3. 3
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4. 4
Introduction
After visiting frontline Afghanistan in July 2009, the Chief of Armed Forces remarked that the
Army would need more helicopters and boots on the ground
• Would it be able to retain full spectrum of conventional capability while fighting ongoing
global war on terror (GWOT)?
• Or, Would they have to eventually give up some of the conventional prowess in favour of
specialist capability to fight current and future GWOTs better?
AND
The Royal United Services Institute (RUSI), a prominent security think tank, has revealed that the
UK defence budget would face cuts by 10 to 15% (approximately $6.6 to $9.9 billion) during the
period 2010 to 2016
AND
The UK defence budget is already running at £35 billion over budget YTD, accumulated primarily
from programme slips and procurement of urgent operational requirements (UORs)
What does this mean for UK MOD and
the UK defence industry?
5. 5
Revisiting Equipment Need for Ongoing War
After visiting frontline Afghanistan in July, the Chief of Armed Forces remarked that the Army
would need more helicopters and boots on the ground
• The Army needs more soldier protective gears, IED- busters, MRAPs, helicopters and
communication gears, including other elements of situational awareness.
• The government should contemplate recruiting more troops going forward and find ways
to retain them
• The Ministry of Defence (MOD) needs to put more frontline lessons into practice in order
to procure the right equipment at the right time.
GWOT
The UK government is under
constant pressure to put more
troops and right equipment on
ground for the Operation Telic in
Helmand province, Afganistan
High rate of casualty in the
warzone suggests that more
measures need to be taken for
developing specialist
equipment, capability and
tactics
The daily business of Whitehall
(UK government administration)
does not reflect the urgency of
the frontline, complained an Ex-
General
Most casualties occur from
Indigenous Explosive Devices
(IEDs) when troops are
vulnerable during foot and
vehicle patrols
6. 6
Can the Budget Support it?
Budget Cuts
A possible £1.5 billion budget cut
in 2010-11 means more cuts
might follow with the prospect of
a future Tory Government
The cut is expected to be in line
with the overall government
spending cuts, which is
estimated to be 11% in real
terms (inflation-adjusted) during
the same period.
It is believed that the UK MOD
can no longer afford budget for
building both the capabilities
with equal emphasis.
The soaring public debt means
that the government would pay
more on debt servicing than its
defence budget from 2011
The Royal United Services Institute (RUSI), a prominent security think tank, has revealed that
the UK defence budget would face cuts by 10 to 15% (approximately $6.6 to $9.9 billion)
during the period 2010 to 2016
• The downward pressure on budget until 2016 and the priority of acquiring specialist
capability means eventual cuts on conventional capabilities are more realistic
• US DOD thrust towards building specialist capabilities – at the expense of standing
programs such as F22 Raptor and Transformational Satellite Program (TSAT), among
others, is also impacting UK MOD’s procurement decisions.
7. 7
How about £35 Billion over Budget Hangover?
• The review of ongoing programmes for possible cutbacks reflects the downward pressure
on future budgets.
• The UK Government is looking at government-to-government deals to pass over the
slashed number of equipment (such as Euro fighters, Type 45 Destroyers, among others), so
as to avert penalty accruing from contractual obligations and let the programmes run as
planned
Programme
Over Runs
The Institute of Public Policy
Research (IPPR) predicted that a
thorough review of current
weapon programmes might aim
at making cuts worth £24 billion
It is estimated that MOD
suffered £6 billion in various
projects YTD. The UORs are
the other substantial
contributors for the total of £35
billion YTD
The Type 45 Destroyer project has
experienced setbacks, with the six
ships now costing £6.46 billion, an
increase of £1.5 billion (29%). ISD
slipped from 2007 to 2010.
The Future Aircraft Carriers
project suffered £1 billion
increase in the cost of £5 billion
for two
The UK defence budget is already running at £35 billion over budget YTD, accumulated
primarily from programme slips and procurement of UORs
8. 8
What Does all this Mean for UK MOD?
UK MOD
As the Armed Forces need
thorough restructuring, Gen. Sir
David Richards, the new Chief
of the Army has emphasized
specialisation as the way forward
at a RUSI land warfare
conference on June 25, 2009.
A recent report by the Institute for
Public Policy Research urged the
government to consider restructuring
of the military, in order to focus on
specialist capabilities as part of a
deepening European defence
integration and the wider NATO
alliance.
Malcolm Chalmers, the Professor
of Defence and Foreign Policy at
Kings College of London, has
questioned about the type of
armed forces that can be afforded
by Britain during the mid to long
term.
Finding the real balance between
capabilities and addressing
conventional threat, besides
asymmetric warfare is something
MOD needs considering a thorough
review on
UK Defence Strategy Needs a Thorough Scrutiny
• It is no longer affordable to fully prepare for confronting two contrasting set of threats and
hence, needs a clear strategy in terms of resource sharing and deepening of alliance.
•The MOD needs to demonstrate character in doing away with some of the conventional
capabilities (such as Trident) in favour of more boots on the ground
•
9. 9
What Does all this Mean for UK MOD?
(Contd…)
The drop of the Trident replacement programme alone would result in savings
of approximately 6% of the budget every year, totalling to £70 billion over the
lifecycle.
• Future carriers
• Type 45 destroyers
• Trident nuclear system
• Joint strike fighters
• Euro fighters
• Cyber warfare
• C3I systems
• Civilian-military
stabilisation and
reconstruction force
Conventional Capabilities Specialist Capabilities
Major Shift in Future Allocations as Restructuring Usher in
IPPR estimates £24 billion worth of
equipment cuts through a strategic
review of all defence programmes
The cut would be partly offset by
an additional investment worth
£3 billion in sectors listed below
during 2009 to 2016.
