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

The Five Forces of Americanisation

4. UK Defence Reform

Synopsis
As the world’s defence industry responded to the end of the Cold War, the structure of the UK’s DIB
has been guided by one consistent policy of successive governments, based on two premises, that:
1. industry’s adjustment to reduced global demand should be a “commercial matter for the
companies involved”, and
2. procurement of goods and services by the MoD should be on a “competition first” basis.
This policy implicitly relied on the assumption that financial markets and business practices are efficient
and that their guiding principles generally align with those required to support the UK’s national
defence and security policy. In particular that, regardless of the scarcity or ubiquity of the item being
procured, competition usually delivers “value for money”. This, in turn, appeared to assume that the
international arms market enjoyed what economists call “perfect competition”, free from distortion by
foreign state intervention or third party corruption. The effects of policy have been profound:
1. Structurally, reform has led to the sale, transfer or relocation overseas of UK defence industrial
companies, assets and technology, reducing the size, breadth and diversity of the UK DIB. Leaving
the companies involved to “reshape” their industry has provoked the haemorrhaging of financial
value, capabilities and intellectual property out of the UK. It has increased the UK’s share of the
world’s defence imports and reduced its export market share, degrading an important tool in the
government’s diplomatic initiatives in international trade, peacekeeping and diplomacy.
2. Competition policy has weakened the strength of British companies’ competitive positioning in their
home market, in many cases eliminating the benefits derived from being UK-based, with close ties
to a large, globally-respected, experienced domestic customer and intimate knowledge of its needs.
It has increased UK companies’ general financing costs and undermined their ability to compete on
price against competitors, many of whom are wholly or partly-state owned, enjoying lower finance
costs and have already expensed development costs within completed domestic programmes.
“Competition first” has also required civil servants to execute duties that 20 years of reviews, and
substantial investment in management consultancy have demonstrated cannot be performed
effectively. The fact that there are still handful of UK defence companies in the world’s top 100 is
primarily due to the income generated by their operations overseas, particularly in the USA.
Hence, the evidence over the last twenty years demonstrates that these assumptions were misplaced.

As well as “repeatedly wasting taxpayers’ money” whilst also creating an “adversarial relationship
between industry and armed forces”, reform has, at a time of mounting global tension, left the UK
“unprepared for high-intensity, prolonged conflict”. A significant contributor to national prosperity and
economic growth has been dismantled, with much of it sold overseas.

In 2021, the Boris Johnson government’s Defence & Security Industrial Strategy (and Prime Minister
Rishi Sunak’s subsequent “Refresh” in 2023) defined a new doctrine:
i. ending “global competition by default” procurement policy,
ii. taking an active oversight role in mergers and acquisitions affecting the UK DIB, and
iii. promoting exports through “closer collaboration between government and industry” .

The new government’s One Defence has taken this initiative further. ”Specifically, scrapping “global
competition by default”; recognising the defence sector as a “strategic resource”; simplifying
contracts; making longer-term commitments; …clear signalling to encourage … long-term investment
decisions”. It also identified two categories where the UK needs to retain production onshore: a
strategic category (nuclear, submarines, cyber and crypt key); an “operational independence”
category, and will consider which areas of the defence sector provide the greatest opportunities for
UK comparative advantage and growth.
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07/07/2025 Richard Hooke 2025