Page 60 - 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

places them at a disadvantage to foreign rivals, then a listing their shares in the USA will be an
attractive option. Or simply de-listing all or parts of the company from the London Stock Exchange and
taking the company private, where funds are more freely available and substantial personal financial
gain is likely within a few years.
With nations across the world anxious to strengthen or rebuild their indigenous defence industries, the
Johnson government published a significant revision of UK policy in its 2021 DSIS. It included specific
provisions which could stop or restrict foreign acquisitions of UK defence companies. This policy is likely
to be an important feature of the Starmer government’s Defence Industrial Strategy to be published in
the autumn of 2025.
This reflects the UK’s hesitancy in acting when faced with change reported in the House of Lords in
2024. (“Ukraine: a wake up call”): the UK’s declining competitiveness in the world defence market was
evident 20 years ago. While still one of the world’s biggest spenders on defence, it is now a shrinking
industrial player, financing a growing share of the world’s defence imports and losing its position as a
leading global defence exporter - together with the international influence that the trade in defence
equipment affords. The experience of which is likely to be missing from all of those now in government.
Indeed, the next major intervention in UK Defence Reform may come from the UK Treasury. It has
launched a consultation on relaxing the rules governing alternative asset managers, a category that
includes private equity and hedge funds. Intended to relax rules addressing compliance and reporting
“red tape”, the need for transparency and the reserves required to cover potential losses, it seems likely
to place publicly-listed companies at a further finance-raising disadvantage to their private
counterparts. It would certainly seem to encourage the further use of arbitrage in further hollowing
out the UK DIB

In the meantime, should another UK listed defence company - BAE, Babcock, Chemring or Rolls-Royce
for example - attract bids from US acquirers in the future, a reference to the Competition & Markets
Authority or Cabinet Office is unlikely to deliver the most advantageous outcome for UK Defence. By
that stage, the “grooming for sale” has been completed, the parties have all but agreed the deal, the
financing is in place, the compensation, the fees, bonuses, paintings in the boardroom, the deposed
leader’s next job: all have been worked out.
With an emboldened new US President, advised by a new cadre of experienced fund managers and
hungry to cut deals, acquiring an influential component of the UK DIB would appeal on many levels:
not least as a tool for introducing Coercive Dealmaking, the new American realism, into European
defence and security industrial affairs. With Lockheed Martin missing out on the US NextGen fighter,
bankers will already be modelling some form of a Lockheed-BAE merger. The UK government should
decide whether this would be good for Britain before the news hits the press … probably over a summer
recess.

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07/07/2025 Richard Hooke 2025