UK Defence Industry: Procurement

Wednesday 22nd June 2022 Westminster Hall

11:00

[Philip Davies (in the Chair)]

People may have noticed that because of what I, as a Yorkshireman, consider to be oppressive heat, I am not forcing Members to wear a jacket in this debate if they would prefer not to.

[Fay Jones (Brecon and Radnorshire) (Con)]

I beg to move,

That this House has considered procurement and the UK defence industry.

It is a pleasure to see you in the Chair, Mr Davies. I should start by declaring an interest, in that my partner is a serving member of the armed forces and currently deployed overseas.

When the UK left the European Union at the beginning of 2020, the Conservative Government had the chance to deliver a stronger, better, independent Britain, built on the principles of sovereignty, security and prosperity. Two years later, the UK has time and again proven that it has done that, most recently through our instrumental support of Ukraine in Europe’s most significant war in recent memory. The importance of the UK armed forces has been highlighted in a way that cements their vitality and necessity and confirms that the UK can now retain its autonomy and sovereignty, further bettering our nation.

Away from the confinements of the European Union and the European procurement directive, we can commit to improving and harnessing the potential of UK defence. Procurement of defence weapons is critical to strong armed forces. Procurement of high-quality, trusted, organically sourced defence weapons is instrumental in world-class armed forces. Each year, the Ministry of Defence spends billions of pounds buying new equipment and supporting existing equipment for the armed forces. That is a substantial amount of money, but never before has ensuring that our defence capabilities are world class been more important. There are challenges to acquiring defence equipment: it is expensive, complex and subject to politics. However, locally sourced, organic procurement is a sure way of supporting the British armed forces, our local communities and our allies.

In the last two years, the Government have significantly altered their priorities, as attested to by the integrated review, the defence Command Paper and the defence and security industrial strategy. In accordance with the DSIS, the UK is adopting a new strategic framework for the MOD’s procurement and acquisitions programme. That will be a dramatic but necessary change. No longer will we follow the policy of competition by default. Instead, we will adopt a more flexible approach that assesses procurement on a case-by-case basis. By outlining our strategic imperatives, such as nuclear and offensive cyber, the Government recognise that there is a strength to retaining defence industries on UK shores. That not only aids us from a national security point of view, but allows businesses to direct their innovation to areas where the Government have demonstrated an interest.

In my constituency of Brecon and Radnorshire, the armed forces are celebrated widely. In my constituency, I am proud to have Brecon barracks, the home of the Army in Wales, and to represent the strong military community that comes with it. In fact, I think I am one of the few Members of the House whose constituency has RAF, Navy and Army sites.

In addition to having the barracks, we are fortunate to be home to innovative defence procurement businesses. This week, I have had the pleasure of speaking to Compact Orbital Gears, based in Rhayader, and Charcroft Electronics, both of which work in the defence procurement industry. Each deals with different elements of the defence procurement supply chain, and produces and distributes to major companies in the UK and abroad. Charcroft Electronics is a distributor and manufacturer of electronic components and specialises in high reliability and harsh environments. It supports programmes such as Typhoon and the Brimstone missile system, which is being deployed in Ukraine. It is proud to be a 100% UK-based company, and it employs 76 people in Wales, plus a further four in England—they are not lucky enough to work in Wales. Charcroft Electronics and Compact Orbital Gears are excellent examples of British companies working to better British security by supplying to our defence industry. UK companies working for UK national security is a strength, the fact of which should not be minimised.

The invasion of Ukraine has laid bare the strength of our armed forces, and it is right that we are proud of that and continue to use our strength to remain a key voice in NATO and ensure the safety of our partner countries. Our seat in NATO and every other major organisation, such as the G7, the UN Security Council and the G20, proves our multilateral influence and should inspire the Government to further commit to British procurement for British security, to protect us and to continue our international influence. To do that, we must keep supporting the UK defence procurement industry. To do that, we must keep supporting the UK defence procurement industry. We will be supporting not only ourselves, but our allies and, critically, the communities that rely on that industry.

