A sustainable defence export market is seen as a means to preserve and develop industrial capability and secure better value for the UK Ministry of Defence (MOD). There is no denying the logic: with declining defence budgets, export is seen by many as the solution to provide the volumes necessary to sustain national capability and make equipment affordable.
Despite the UK being the world’s second largest defence exporter after the US (with sales of over £56 billion in the last ten years), it is difficult to identify a UK-developed platform in recent decades that has sold to a number of countries. Much of the commercial export success is attributable to one-off, albeit substantial, Tornado and Typhoon sales to the Kingdom of Saudi Arabia. Fundamentally, many UK-built products (for example Type 45 destroyers) are so specific to UK requirements that they are not suitable for export.
To secure more affordable equipment and maintain UK capabilities, export must be a priority consideration that drives the way the MOD and industry work together, in requirements setting, design and the funding of development risk.
This will require a focus on four key areas:
Historically, the approach to export has been to design to meet UK requirements first. This results in bespoke, complex and expensive platforms which do not meet the needs of nations whose budgets are more limited.
The alternative is to design for export first. It sounds obvious but to do this requires a fundamental shift in industry’s business, product development and review processes. Defence firms must fully understand their export customers and markets and establish product strategies that meet these requirements at a market-driven price. The MOD can help by agreeing more flexible, export-friendly requirements in return for lower cost equipment.
Agile and adaptable modular systems can be used to establish a base offering which is tailored for different markets. This approach provides potential customers with a range of options and enables easy upgrades of the capability. To achieve this, systems must be designed primarily for export, with the range of options and upgrades in mind. An early and successful example of this approach is the modular Meko Frigates developed by ThyssenKrupp which has sold 67 ships to 10 countries.
The UK government has announced its intention to buy ‘off-the-shelf’ in future rather than funding development from the outset. To meet this need and achieve the rewards of export, industry may need to take on much more of the development risk than previously. The French firm DCNS has recently demonstrated this approach. The first-of-class Gowind OPV is being built under a DCNS-funded programme; on completion, the ship will be loaned to the French Navy for three years to get a ‘Navy proven’ seal of approval. UK companies may need to be as innovative and bold to compete.
If the UK is to maintain defence industry capability and jobs, industry must work jointly with the MOD to transition to a new export-led way of working. The ‘as used by HM Forces’ seal of approval is vital for export success as products not used by the home customer are unlikely to be successful overseas. The MOD will need to consider export potential in the development of sector and industry strategies. It must also work collaboratively with industry to design programmes and trade requirements in such a way as to support the development of globally successful products in return for more affordable equipment and UK sovereign capability.
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