Page 40 - 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

“The messages delivered by Washington in recent weeks come as the EU takes steps to boost
Europe's weapons industry, while potentially limiting purchases of certain types of U.S. arms.
“In a March 25 meeting, Secretary of State Marco Rubio told the foreign ministers of Lithuania,
Latvia and Estonia that the United States wants to continue participating in EU countries' defense
procurements … Rubio said any exclusion of U.S. companies from European tenders would be seen
negatively by Washington.
“(according to) a senior State Department official… Trump welcomes recent efforts from European
allies to "strengthen their defense capabilities and take responsibility for their own security," but
warned against creating new barriers that exclude U.S. companies from European defense projects
… Transatlantic defense industrial cooperation makes the Alliance stronger".
WASHINGTON/PARIS, April 2 (Reuters)

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Consistent with its disciplined application of the ITAR to control the flow and use of defence
technology, the new US government also seems intent on remaining the world’s pre-eminent arms
supplier, controlling both its accessibility and its ultimate use. Hence, whilst urging the EU to spend
more to defend itself, the US does not intend to stand by while Europe becomes self-sufficient -
developing and supplying its own arms. Nevertheless, US actions currently appear to have galvanised
Europe into a concerted effort to become a major collective force, independent of US support. And,
in the process, becoming a more powerful competitor in the global arms industry.
The US administration has shown the ability to flex or even reverse previously adopted positions and
so it may yet take action to persuade Europe that it is unnecessary for Readiness 2030 to proceed as
currently planned. Even so, most UK defence companies would appear to be well positioned:
operating in the US whilst based in Europe but outside the EU.

From a financial perspective, suppliers to the DoD can secure multi year contracts, providing the
longer term visibility of earnings important in financing working capital. In 2025, the US Research,
Development, Test & Evaluation budget set in March, 2024 by then President Joe Biden stood at just
under US$143 billion out of a proposed total spend on defence of US$850 billion. In contrast, in
2023/24, the UK’s total expenditure on defence was £54 billion, with Research & Technology
accounting for £2.6 billion.

UK contractors have long regarded the US market as open, accessible and efficient within which to
operate. For defence security reasons, the DoD requires British companies to establish a proxy board
of directors, comprising US nationals, to manage their activities in the USA. On occasion, the DoD may
determine that management responsibility can be discharged through a Special Security
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Arrangement (“SSA”), enabling a combination of both British and US nationals to act as directors of
the US business. The SSA does, however, restrict the nature of the information that can be disclosed
to non-American board members. According to former BAE Systems Chief Executive, Mike Turner,
these arrangements work efficiently, allowing decisions to be made with “the highest levels of
assurance and integrity in some of the most sensitive fields of national security provision.”

This was not always the case and UK companies remain vigilant. In 1987, UK-listed defence company
Ferranti plc merged with American-listed The International Signal & Control Group. According to the
UK National Archives, two years later, it was found that Ferranti had been defrauded of approximately
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£215 million on “non-existent contacts and incorrect valuations ”. For UK companies, this aspect of
doing business in the USA, plus the impediment to exports and integrating operations that the ITAR
can present, is one of very few barriers to entering a technologically advanced, influential and
sustainable world-leading and overwhelmingly attractive market.

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07/07/2025 Richard Hooke 2025