Page 87 - 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

ii. Confirming an effective oversight regime to control and deploy as necessary the UK defence
and security technology/IP base

Both to audit the UK’s current “stock” of technology/IP, together with any restrictions
regarding its use, and to evaluate the control systems governing the sharing or transfer of such
technology or IP within companies operating across national borders and between companies
as part of a merger, acquisition or some form of strategic alliance. This may require the
development of a UK version of the US ITAR. It may also require a visible change in governance,
applying equally to US and other overseas countries owning defence assets in the UK and
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similar to the USA’s “Special Security Agreement” (“SSA”) .
2. Sustaining an effective Defence Industrial Base (DIB)

The war in Ukraine has demonstrated the importance of the DIB (the ability to supply ammunition,
equipment and technical support) in the UK’s foreign affairs and ultimately to its own security. It
follows that any changes in the nation’s DIB should be intentional.

It therefore follows that an understanding and appreciation of other, broader but significant
factors should inform R&T, sourcing and procurement policy in future: from force projection,
scarcity or differentiation to sources of national competitive advantage (eg: supplying Anti-
Submarine Warfare sonobuoys to the US Navy), export potential, derivative innovation, intellectual
property or knowhow, and the effect on national defence industrial infrastructure (eg: professional
and regulatory bodies, UK legal and financial structure). The USA’s Department of Defense (“DoD”)
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February 2022 report on the “State of Competition within the Defense Industrial Base” is a useful
reference. It not only sets out the criteria by which M&A transactions should be assessed from a
DIB perspective but also provides guidance on how and when “the antitrust agencies can
implement behavioral or structural remedies”. One Defence has broadened the scope
i. Foresight and prevention – sustaining effective oversight and being proactive in taking steps
to anticipate, avoid or even exploit the opportunities for change provoked by potential
corporate failure
Ministers should not be expected to block or review mergers or divestments already publicly
announced. In a country that values its defence capabilities and knows how to use them on
the world stage, any potential corporate activity needs to be fully considered by all the
appropriate stakeholders. Early. Hence there needs to be an “early warning” system.

Whilst supplier monitoring is common practice in most business corporations, according to its
Chief Executive, the UK Civil Service has been an exception. The collapse into liquidation of
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government contractor Carillion plc in January, 2018 is a notable example of both the need
to be vigilant in assessing the potential for corporate failure (even if it applies to a company
listed on the London Stock Exchange) and of the potential for even the most senior levels of
Civil Service management to ignore evidence of a developing crisis.
Both Ultra and Cobham had been heading for either restructuring or repositioning for several
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years. This could be detected from public sources , let alone from attending investor
presentations and roadshows given by the respective management teams.
The solution ultimately prescribed by the principal shareholders in both cases was an urgent
and dramatic intervention: to replace the Chair and most of the board and to appoint a new
team with a mandate to realise or rebuild value quickly. This is symptomatic of a governance
regime that has failed. In both cases, the need for recovery or repositioning could be
anticipated some years in advance. Such anticipation would be enabled by consistent
monitoring, using both quantitative and qualitative data routinely made available to the public
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and used systematically by financiers and company analysts . This should provide the

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