Page 15 - Five Forces of Americanisation Richard Hooke 04072025 final post SDR1

The UK Defence Industry in the 21 Century
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The Five Forces of Americanisation

Overview

Since 2019, successive UK governments, provoked by conflict in Europe and the Middle East,
heightened tensions in the Far East and an emerging new world order provoked by new US foreign
policy, have published three reviews of its Defence Strategy. Together, they project an understanding
that modern peacekeeping is built on three basic pillars: i) trade, ii) diplomacy and iii) military power
or defence. Put simply, the ability to project and, when necessary, to use military power in support of
sustaining peaceful co-existence through both trading and through maintaining positive relationships
with foreign countries. Sustaining an appropriate balance between idealism and realism, the source,
according to former UK Foreign Secretary, Douglas Hurd of “continuous and striking tension” in US
foreign policy, relies on those three pillars functioning in a co-ordinated, interdependent manner.
In highlighting the importance of these three pillars, the 2025 UK DSR has in turn stressed the
importance of a nation’s Defence Industrial Base (“DIB”), not only in defending itself against the threat
of war but also in forging and maintaining those international alliances that support and preserve
peaceful coexistence. As new government policy evolves over the next few months of 2025, three
issues should influence its development:

1. Ownership of the DIB is a crucial asset. A nation’s ownership of its defence industry, either through
its subjects and institutions, including the state itself, as shareholders, provides the freedom to
act independently of others. It can deploy and supply weapon systems produced indigenously
where, when and why it sees fit.
Since Russia’s invasion of Ukraine, this capability has become a particularly important objective
for nations across the world, from central Europe and the western Balkans, to Australia, Canada
and many of the EU’s smaller nations. Unlike the USA, most countries, the UK included, cannot
afford to own an entire defence industry. It must therefore make informed choices regarding what
capabilities must be sustained by UK-owned sources and how best to maximise control and
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direction of those provided by foreign suppliers, either on-shore or via imports.
2. Whilst they finance and supply most of the arms and equipment required in the western world,
the world’s contemporary business and financial communities have not been designed to operate
in a manner consistent with preserving national security or enhancing national prosperity.

Realising shareholder objectives, reinforced by substantial personal rewards for senior corporate
executives and directors, is the primary business goal. This will generally involve delivering
financial value: a return on invested capital. International financial markets reward the delivery of
such value. The time value of money and the synchronisation of the world’s financial markets now
offer executives and shareholders the opportunity to realise huge financial gains through
arbitrage: buying, breaking up and selling companies to generate large one-off gains in cash. With
global defence spending at a record high, new sources of private finance are emerging,
encouraging speculation, arbitrage and the promise of huge personal wealth.

Private institutions now have the ability to influence (and possibly shape) national security and
foreign policy, conflict resolution and a nation’s prosperity. But only as a bi-product of generating
returns for shareholders.
3. Overseeing, maintaining and optimising the DIB’s capabilities and their development is an
important government responsibility. In particular, the ability to determine how best to finance a
sector where growth is seemingly guaranteed, where ownership provides technological control
and where the regeneration of knowledge and skills, and the delivery of funds for reinvestment
are vital components of national defence.
Government fulfils a number of important roles: as a customer, regulator, risk manager, as a
channel to export markets and as a potential investor. These roles require co-ordination if they
are to be fulfilled both effectively and in the best interests of the country.

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