Page 84 - 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

Goldman Sachs refers to a relatively new pool of investment funds that governments, including the
UK’s, are keen to incentivise to drive economic growth. It also describes the breadth of financing
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activities in which firms like US-based Cerberus Capital Management operate. Founded by the
newly appointed US Deputy Secretary of Defence, Steve Feinberg, and with former US Vice
President, Dan Quayle a member of its leadership team, Cerberus’ experience in buying and selling
defence companies (Dyncorp International and Sparton, for example) is distinctive. Like other US
private fund managers (notably Advent International and Carlyle Group, current and former
owners of large UK defence companies), this could, contrary to the UK Treasury’s aims, stunt
industrial and economic growth by making it easier for private investors to achieve superior returns
by arbitrage, where leverage (debt) is an important tool in trading in various asset classes (the
shares of listed companies included) to exploit market inefficiencies.

This makes it important for UK listed companies to promote their stock, to be open to equity
investors located outside of the UK and to use leverage as a strategic tool. Hoarding cash is
unhelpful: private funds will be attracted by unused pools of liquidity.

The more traditional US financial institutions are familiar with and open to financing defence but
it is likely that governmental pressure to locate facilities in the USA will continue. Where output is
sold in US$, this provides UK companies producing in the USA with a “structural” hedge against
adverse fluctuations in the US dollar–sterling conversion rate. US$ sales can be matched with US$
costs. However, operating as a foreign country in the USA also attracts the restrictions imposed by
the ITAR. This presents a barrier to securing the cost benefits of integrating similar business
operations or the production of the same or complementary products, where exports or UK
customers are concerned. Some US companies, RTX for example, use the UK as a location for
supplying ITAR-free equipment and services for both UK and foreign export customers.

2. Selecting the right partners and programmes
Maintaining a dialogue with government on foreign policy initiatives and participating in
developing and delivering export opportunities
This will be particularly important in connection with the EU’s Readiness 2030 through which some
form of defence industrial alignment will be achieved – without jeopardising alliances in the USA.
By building on the foundations provided by existing or recent UK defence export markets such as
Saudi Arabia, Abu Dhabi, Australia, Japan, Indonesia, South Korea and South Africa, UK companies
can develop a role in promoting both defence exports and those associated with industrial
participation programmes both inward (eg; from the US) in the UK and those overseas
The UK is one of perhaps only three European countries with the capability to act as prime
contractor on major export programmes. The significant value of this asset should engage the
wider UK DIB wherever feasible and inform UK trade and diplomatic policy.
3. Integrating, protecting and exploiting Intellectual Property
Maximising the value of Intellectual Property

Ensuring that its incorporation into equipment or support enables access to the widest possible
market or attracts the heightened value that its scarcity merits. Its development and oversight
also needs to be provided only by those employees legally qualified to do so within the country in
which its located.
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07/07/2025 Richard Hooke 2025