Page 64 - 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

comments described as “evidence” to the formulation of Defence Industrial Strategy in 2006. It
seemed to overlook the fact that, whilst major defence contractors operating in the UK could indeed
provide intelligence to the “heart of (UK) government decision making”, they could share this with
their own host governments too - notably French, Italian, American, German, Swedish and Israeli.
“the UK’s DIS provides ample evidence that a powerful military industrial network exists, which if
not dominant, clearly has substantial influence. Senior members of that network move effortlessly
through the system, from senior positions in the defence procurement and R&D agencies to senior
positions in the major defence contractors (and back again) while sitting on important committees,
think tanks and other agencies with direct connections into the heart of government decision
making.”
(British American Security Information Council evidence; House of Commons Defence Committee;
th
The Defence Industrial Strategy, Seventh Report of Session 2005–06 26 April, 2006)
British companies have in turn acquired companies from overseas, notably the USA. Counter-
intuitively, this has resulted in the further relocation overseas of UK assets and technology, with the
USA again the main recipient. London Stock Exchange-listed BAE Systems has remained one of the
world’s largest defence companies but this is primarily due to the fact that 68% of its revenues in 2023
were secured from the US government (up from 23% twenty years ago). So, for over 35 years, whilst
successive UK governments’ policy of competition in defence procurement has encouraged foreign
companies to locate operations in the UK, UK-owned companies have in turn, set up operations in the
US in order to supply the world’s largest market. Since the US$ is the currency of choice in most
international markets, locating operations there is also used as a structural “hedge”, balancing US$
revenues with a US$-denominated cost base.

The consistent pace of corporate activity has shown how the principles based on national defence
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(described in our 2005 paper and which had preoccupied both Sweden’s Olof Lund and his
counterparts across the western world) have progressively been succeeded by the application of
business and financial logic. Along with the decline in the number of UK-listed defence companies in
the world’s top 100, BAE’s profile neatly summarises the shift of the UK’s DIB to the USA, with the
attendant shift of customer influence away from the UK Ministry of Defence to the US DoD.
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In 1996, Olof Lund was Chief Executive of Swedish shipbuilder Celsius. He was concerned about order
cover from the Defence Ministry to ensure that the country could retain important but scarce skills
and knowhow. He realised the potential and importance of overseas sales but was aware that he
would need to work closely with a Swedish government that, like him, had limited experience in
overseas sales. Interestingly, the Swedish Defence Materiel Administration (“FMV”) subsequently
turned to the UK’s Defence Exports Services Organisation (DESO) for guidance.

Over a decade later, exporting defence equipment had become “business as usual” and a Chief
Executive’s role involved delivering for shareholders as well as the nation’s armed forces. Hence, in
2010, one of Lund’s successors in leading Sweden’s defence industry, Saab CEO Håkan Buskhe,
reviewed the “spread” of Saab’s business units across its various market segments. Times had
changed. With a presentation due to the company’s shareholders and equity analysts, he assessed the
performance of each of Saab’s diverse businesses in terms of value creation.

Whilst each of his Saab business heads viewed cash generation and profitability as important
performance indicators, they were less attuned to the level of profitability investors should reasonably
expect of a business trading in its specific market segment. Since shareholder value is only created
when performance exceeds investor expectations, Group CEOs like Bushke need to know which
companies in their portfolio are underperforming against market expectations and which are creating
value. This would inform decisions on allocating capital effectively across the group and on the
cohesion of the portfolio as a whole.

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