Defence Industrial Policy: Procurement and Prosperity, HC 163
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Defence Committee Oral evidence: Defence industrial policy: procurement and prosperity, HC 163. Tuesday 23 June 2020 Ordered by the House of Commons to be published on 23 June 2020. Watch the meeting Members present: Mr Tobias Ellwood (Chair); Stuart Anderson; Sarah Atherton; Martin Docherty-Hughes; Richard Drax; Mr Mark Francois; Mr Kevan Jones; Mrs Emma Lewell-Buck; Gavin Robinson; John Spellar; Derek Twigg. Questions 56 - 116 Witnesses I: Nigel Whitehead CBE FREng, Director, External Relations, BAE Systems plc; Peter Ruddock CB CBE FRAeS, Chief Executive, Lockheed Martin UK; Avril Jolliffe, Director, Strategic Business Development, Thales. II: Paul Everitt, Chief Executive, ADS; Andrew Kinniburgh, Director General, NDI; Michael Formosa, Managing Partner, Renaissance Strategic Advisors. Written evidence from witnesses: Lockheed Martin UK (2017-19) & (2019-21) ADS (2017-2019) & (2019-2021) Thales (2017-19) BAE (2017-19) MAKEUK/NDI (2017-19) Examination of witnesses Witnesses: Nigel Whitehead, Peter Ruddock and Avril Jolliffe. Chair: Welcome to this Defence Committee hearing. This is our second evidence session in which we will be examining the challenges of doing business with the MoD from the industry perspective. It will also explore implications of Covid-19 for the defence industry and the attractiveness of the UK defence market for investment. I am very pleased to welcome six panellists. Our session will be divided into two. The first panel includes Nigel Whitehead, who is the director of external relations at BAE Systems, Peter Ruddock, chief executive of Lockheed Martin UK, and Avril Jolliffe, director of strategic business development from Thales. Our second panel is Paul Everitt, chief executive of ADS, Andrew Kinniburgh, director general, NDI and Michael Formosa, managing partner at Renaissance Strategic Advisors. Ladies and gentlemen, you are more than welcome this afternoon. Thank you very much indeed for your time. We will move to the first panel straightaway. Q56 John Spellar: What would you say are the key features of an effective defence industrial policy and strategy. Quite frankly, as far as you can see, does the UK have one? Nigel Whitehead: Thank you for the invitation this afternoon and the opportunity to contribute. The features are that we need a clear, unambiguous articulation of the future equipment plan and a statement about the industrial footprint and involvement that the MoD would expect of its defence industry. Through that, there needs to be visibility of the major programmes, to individual equipment levels, whether it is sensors, radars, power plant and so on, and a statement of what is intended. Industry then has an opportunity to respond to that, in terms of organising its skills, resources and technologies, sorting out its time to market and setting up for export. As part of it, you would hope for an articulation of the willingness to collaborate and work with industry to discuss the set-up of a long-term pipeline in each area. The terms of trade should be articulated, with a view to attracting investment and securing the returns for the businesses that get involved. Along the way, the Government’s support for export should be established, therefore establishing the case for industry to be involved. Do we have one? In parts, there are elements that exist today, but clearly, as it stands today, there are some bits missing in that jigsaw. Where we do have a strategy, we are greatly enthused by it. The example I would give is the combat air strategy, articulated in the middle of 2018. That makes it very clear what the path is for the development of combat air capability in the UK. That has already attracted significant investment from industry, so it works. We know where the employees are who work on the programmes and they are actually resident in some 500 constituencies all across the country. We are already energised, activated and working as a result of that clear articulation. As we move into the integrated review and the defence and security industrial strategy, we hope for that certainty around the key programmes across land, sea, air and data security. We hope for an articulation about global Britain as a provider of defence and security capability. We hope for an articulation of the sovereign capability, the visibility of those long-term plans, a procurement system that is perhaps simpler, agile and collaborative in its nature with industry, and of course a platform on which we can contribute to that lofty objective of having 2.4% of the country’s GDP spent on technology and R&D. Avril Jolliffe: Thank you very much for inviting me today. I very much support much of what Nigel has just said. As a technology company, we believe the industrial strategy’s overarching imperative needs to be focused on how we support platform lethality, survivability, availability and affordability. There is a real need right now to reflect on some of those technologies that are going to be required for defence over the next 30 years and many of those additional technologies that we see already in our day-to-day lives. We are very much focused on what the future operational advantage might need to be. We believe it will be focused at the sub-system and system level, as opposed to platforms. We think that any new industrial strategy needs to drive investment in those key areas, like cyber, space, electronic warfare, AI, robotics and autonomy. The operations that we will be facing in the future are likely to be in grey-zone warfare or indeed even on a critical national infrastructure. Alignment around the recently published Defence Technology Framework would be a huge step forward. That would really play into some of these transversal technologies. Thales is a company that is slightly more civil than defence, so we very much see that the market dynamics in some of the civil technologies, such as AI and cyber, are moving much faster than defence. Any strategy needs to focus on how they can be pulled forward into defence and be exploited, and in particular how we can find cost-effective ways of building on civil technologies that are already available. Peter Ruddock: I will add three quick points. From my perspective, and I think from a lot of the industry’s perspective, an effective policy would be supported across Government. There are three things that need to be clearly articulated. The first would be to identify which aspects of capability need to be developed onshore and, importantly, why. Opportunities for international co-operation need to be identified. Finally, we need to define prosperity and how it will be considered as part of procurement. Q57 John Spellar: Mention has been made of the fact that you are both civil and military, and so is your supply chain. At the moment, with the collapse of much of the engineering and technological industries, is there any scope for the Government to bring forward orders and projects in order to drive products and therefore the supply chain? Nigel Whitehead: It is a very clear yes to that. The defence industry in the UK is essentially centred around many of the regions. There are active programmes in land, sea and air. The industry stands ready to accelerate the activities on those programmes. You can see a fantastic revitalisation of the economy, the creation of skilled jobs, the investment in technology and the creation of great capability for the UK and its allies through that process. We are very enthusiastic about the role that the defence industry is going to play in this vital stage of getting the economy back on its feet. Q58 John Spellar: Does your ultimate customer need to be accelerating that level of purchases in order to drive that process? Nigel Whitehead: Yes. There is a simple dynamic that would make that work. We have to look at what can be funded. We have to look at the nature of how we would ramp up those programmes. We can see many opportunities to do that and would welcome that conversation. Avril Jolliffe: I have a very quick point. Not only should the Department be looking at ways of accelerating some of the competitions it already has in train and compressing some of those timescales, which would be so exciting and helpful to us as an industry, but also starting to think about what sort of technology demonstrator programmes might be available for us to start building some UK IPR that we could take out into the export markets and also support the MoD in shaping some of its requirements going forward. Q59 Mr Jones: Do you not think that there needs to be a bit of a change in mindset? You have, for example, very good contracts, such as the advanced munitions contract up at Sunderland, at Washington, with BAE Systems. The Government are looking at putting that out to competition now again, after a very successful 10 or 15-year programme. Are there not good examples like that where it will not actually take anything, in terms of spend from Government, to have an impact? They could roll over contracts or give some certainty to industry that those contracts could continue. Nigel Whitehead: Yes. We are at a point where there is a “get real” moment, where we can act quickly. As a nation, we can make some decisions about what we ramp up. We can also send a signal to our foreign partners and collaboration partners, on programmes such as Tempest, that we are serious about these programmes. We can get on and make the decisions and have that immediate effect, so we would welcome that.