Page 17 - 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

Without government and regulatory intervention, the increasing influence of financial markets is likely
further to emphasise the inequality of the “special relationship”. Particularly significant is the
development of large, diversified private fund managers whose activities now span a broader range
of investment, lending, asset management and other financial services. They have the freedom to act
outside of some of the constraints of public limited company regulation and global credit agency
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ratings orthodoxy, as Advent International has demonstrated in the UK over the last five years . The
focus is on the short term, with an attitude to ownership and risk subordinated to a more aggressive
use of debt linked to substantial financial rewards. The appointment in March 2025 of the co-founder
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of one such (highly successful and defence-savvy) US fund management firm as the 36th Deputy
Secretary of Defense of the United States could herald a very significant change in the scale and
breadth in US corporate merger & acquisition activity. Especially in the UK, where the flow of industrial
assets to the USA is well-established.

Whilst the UK DIB is smaller than twenty years ago, its investment plans, governance and development
of overseas markets now need to be challenged, supported and strengthened by its domestic
government. There are less British-owned defence companies than twenty years ago and this has
depleted UK taxpayers’ and shareholders’ funds, whilst hollowing out the London Stock Exchange’s
skills, experience and support for financing defence. This has encouraged those remaining defence
companies based in the UK to operate in the USA, relocating, acquiring or developing operations there
and developing business with the US DoD. If their ownership remains in Britain, this could be to the
UK’s benefit. However, the UK DIB is an asset that now requires the structure and guidance implied
by the UK government’s One Defence.
According to SIPRI, BAE Systems remains the sole non-US member of the world’s top six largest
defence contractors. That said, at the half year, 2024, around 50% of BAE’s revenues had been
achieved in America (up from 37% in 2005), with less than a quarter of its sales in the UK. Even so, it
means that the UK still has the on-shore sovereign ability to act as a prime contractor: probably one
of arguably only three European countries with this capability. As part of a resilient DIB, this is crucial
in maintaining an integrated peacekeeping policy that links trade, diplomacy and defence. Whilst the
prime contractor operates at the apex of a nation’s DIB, it also provides the fulcrum of multinational
defence and security export programmes, usually involving a range of contractors from various
nations.
In 2025, with the forces of Americanisation taking on a more insular and confrontational aspect, the
UK and the rest of Europe are compelled to develop a new order through which to secure peace and
prosperity. The US security platform, relied upon by Europe since World War II, has been engulfed by
the flames of America First.

As the world now adapts, the influence and authority of America’s financial institutions has come to
the fore and its country’s leadership blurs the lines that have, at times tenuously, separated
government and business. In defence, without firm government direction, the future of the UK’s
industrial base is more likely to be determined by business leaders and corporate financiers than by
its elected politicians. With Lockheed Martin missing out on the US NextGen fighter, bankers will
already be modelling some form of Lockheed-BAE merger. The UK government should decide whether
this would be good for Britain before any such news hits the press … likely to be during a summer
recess.

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07/07/2025 Richard Hooke 2025