A major win for UK industry’: Defence industry representatives hail new MOD scheme to create defence inward investment.
Industry representatives have lauded the announcement by the Government’s new Defence Industrial Strategy to create a new scheme to drive UK economic growth through a defence inward investment scheme when buying defence equipment from overseas.
The Defence Industrial Strategy, published this week said that the MOD will launch a new defence inward investment scheme known as ‘offset’ next year – arguing that the policy “can be an effective way to create opportunities for firms to enter global supply chains, boosting the domestic industrial base, creating jobs and supporting economic growth”.
Director General of Make UK Defence Andrew Kinniburgh has described the announcement as a “major win for UK industry”.
The trade body, which represents over 700 SMEs in the defence industry, has been campaigning for the UK Government should draw inspiration from 53 other developed nations with similar policies such as Norway, Poland and South Korea and adopt a defence inward investment plan, or offset regime, as a central pillar to the UK’s growth mission and to strengthen our industrial capacity.
Earlier this year, Make UK Defence argued that such a scheme could allow up to 90% of the economic value of defence contracts going overseas to go back into the UK economy over a ten-year period, unless it was deemed necessary for national security reasons. Companies could achieve this in multiple ways such as creating new UK jobs, utilising UK supply chains with both large and small businesses, creating novel technologies and investing in skills training and apprenticeships.
Make UK Defence point to the successes other countries with similar policies such as Poland, which secured $6bn (£4.4bn) in inward investment following their F-16 acquisition in 2003. In 2023, the country also secured £200 million inward investment from the WILSA anti-aircraft and anti-missile programme.
The trade body now want to ensure the MOD utilises the new defence inward investment scheme to incentivise the utilisation of SMEs in the defence industry and to support industries supplying critical raw materials the Defence Industrial Strategy identified as critical to UK Defence, such as steel and semiconductors.
Make UK Defence Director-General Andrew Kinniburgh said: “The MOD’s commitment to design a new defence inward investment plan – something Make UK Defence has spent months campaigning for – is a major win for UK industry.
“By adopting this plan, the Government will deliver more work for UK based companies, including primes, mid-tiers and SMEs, and help to fulfil the defence dividend – unlocking private investment in UK jobs, skills, and supply chains across the nations and regions.
“We look forward to continuing to work closely with the MOD to ensure the new defence inward investment plan delivers for all of industry, including SMEs, and boosts economic growth across the UK.”
Dr. Graham Hoare, CEO of Manufacturing Technology Centre (MTC), comments on the Government’s Defence Industrial Strategy: “This announcement is not just good for defence, it’s a strategic boost for the entire manufacturing sector.
“The Defence Industrial Strategy will bring government and industry together, aligning plans to strengthen the UK’s industrial capabilities with delivering the country’s security needs and driving economic growth.
“The strategy will give industry the confidence to invest in new technologies and skills, that will enhance productivity, strengthen supply chain resilience, support small businesses to scale up and create high-value jobs across the country.”
On working with the Government, Sir Rick Thompson, MTC’s Managing Director for Defence, says: “As part of the High Value Manufacturing Catapult, we are committed to working with the Government through a new Alliance with the Ministry of Defence to unlock the potential of businesses across the UK manufacturing supply chain. MTC stands ready to help accelerate innovation, deliver industrial transformation and equip the next generation with the skills the industry needs to thrive.”
Andrew Carwardine, Defence Senior Partner at RCK Partners: “With the publication of the Strategic Defence Review, it is clear that R&D must sit at the heart of UK defence strategy. The pace of modern conflict, as shown in Ukraine, demands that we out-innovate our adversaries. That can only happen if we invest effectively in R&D.
“Over the last 25 years, UK defence has shifted, with fewer tanks, ships and aircrafts, but with each one more powerful. However, we’ve fallen short in making sure those platforms work together seamlessly in a multi-domain environment. The Review’s focus on new structures such as the National Armaments Group is an encouraging step towards solving this, but will need to be backed by a strong, well-funded innovation pipeline. Currently, the UK Defence Industrial Base is incentivised for efficiency, not resilience and that needs to change.
“Ultimately, there needs to be a whole government response to national resilience of which Defence forms part, but not all of the solution. Building national resilience will require coordinated support across government, and that includes bolstering support for innovation funding within the sector. Emerging technologies like AI offer huge potential that can’t be realised, unless there is the right environment for UK industry to develop and deploy them at speed. The Strategic Defence Review presents a timely and vital opportunity to put R&D at the centre of our national security strategy and prepare UK defence for the future.”
ADS CEO Kevin Craven commented: “The primary purpose of defence and security is to protect and deter – but in doing so, the value we provide to the economy is increasingly critical to innovation and prosperity. Our members – the manufacturers and service providers behind the UK’s deterrence capability – are proud of all that we deliver for people, innovation, and security.
“This afternoon’s long-awaited Defence Industrial Strategy is a remarkable moment on that journey, and for the 180,000+ people driving our sector forward. Defence businesses are at the heart of local communities: our sector drives social mobility and prosperity through the high proportion of jobs we provide to people from all walks of life. Significant investment in wider skills packages, alongside the £250 million investment in Defence Growth Deals, will be critical to maintaining both our defence posture and the talent that delivers it.
“Exports from the UK’s defence and security sectors have doubled in the last decade. UK-made capability is in demand, and any way that government and industry can work together to speed up this process is welcome.
“Our modelling, as noted by the Minister for the Armed Forces in his statement to the House, indicates that increases in spending could generate an additional 50,000 jobs and £8 billion in value to the UK economy. Effective delivery of the Defence Industrial Strategy will deliver a whole-of-society benefit. Industry stands ready to play our part.”
Image: Editorial credit Alex Segre Shutterstock.com
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Vicky has worked in media for over 25 years and has a wealth of experience in editing and creating copy for a variety of sectors.
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