[Dr Luke Evans (Bosworth) (Con)]

My hon. Friend is making a fantastic speech. We have seen a sea change in procurement, and the results are coming through on the ground. I have MIRA in my patch, which is involved in Spiral 3 and the development of unmanned ground vehicles. The benefit of the way the UK system works is that it allows new, small-scale entrants to build up and move into procurement, which they have not been able to do before. That is a step change, and we are leading the world in that sense. Does my hon. Friend believe the Government should do more to allow more entry from local businesses? Local supply networks, such as the one in Leicestershire, in which we all build together as a community, will give us agile procurement fit for the future.

[Fay Jones]

I completely support my hon. Friend’s point, and I am delighted that Compact Orbital Gears in my constituency works closely with MIRA in his constituency. That is the type of arrangement that the Government should be facilitating, and I fully endorse his words.

I firmly believe that, as my hon. Friend pointed out, that if we support the UK’s small and medium-sized enterprises and harness our international influence, the UK has the potential to be the defence marketplace for our NATO partners. We have the intellectual prowess and manufacturing capability to become the hub for defence innovation globally. I understand from Charcroft Electronics that it has seen an increase in trade with our European partners due to its profile in UK markets, and it is looking to expand its production due to demand. To quote its director, orders from German and UK customers

“have gone through the roof”,

and it is at capacity until the end of next year.

Charcroft has demonstrated to me that there is a clear sense of security in a country knowing that its parts are not stored or being built abroad, and therefore potentially subject to disruptive geopolitical shocks. It is harnessing its influence at home and abroad to work closely with other UK defence businesses and those in our neighbouring countries. It is engaging in research and development for future defence programmes. Charcroft’s success is obvious and well deserved, and I am grateful to the Government for committing to supporting SMEs across the UK via the SME action plan, so that we can improve engagement and ensure that the whole defence supply chain is guaranteed the quality and service delivered by our UK businesses.

While I commend Charcroft, Compact Orbital Gears, and other businesses across Wales that are supplying the defence sector, there are limitations on procurement in UK defence. To continue the success and development of those businesses, we need to ensure that our skills-based economy is up to scratch, so that it matches our intellectual capacity. It is apparent that there are limitations on growth due to the difficulty in hiring highly skilled individuals in rural areas. I welcome the Government’s commitment to investing in our defence sector, and recognise their commitment to apprenticeships, which will combat skilled jobs shortages. I understand from ADS Group, a trade organisation for companies in the UK defence sector, that around 5,000 apprentices are employed in that sector. That is evidence of a budding workforce.

However, in constituencies such as mine, the picture is different. There are myriad reasons for that; in rural communities, problems include inaccessibility and a lack of connectivity. Charcroft told me that despite its best efforts,

“apprentices are hard to come by.”

We need to be committed to nurturing our home-grown talent, so that we can strengthen our defence industry, and so that businesses can expand and develop easily without that anxiety.

[Mr Marcus Fysh (Yeovil) (Con)]

Does my hon. Friend agree that the new medium helicopter programme is a very good example of how we can support skills development, and the sustainment of those skills—particularly design skills—in the defence manufacturing sector? My college in Yeovil works closely with Leonardo to provide apprenticeships in exactly the sorts of areas that my hon. Friend is describing, and if the MOD becomes the reference customer, there is a massive opportunity for major export business to be done off the back of that in future. That would sustain jobs throughout Wales and the south-west, as well as the wider UK.

[Fay Jones]

I certainly agree with my hon. Friend; I saw that when I was part of the armed forces parliamentary scheme and went on a visit to, if not his constituency, somewhere very near it. A key part of the Government’s levelling-up agenda is their doing whatever they can to remove the barriers to recruiting and retaining talent in rural areas. I would really like that extended to the defence procurement sector. It is by investing in the next generation that we will harness our talent and ensure that the UK remains the epicentre of defence in Europe, a position that has been solidified in recent months.

