14 Mar 2017

Brexit: what will it mean for the defence industry?

Here we preview the appearance at DPRTE of Professor Trevor Taylor of RUSI, who will present an expert view on Brexit and its impact on the UK defence sector.

Brexit means Brexit, we are told, but what will it mean for defence acquisition in the UK?

This is a question which will be addressed at DPRTE in the Live Keynote Arena by Professor Trevor Taylor, Professorial Research Fellow at the Royal United Services Institute (RUSI).

At RUSI, Prof Taylor heads up a research programme in Defence, Industries and Society, and is a member of the Acquisition Focus group which publishes regularly in RUSI Defence Systems.

He is also Professor Emeritus at Cranfield University, where he still teaches, and where he was head of the Department of Defence Management and Security Analysis from 1997 to 2009. He also works regularly for the Naval Postgraduate School in Monterey, where he is an adjunct faculty member.

He speaks and writes regularly at conferences on defence acquisition and management. A joint author of a book on the UK defence industry, he was for six years an elected council member of the former Defence Manufacturers Association (DMA).

He was previously Professor of International Relations at Staffordshire University and from 1990 to 1993 was head of the International Security Programme at the Royal Institute of International Affairs (Chatham House) in London.

At DPRTE, Prof Taylor will argue that the UK’s decision to leave the EU injects a large degree of uncertainty into many aspects of life in the UK – not least in the field of defence acquisition.

He says: “In uncertainty, the need is to identify the different possibilities that could emerge with some assessment of their probability, as opposed to simply identifying what looks the most probable and assuming that will prove to be the case.’’

Prof Taylor believes that the impact of Brexit will be felt not just in the next year or so but across the whole of the period covered by the current Defence Equipment Plan and beyond.

He adds: “The impact of Brexit on defence will also interact with factors in the wider world, including political developments in the US and Russia, and other internal defence matters including the cost of the deterrent.

“Much depends on whether the depreciation of the pound proves to be a sustained phenomenon and what will be the development of GDP over the next decade. My presentation will present some basic calculations to illustrate the scale of the potential importance for defence of these matters.’’

Prof Taylor points out that after Britain’s EU referendum result last summer, the pound fell against the US dollar by around 15%, a decline which, if sustained, would inflate the cost of the UK’s defence imports by around £700 million a year from 2018/19, representing about two per cent of the total defence budget.

Unless there is another significant shift in exchange rates, these extra costs could be difficult to avoid, given the continuing support costs of in-service imported equipment for purchases made since 2012 – including the Rivet Joint fleet and additional Chinooks – and the commitments to buy 138 F-35s, in addition to the replacements for the Reaper and Apache fleets, and nine P-8A aircraft. On this basis UK defence imports would be running at least $10 billion a year.

Prof Taylor believes there will be other defence implications to Brexit, apart from cost.

He says: “A major element of UK procurement has involved working with partners in Europe. In some ways Brexit could lead to increased cooperation in this domain, but risks to defence projects must be recognised from the manner in which the negotiations on the UK’s separation from the EU are conducted. The potential significance of linkage politics should be discussed.

“Clearly, the UK network of political relations and the finance available for defence will have significant implications for defence businesses in the country, both UK and foreign-based.’’

 

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