Page 9 - Five Forces of Americanisation Richard Hooke 04072025 final post SDR1

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

Although global spending has more than doubled since 2005, the USA is pressing its allies to spend
more, even while it challenges the values that have bound its nations together and, in the Middle East
and Ukraine, prefers taking unilateral action to collectivism.

The UK is not the only country being forced to re-examine its defence policy as a result of America
First. European thinking is shifting and a completely new approach to its collective security is evolving
3
with startling rapidity. Whilst John Hamre and many Americans might think this well overdue, the
early signs are that the EU’s “Re-arm Europe - Readiness 2030” has taken the US by surprise. Far from
4
applauding EU plans for investing in the capacity for self-defence, US Secretary of State, Marco Rubio
announced that “exclusion of US companies from European tenders would be seen negatively by
Washington”. Adding that “Transatlantic defence industrial co-operation makes the Alliance
stronger”, he expressed one of many seemingly contradictory policy statements emanating from the
new US administration.
The UK government has announced initial findings of its Strategic Defence Review (“SDR”), having
previously, in October, 2024, announced changes indicating a shift towards what Defence Secretary
5
John Healey called “One Defence” : “cracking down on waste and boosting Britain’s defence industry
… clear in its goals and consistent in its methods, to make Britain secure at home and strong abroad.”
The SDR addresses a very different defence industrial landscape compared with the post-Cold War era
of 20 years earlier. There are fewer British-owned defence companies quoted on the London Stock
Exchange and, for most of these, the US Department of Defense (“DoD”) is now the most important
customer. Increasingly, the USA has also been viewed as the more favourable market for locating and
financing operations. This is reflected in the higher values that investors place on US defence
companies compared with UK counterparts. This has in turn prompted two significant acts of
arbitrage, where a US private equity firm used significant levels of debt to acquire, break up and then
sell the constituent parts of two publicly-listed UK defence companies (Cobham and Ultra Electronics)
to non-British acquirers between 2019 and 2021. As well as US publicly-listed companies like Eaton
and TransDigm, buyers of Cobham’s individual business units included Thales, 27% of which is owned
by the French government.
As Parker Hannifin demonstrated in acquiring UK-based Meggitt plc in 2022, New York Stock
Exchange-listed companies are also alert to opportunities to buy UK companies. Given the US
government’s recent decision to award Boeing the F-35 successor NGAD contract, bankers in New
York and London will no doubt be assessing Lockheed’s export plans for the F-35 and preparing a case
for combining its combat aircraft activities with BAE Systems’.
Successive UK governments over the last twenty years have endorsed a “free market” approach to
defence industrial development. They have consistently regarded the structure of the national DIB as
a “commercial matter for the companies involved”. Calculated or not, this approach has predictably
driven UK defence companies towards the world’s largest defence market: the USA. In so doing, UK
companies have, of necessity, reduced their reliance on UK defence spending. This has altered the
balance of power between the MoD and those of its suppliers with major markets outside the UK.

9
07/07/2025 Richard Hooke 2025