Just outside my constituency, in Merthyr, the Ajax armoured vehicle programme is being developed. The site employs 600 people and is considered a key employer in the area. It employs highly skilled people, many of whom live in my constituency. I understand the difficult position the Government are in on the future of Ajax. It is extremely expensive, and continuing with a project that continually reveals design flaws is sub-optimal to say the least. I fully understand that the Government are in a difficult position, but we would all like an end to the uncertainty about the future of Ajax. There is a real opportunity for further investment in this skillset, so that we can overcome the issues that we have seen. Home-grown talent breeds better security. I understand that Ministers are looking closely at Ajax, but closing that program would have some negative consequences, as I know the Minister understands.

The prosperity review of 2018 suggested that prosperity should be taken into consideration when deciding on procurement contracts. As DSIS outlines, in order to ensure a prosperous, secure Britain, we should encourage the placing of contracts with UK suppliers, rather than buying from overseas suppliers. If we factor in the local prosperity arising from training, jobs, further opportunities for UK exports and increased industrial productivity, UK defence spending can be used to the greater benefit of the wider economy and the many local economies that have a part in the UK’s defence industry.

There are undeniable benefits from ensuring that procurement for the defence industry operates and develops within the UK. I would like the same logic to be extended to the operational ration packs that our military use on active duty. The Minister will remember those ration packs probably slightly too well. One of the reasons why I sought to secure this debate was that my kitchen is full of leftover ration packs from various exercises across Salisbury plain and the Brecon Beacons. Going through them one day, I noticed that the majority of the food we give our soldiers does not come from this country. I understand that we are dealing with a particular need; soldiers certainly do not have the time to eat a three-course meal, nor would they want to. We have to consider operational needs. We are looking to keep our military personnel fed, but it is important that they are well fed.

Anything we can do to use more of the high-quality, nutritious food that we produce in this country should be celebrated, and it would further extend the Government’s commitment to working with UK businesses. I understand that the country of origin of each ingredient in the ration packs is considered. So too is our national security, as it should be. It would be fantastic if the Government looked to extend their commitment on UK defence procurement to cover the food that we give our armed forces. I have previously drawn attention in this House to food security. I am delighted that the Government recognised the importance of domestic food production in the food strategy published last week. It is time we extended our self-sufficiency beyond defence equipment to the food we give our armed forces. I hope that the Minister will consider that issue in his response.

I am extremely proud of this Government’s record on British procurement in the defence sector; it is of vital importance to jobs and prosperity in my constituency. I leave the Minister with two clear points. First, in order to sustain the prosperity that the Government are determined to deliver, we should remove the barriers that companies working in the defence procurement space face in recruiting apprentices, and in recruiting from rural areas. Secondly, the Government should complement their commitment to food security by increasing the amount of food for our armed forces that is sourced in Britain, in order to ensure secure and prosperous armed forces.

11:14

[The Minister for Defence People and Veterans (Leo Docherty)]

I am pleased to respond to this important debate and very grateful to my hon. Friend the Member for Brecon and Radnorshire (Fay Jones) for securing it. This is Armed Forces Week, so I would like briefly to reflect on the important contributions of our military, especially the Welsh elements, in recent times.

Last summer, we saw the magnificent performance of the Royal Welsh in helping to evacuate refugees from Afghanistan during Operation Pitting, and during covid we saw the remarkable performance of the 160th (Welsh) Brigade, which came to the fore delivering personal protective equipment and driving ambulances. We also have the incredible RAF pilots at RAF Valley. The home of excellence in the British infantry is, of course, the school in Brecon, which I know very well, to my own discomfort. I am very pleased that in recent times we have been able to reaffirm our absolute commitment to Brecon barracks. Of course, we are grateful to my hon. Friend and note her energetic campaigning on behalf of Brecon barracks.

