Livingstone recently co-hosted an Aerospace & Defence roundtable with the team at British Growth Fund. The lunch brought together the CEO’s and MD’s of some of the UK’s most dynamic mid-tier Aerospace, Defence and Security sector manufacturers and service providers. With an upcoming UK general election, continuing budgetary squeeze and serious questions being raised about the UK’s ability to defend itself at home and project political influence internationally, the environment for Defence has never been more dynamic. Following a scene-setting talk on the ‘importance of finding good wingmen’ by Air Chief Marshal Sir John Allison, the gathering participated in a lively debate on the threats and opportunities open to UK SME’s in the market. Some of the key messages arising from the debate were:
- UK Defence and Security spend continues to be very tight and DE&S has not been a consistent partner or shown willingness to support significant new developments;
- There is a recognition that the best product at the best price will not always come from a UK supplier and there are conflicting goals for UK Government of buying well but supporting innovation and a national capability in key areas;
- UK procurement remains inefficient and too reliant on key individuals to drive through progress; but
- UKTI Defence & Security organisation is doing an excellent job opening doors internationally for British companies to export technologies, products and services, and is characterised as giving UK exporters a strong extra salesman on the ground in a growing number of key markets.
In addition to the UKTI work, the UK Government’s Defence Growth Partnership (‘DGP’) initiative, which is supported by the MoD, identifies how the UK can continue to modernise and reshape the way it works. Some companies involved have described it as ‘the best thing out of the UK Government’, as it seeks to grow technology capabilities to fulfil real needs. As capital from previous defence budgets has been deployed on initiatives that have been scrapped prior to volume production – this directive answers a key past criticism. The combined result of the above is a lumpy and capricious domestic market (albeit one that is trying to become more efficient) but a growing, and very addressable, international opportunity. Nonetheless, all defence budgets are uncertain and in overseas territories competition can be heavily politicised and is always fierce. Faced with this environment all of our guests, in line with the best principles for success in any business, showed us their businesses are evolving rapidly. Diversification The UK’s Aerospace, Defence and Security SMEs excel in offering innovative, flexible technologies and the highest level of quality assurance possible. These characteristics are proving attractive across a range of sectors including Energy, Medical, Life Sciences and Industrial markets, on a domestic as well as on a global basis. Our guests’ technologies are often more adaptable than even they realised, and have found uses in areas as unusual as satellites and road traffic management. The future of the new UK Defence and Security manufacturing and service base is moving from a small sector of defence specialists to a potentially much larger base of technology companies with capabilities for defence applications amongst many others. Britain has a proud history of innovation, and these SMEs are continuing that tradition to form a growing UK Mittelstand of technology companies that can flex in and out of the Defence sector as and when opportunity rises and budgets exist.