Expand the military industrial base

Rishi Sunak
Rishi Sunak

Rishi Sunak has placed the British defence industry on a “war footing”. The phrase conjures up images of munitions and aircraft factories churning out shells and Spitfires more than 80 years ago. But even if the pace will not be as frenetic, the motivations are not dissimilar. Britain in 1939 was unprepared for the conflict to come and had to ramp up its manufacture of the armaments needed in short order or face calamity.

The Prime Minister is right to say we must not be found wanting again after a lengthy period of military retrenchment. Since the end of the Cold War, governments of both stripes have been happy to spend the so-called “peace dividend” running down our Armed Forces and decimating our defence industries as contracts dried up.

Mr Sunak says he wants to fire up the UK defence industrial base by spending at least an additional £10 billion over the next decade on munitions production. This would be invested in the UK, delivering high-quality jobs and ensuring 
rapid production capacity and stockpiles of next‑generation munitions.

These are commendable ambitions but recent history suggests they will only be achieved with the application of political will, clear goals and tight controls over costs and standards. The reality is that purchasing by the Ministry of Defence has become a byword for waste and inefficiency.

Mr Sunak, in Berlin for talks on a new Anglo-German partnership yesterday, wants to see radical reforms of defence procurement and a new Defence Innovation Agency to ensure the UK is at the cutting edge of modern warfare technology. At least 5 per cent of the defence budget is to be committed to research and development.

Defence firms need certainty of future orders and yet in an election year these cannot be guaranteed. Labour has not matched the Government’s commitment to increase defence spending to 2.5 per cent of GDP by 2030, though it is a stated aim “when conditions allow”. That will not be good enough for investors in defence companies.

Investment, too, needs to expand. Corporate Britain’s obsession with environmental, social and governance (ESG) means that defence is seen as off limits for many funds. Yet supporting arms companies is a moral endeavour. The defence industry contributes to our national security, defends civil liberties and delivers long-term returns for pension funds. It is time investors recognised this and got behind it.