That decision, coupled with our plans for Future Soldier, with an upturn in the percentage of our forces based in Wales, and an announcement of contracts worth £695 million to support the Hawk T2 in RAF Valley, as well as the opening of the new Royal Navy Reserve base in Cardiff Bay, to the tune of £11 million, reaffirms our commitment to Wales in the context of UK defence.

However, as my hon. Friend rightly pointed out in her eloquent remarks, that military presence delivers not just security, but local prosperity. In 2019-20, Ministry of Defence direct expenditure supported more than 5,000 Welsh jobs, and just last year we spent £866 million with local industry, which equates to £270 for every person in Wales. That just gives a sense of the scale of the level of investment in Wales.

Of course, defence is a UK endeavour; it is not just about Wales. So I should point out that in Scotland the equivalent expenditure was £1.99 billion, driving forward our remarkable Trident programme, which delivers our unique and magnificent deterrent capability. In Northern Ireland we delivered £64 million of expenditure. For the whole United Kingdom we delivered £20.5 billion just last year.

I should also declare my particular interest, because in my constituency we have the birthplace of British aviation as well as the home of the British Army, in the shape of Farnborough. The remarkable excellence of UK defence industries as a whole will be showcased magnificently during the Farnborough air show next month. I hope that all right hon. and hon. Members will be able to join me and others at the Farnborough air show to celebrate the remarkable standard of excellence and the economic contribution that the defence industry makes to the prosperity of our constituents.

[Dave Doogan (Angus) (SNP)]

Reflecting on the point that the Minister has just made, I wonder whether he would like to express his esteem for the 10,000 manufacturing jobs in Scotland that support defence operations in the United Kingdom as they take effect across the world and, in so doing, recognise that those jobs are not a benevolent charitable gesture; instead, they are a reflection of the skills and expertise that exist in education, manufacturing and engineering in Scotland, and they are an indispensable component of the procurement process. Will he also reflect on the fact that the UK manages very well on several platforms—whether Typhoon; its predecessor, Tornado; or its successor, Tempest—to work very well with other nations in defence procurement?

[Leo Docherty]

Yes, indeed. I join the hon. Gentleman in commending, and reaffirming our commitment to and admiration for, those 10,000 defence jobs. He rightly points out that they exist because of the standard of international excellence that those workers achieve, particularly as part of our deterrent. I hope that he will take a public opportunity—maybe not now, but perhaps in future—to put on the record his commitment to the deterrent. It may not be easy for him to do that, so I will move swiftly on.

[Dr Julian Lewis (New Forest East) (Con)]

Before the Minister moves swiftly on from the deterrent, I would like to take him back to aerospace. In the past he has been generous with his time and has met me to discuss the subject of the war widows, a subject that falls more within his own bailiwick. I have been trying to get a meeting with his colleague, the Minister for Defence Procurement, my hon. Friend the Member for Horsham (Jeremy Quin), so that a British-based aerospace firm can show him a presentation that greatly impressed me when I chaired the Defence Committee. I have no financial or commercial interest in the company concerned, but I am worried that independent, smaller companies get squeezed out by the big operators, and I would not ask for such a meeting if I did not think that company had something important to offer to defence.

[Leo Docherty]

I am happy to recommit our determination to ensure that SMEs are a part of our collective success. I am sure that the Minister for Defence Procurement will be delighted if I commit on his behalf to him meeting our right hon. Friend.

My hon. Friend the Member for Brecon and Radnorshire mentioned Ajax. We entirely understand the concerns that she has expressed and we have made no secret of the fact that it is a troubled programme. Despite those troubles, we are proud to be in Merthyr Tydfil because of the excellence of the workforce. I can offer some reassurance, in the sense that the Secretary of State for Defence and the Minister for Defence Procurement continue to meet with our commercial partners, but the bottom line, very clearly, is that we will not accept a vehicle that is not fit for purpose. I am sure that my hon. Friend the Minister for Defence Procurement will keep colleagues updated as progress is made.

