Inner strength

Writing in The Guardian in March, Sharon Graham, the general secretary of the trade union Unite, fired a warning shot across the government’s bows over the procurement of replacements for the RAF’s Typhoon fighter jets. Her concern is that the MoD is considering the purchase of US-made F-35 jets, which the Royal Navy already deploys on its aircraft carriers. “Replacing British RAF Typhoons with American F-35swould make a mockery of the prime minister’s promise on British jobs and British skills,” she argued.

The early signs, though, are that the government appreciates the crucial role of domestic defence manufacturers. When Rachel Reeves travelled to Fife later that month, she announced a £2bn increase in direct lending capacity for the UK defence industry, realising Labour’s commitment to increased defence spending while simultaneously highlighting the potential impact for British companies. The defence industry already supports over 430,000 jobs across the UK, most of which are located outside London and the south east. The government’s promise of an additional £13.4bn from 2027 could create even more. The crucial question, then, is how much of this increased spend is likely to go to British companies, including small and medium enterprises (SMEs)?

Studies suggest that investment in the UK defence sector has a strong economic multiplier effect. Oxford Economics found in 2019 that every £1 spent generates approximately £2.20 to £2.50 in broader economic activity. In the case of Sheffield Forge masters, a heavy engineering firm which came into MoD ownership in 2021, the local benefits are already clear. With 725 people in direct employment, up from 650 in 2021 when the MoD acquisition took place, it is now bringing a previously empty site into use as a specialist facility for the manufacture of gun barrels to supply Ukraine. The effect on the broader supply chain has been significant, with local companies including Turner & Townsend, Bond Bryan, Professional Lifting Services Ltd and SP Fields amongst the many who have secured contracts.

While the need to increase production of armaments has been brought into stark relief by the conflict in Ukraine and the volatile international situation surrounding Russia and the US, high-tech warfare (‘deftech’) is an area where the UK already had an opportunity – and perhaps an imperative – to step up and become an international player. Businesses in this sector are often smaller scale, but hugely innovative and agile in a rapidly changing market.

Two such domestic companies are 2iC and GemaSecureLtd. Both are SMEs, with the former offering “digital interoperability in the battlespace with proven off-the shelfs software” that connects otherwise non-compatible systems; the latter “ultra-secure, voice, video, and data technologies” designed to process large amounts of data at high speed. These companies are harnessing the UK’s digital capabilities to ensure we are equipped to defend the country against high-tech threats.

Larkspur International, which offers business support across a number of sectors, is a strong advocate for such SMEs within Labour’s defence industrial strategy. It argues that agile and innovative SMEs can help ensure the deftech ecosystem is dynamic enough to adapt quickly to emerging threats. It supports government prioritisation of UK-based businesses for defence contracts to ensure that SMEs can benefit from increased demand for locally produced goods and services.

Under the Conservatives, there were doubts over the depth of the government’s commitment to national products over other systems, many of which are purchased from the US and require a long-term commitment to operating systems without which they cannot function. For example, in 2021 the MoD decided to equip its new fleet of Boeing AH-64E Apache attack helicopters with the U.S.-made Lockheed Martin Joint Air-to-Ground Missile (JAGM)– rather than, say, the domestically produced MBDA Brimstone missile. Even at the time, this decision attracted criticism for prioritising short-term cost savings and ease of integration over long-term strategic benefits, including jobs, sovereign capability, and operational superiority.

Labour must leave no such doubts. Keir Starmer’s pledged increase will raise defence spending to 3 per cent of GDP in the next parliament, presenting an enormous opportunity to boost domestic industry and create skilled jobs across all our regions. This commitment would be justified by the unpredictable and disrupted international situation alone; but the public may feel it is doubly justified if it does indeed translate into investment in “British growth, British jobs, British skills and British innovation”.

Image credit: Number 10 via Flickr