reliance on foreign companies for the next generation of fighter jets to replace Typhoon. America’s Lockheed Martin is the lead contractor on the F-35, the new stealth fighter that flies from the UK’s two new aircraft carriers. BAE holds a 15 per cent stake in the programme and makes the rear fuselage section in Lancashire.

Defence experts believe continued work on the F-35 and investment in a UK-led planned sixth-generation fighter, dubbed Tempest, is critical if Britain is to retain key industrial capabilities. France and Germany on Wednesday announced they were moving ahead with plans for their own next generation jet.

The IHS Markit report painted a gloomy picture as contracts for major pieces of defence equipment and weapons systems tail off in the coming years.

“The UK is set to become the fifth largest market for defence imports, despite being traditionally outside the top 10 importers,” the report said. The defence secretary Gavin Williamson launched a refreshed industrial policy in December 2017 which highlighted recent moves to shore up the industry, including the national shipbuilding strategy.

BAE won a multibillion pound contract to supply nine of its Type 26 warships to the Royal Australian Navy last year. The victory was a coup for the company, but while UK design and engineering teams will be involved, the ships will be built in a government-owned shipyard in Adelaide and few jobs will be created in Britain.

A report by the former defence minister Philip Dunne said that on average the sector generates £7bn of exports each year.

Francis Tusa, editor of Defence Analysis, said that to grow its share of the global export market in the coming years the UK would have to focus on high end equipment which could not be produced more cheaply by new players like Turkey, South Korea and China.

“If the UK is to return as a serious player in defence exports, we cannot compete for the lowest common denominator,” said Mr Tusa. “We have to go high end.”

The IHS study also underlined the emergence of Qatar as a key importer of defence equipment, with the country jumping to ninth position globally after only entering the top twenty importer list in 2016. France is predicted to overtake Russia as the world’s second-largest exporter in 2020, with annual exports due total $7bn, driven by sales of the Rafale fighter jet.