I agree entirely with the main thrust of the speech we heard from my hon. Friend the Member for Brecon and Radnorshire, which was about supporting SMEs as an integral part of our supply chain. They are indeed the lifeblood of the Welsh defence industry. She referred to the fact that there has been a growth in the proportion of supply they make up, which I am pleased about. We want to increase the proportion of defence expenditure that goes into SMEs to 25% by the end of this year.

That will not happen by accident. It is happening because we are fortunate to have many SMEs who are agile and producing products that we absolutely want. My hon. Friend mentioned Charcroft Electronics and Compact Orbital Gears in her constituency. They are two very good examples of first-rate SMEs. I should also mention Radnor Range Ltd at Presteigne, which provides range facilities for the testing and evaluation of weapons and is another good example of a first-class SME with which we partner.

My hon. Friend can rest assured that institutionally we will continue to support companies big and small, and we have strategies such as the defence equipment plan, and the defence and security industrial strategy, which colleagues will be familiar with, alongside subsector plans to provide industry with the transparency it craves in order that it can clearly understand what capabilities we need and then respond to that.

As my hon. Friend mentioned, we are also using the opportunity provided by our departure from the European Union to develop better defence and security procurement regulations, which will be tailored to better meet our own needs. That will lead to the Procurement Bill, which will replace the existing set of complex public procurement ordinances with a single uniform framework. It will be simpler to use for both the Ministry of Defence and suppliers and it will make the acquisition process much faster, helping to unleash the innovative potential of British businesses. That is a concrete and important legislative step forward, which I am sure colleagues will welcome.

Our Department is also doing all it can to encourage larger defence primes to invest in and develop SMEs. As my hon. Friend pointed out, our refreshed SME action plan, which we launched at the beginning of the year, will be pivotal to this work. We are doing that to help smaller companies maximise future business prospects, ensuring that we can maintain an agile supply chain, which will help us meet the evolving threats that we face. To help innovative companies succeed, we have ringfenced £6.6 billion for research and development spending. That money will help industry produce the kinds of game-changing capabilities that are necessary to keep us ahead of the curve of innovation.

My hon. Friend mentioned exports. I was pleased to hear about the company that has a full order book. We commend that, and we are trying to do everything we can to offer more export opportunities to a greater number of players. We have committed to developing a standardised commercial mechanism for Government-to-Government defence and security sales, which should make it much easier for customers and partners to do business with us.

My hon. Friend mentioned operational ration packs. I confirm that I do know them through a great deal of personal experience, and I am actually a big fan. When it comes to procurement, it is only right that we have a nuanced approach. For some generic procurement, we are bound to a degree by public procurement regulation, but British food, of course, needs no introduction and has the competitive advantage of being great value for money. That is borne in mind more broadly across defence for not just the operational ration packs, but our provisioning for the entire defence establishment. We are reviewing the way we feed our force, and access to fresh, local British produce will be a key component of that. I am grateful for her remarks on the matter.

On skills, I applaud the apprenticeship programme that my hon. Friend mentioned. I have similar programmes in my own constituency, and I am pleased to confirm that we are working with the Department for Education to develop STEM programmes in local schools and colleges. I hope hon. Members would agree that the RAF has been ahead of the game on that matter. I am pleased that my hon. Friend the Member for Yeovil (Mr Fysh) mentioned the success of the commercial and institutional partnership that takes place at Royal Naval Air Station Yeovilton—between Leonardo, the Royal Air Force and local schools—to drive the collective success of the Fleet Air Arm and the Commando Helicopter Force at that critically important Royal Navy air station, which one of the busiest air bases in Europe. I am grateful for his comments.

I want to be clear that we are absolutely on the same lines. We are excited about the prospect of a greater number of SMEs being involved in the collective success of defence procurement. It is an exciting and innovative time for defence investment, driving forward the kind of operational output we need to fulfil our ambitious plans in the Future Soldier programme and the defence Command Paper. It is sensible to say that defence procurement not just in England but in Wales has a very bright future indeed.

Question put and agreed to.

11:27

Sitting suspended.