03 Dec 2015

UKTI DSO: looking to the future with enthusiasm

Following the recent release of healthy UK defence and security export figures, it is clear that UK businesses are enjoying success in overseas markets. MOD DCB features writer Paul Elliott spoke to Stephen Phipson, head of UKTI DSO, about this success and his plans to facilitate further success in UK defence and security sector exports.

Exports have always been vitally important to the UK defence and security supply chain, and never more so than in recent years when the Ministry of Defence and wider government operated within a more constrained budgetary environment. Businesses across the board have been looking to expand into international markets to sell their products and expertise – and have been highly successful in doing so. The UK is currently the most successful defence exporter in Europe, and indeed is second in global terms only to the US.

UK Trade & Investment’s Defence & Security Organisation (UKTI DSO) recently released its UK defence and security export figures for 2014, giving an insight into the success of UK businesses overseas. The figures reveal that the UK won defence export business worth £8.5 billion and that the UK’s share of the global defence market was an estimated 16%. The statistics also show that the value of UK security exports was £3.4 billion, compared with £3.2 billion in 2013. The UK was ranked sixth for global security (including cyber) exports in 2014, with a market share of 4.4%.

These successful export figures are something Stephen Phipson is proud of. As head of UKTI DSO, his job is to ensure that UKTI DSO’s teams give outstanding support to UK defence and security companies who are looking to export. He also helps defence and security businesses overseas to invest in the UK.

Mr Phipson said: “I was delighted that we maintained our position as the second most successful defence exporter and that the figures for security exports were up by £200 million. It is important, however, to see these as trend figures as exports can fluctuate. It is clear that the global market continues to be competitive and we must continue to support companies in offering value for money solutions supported by logistics and training.  

“It is vital that we have a strong defence and security export performance as it has such a positive impact on the UK economy and also our important defence and security engagements with countries around the world. It is important that companies in the sector look for long-term opportunities while also looking at opportunities for joint ventures and industrial partnerships.”  

UK companies continue to offer outstanding industrial support to the Armed Forces, and the MOD has set out its long-term procurement plan which will help the defence supply chain plan for the future. Many companies have welcomed the Chancellor’s pledge in his Summer Budget to meet Nato’s request to commit 2% of GDP to defence every year until 2020; this comes on top of an increase in the defence budget and a commitment that savings in defence programmes can be invested back into new equipments. Nonetheless, boosting export sales is still high on the agenda for firms in the defence and security marketplace.

Mr Phipson has been head of UKTI DSO since February 2015, coming to the post full of ambition. He says his main ambition for UKTI DSO is for it to be the best defence and security export department in the world. The three sectors UKTI DSO primarily works in are defence, security and cyber. It is also heavily involved in the work of the Defence Growth Partnership (DGP) – a government and industry collaborative effort to boost defence sales overseas.

Mr Phipson explained: “We’ve got some very interesting new approaches in the way we’re doing defence, one of them being the Defence Growth Partnership initiative. The DGP is a really big ministerial supported programme where we identify partners that we’re not just selling equipment to, but actually co-developing capability with.

“We are putting an emphasis on that in the longer term, and we are meeting people who are very interested in participating in that from an overseas country point of view so we can co-develop and then get our industries more imbedded in their climates. It’s another way forward, so that’s quite interesting. We’re also interested in being on the services provision availability side of exports; this is not just about exporting ships and aircraft, it’s about how we make these things available at a much higher rate than competitive nations are doing.

“We’ve developed really good structures in the MOD for doing that, and we’re selling well in that regard to overseas governments. So that’s another angle to accelerate what we’re doing in defence, because if you look at defence exports it’s pretty much been flat for the last five years. We’ve got a good position, a strong position, but globally defence budgets are under pressure.

There are many barriers facing businesses and nations across the globe who aspire to advance their defence capability. Part of the challenge for the UK is to think of ways to work with them in their efforts, and Mr Phipson believes part of this is about indigenous manufacturing and the UK supporting others to grow their own defence industries. He says a lot of nations are starting to do this and questions where the UK’s participation is in that process. He would like to see UK companies setting up in such countries, helping develop industry there. So what markets does Mr Phipson see this happening in?

He explained: “There’s a bit of that happening in the Gulf. Also, in Turkey we see a strong local defence industry that has been supported by British industry for many years, and very successfully, so there’s a good two-way street there. My message on the defence side is that it’s now about much more than simply selling MOD equipment to other countries. This is a way forward to sustained growth, and also a way forward to imbed us in those countries and defence infrastructures effectively.”

The main export initiatives currently in development will see UKTI DSO continue to support Typhoon programmes in the Gulf and Far East as well as future requirements for training aircraft. It is also supporting helicopter programmes, border protection, medical and of course programmes in the security sector, including cyber. UKTI DSO has reported in its ‘Official Statistics’ that the global growth rate for the overall security sector remains bullish, with an anticipated growth rate of 11.5% to 16.3% between 2014 and 2019; this expansion is largely powered by the burgeoning cyber sector which is expected to generate growth of 16.7% to 23.7% between 2014 and 2019.

In security the UK is seeing strong growth being regarded globally as a world leader in certain sectors, a prime example of which is aviation security. If you walk around any airport in the world you’ll see British equipment at checkpoints and surveillance areas and particularly in the all-important integration of command and control.

Mr Phipson commented: “We’re world leaders in integration. The way we integrate systems together, the way we provide things like border security protection programmes at major events such as the Olympics, and the technologies we use to string that together, has created a lot of interest from other countries.

“We’re seeing that sustaining as well as a good 10% a year growth in the security sector, which is about another £2 billion a year of exports, compared to about £8-9 billion of exports in the defence sector, so it’s smaller but growing substantially.”

Then there’s cyber security, an ever-expanding market in which the UK is exporting successfully with aspirations for further growth. In cyber UKTI DSO’s role is about facilitating government-to-government discussions, rather than working in areas like the business-to-consumer market, which is largely focused on solutions such as anti-virus software. At government level UKTI DSO provides capability to protect countries’ critical national infrastructure like energy assets and railways systems. Mr Phipson says cyber has been a really successful area over the last 12 months with growth approaching 20% a year in this sector.

All of this success is built upon a strong marketplace. Mr Phipson is particularly impressed by the export ambitions shown by UK defence suppliers. He explained: “I am always impressed with the desire and commitment from companies both large and small to export their expertise and innovation. Many companies, however, still do not export their capabilities and it is important that we do all we can to help them by offering advice on their priority countries and ensuring that our staff in the UK and in the Embassies and High Commissions advise on opportunities.

“I have really enjoyed the opportunity to work in government as well as engaging with both prime and smaller companies. I have also enjoyed the opportunity to meet overseas governments to discuss their requirements and also the performance of UK companies. I still have a lot to achieve and I look forward to the future with enthusiasm.”   

UKTI DSO’s aspiration is that all defence and security business areas will see an increase in exports going forward. Mr Phipson says it is important that the UK not only maintains its position in current markets but also looks at emerging markets in North Africa, Asia and South America. There is a strong drive to ensure that opportunities are identified as soon as possible and that work is supported across government and with companies to win business against the UK’s competitors.

For more information, visit: www.gov.uk/government/organisations/uk-trade-and-investment-defence-and-security-organisation