10. 10
Outcome: Increased acrimony between services
might jeopardise Armed forces battle worthiness
As the Air force played a lesser role in the Iraq and
in Afghan war, there might be a sizable cut in the
budget. Programmes such as JSF, Typhoon,
Tornado, MRA4 would continue to be affected
Increasing the number of troops, equipment and
helicopters is currently the most important need for
the Army, as demanded by the frontline. Therefore,
any budget cut for the Army is least likely
Services
Least Affected
Army
Air Force
Navy
Most Affected
Navy
Most Affected
Source: Frost & Sullivan
Impact
The replacement of Trident is not being
considered. Future Carrier and Type 45 Destroyer
programmes are under severe pressure. The
Royal Navy is experiencing a severe shortage of
ships
Medium Affected
Impact on the Relationship of Three Services
The immediate past and present
chiefs of Army have been critical
about the ambitious projects such
as Trident which is worth £20bn.
What Does all this Mean for UK MOD?
(Contd…)
11. 11
UK MOD
Challenges
Source: Frost & Sullivan
Uncertainty of Black box
Time
A security risk remains in the
transition time between when
the specialist capabilities are
built at the expense of
traditional capabilities and the
regaining of tradition
capabilities, which is unlikely
until UK economy fully recovers
from current crunch
Finding a Balance between
Traditional and Specialist
Capabilities
The UK think-tanks and
politicians need to jointly work out
a balanced strategy. The
economic downturn would result
in unfavourable conditions, but it
is crucial to find the balance
between choices with respect to
time, money and urgency.
Challenges of Retaining
Skills and Capabilities
The key challenge is to retain the
skill set and industry capability,
and more importantly, job intact,
while cutting back on
conventional arsenals; prioritise
capabilities and support them to
navigate difficult times.
Fulfilling UORs of Ongoing
War in Afghanistan
The phenomena is expected to be
in place for years until the war is
over. This means the threat of
cutbacks on traditional projects,
re-scheduling or even cancellation
would remain until 2016.
MOD Faces New Challenges
What does all this mean for UK MOD?
(Contd…)
12. 12
Defence
Industry
The assurance given by the
MOD through its “defence
industry strategy” to help sustain
the domestic industry by offering
a consistent stream of revenues
over longer term is under
question mark
The fear of budget cuts would
threaten £35 billion a year UK
defence Industry and over
300,000 high-value jobs, as
viewed by Ian Godden, chief
executive of the Society of
British Aerospace Companies.
The individual companies need
to take a hard look on how their
revenue stream and
sustainability are being
impacted by the cutbacks on
many major projects
The government has to find a
way for protecting the largest
defence industry in Europe and
its capabilities, which is crucial
for not only jobs, but also for
security and technological
advancement.
UK Defence Industrial Strategy Faces a Big Question Mark
• The defence industry associations are required to work with the government to
find a way of recovering from recession, with sustenance of the sector.
• The defence industry needs a realignment of its resources and capabilities
towards fulfilling the changing requirements of MOD.
What Does all this Mean for UK Defence Industry?
(Contd…)
13. 13
Soldier
Systems
• Soldier Radio with
navigation and sensor
• Sniper Rifle
• Ballistic Jacket
• IED-proof boots
• Lithium-ion/fuel cell
battery
• SDR waveform
• IR
• Anti-blast
Systems Equipment Technologies
• MRAPs
• UGVs
• Heavy armoured cars
• Helicopters
• Autonomous system
• Ballistic shield
• IED-proof platform
• Artificial Intelligence
• UAVs
• SATCOM
• SDR
• Computer terminals
• Navigation systems
• Communications,
navigation and sensor
technology
• Space technology
• Systems integration
• Soldier-vehicle
interface
Transportation
Systems
C4ISR
Source: Frost & Sullivan
Equipment and Technologies under Spotlight
What Does all this Mean for UK Defence Industry?
(Contd…)
14. 14
• Specialist capability procurement includes Land and C4ISR, and conventional capability
procurement includes Air and Sea.
• On an average, UK MOD can spare approximately 22 to 25% of the defence budget for
equipment procurement.
UK MOD Procurement Expenditure Trends – Conventional versus
Specialist Capability Allocations
Source: Frost & Sullivan
Defence Companies Would See Change in Future Revenue
Streams
0
1000
2000
3000
4000
5000
6000
7000
8000Million£
2008 2009 2010 2011 2012 2013 2014 2015 2016
Year
Procurement Expenditure Forecast (UK), 2008-2016
Specialist Conventional Others
What Does All this Mean for UK Defence Industry? (Contd…)
15. 15
Strategic Recommendations
• The UK MOD might undertake a Strategic Defence Review in order to work out a
balance between conventional and specialist capabilities in light of the 21st century
security needs. The review should consider parameters such as shift in the nature of
threats, shift in the way current war is fought (such as the use of soft power by the war
fighters), growing impact of cyber warfare (which is not less then nuclear weapon),
globalisation and demographic shifts and the possibility a nuclear free world, among
others.
• The National Security Council should be proactively engaging and closely monitoring the
war efforts in Afghanistan. It should have an oversight of the transactions between the
Armed forces and the Government so that real demands of the military are not
overlooked by the decision makers at the helm. It also needs to be vigilant, in order for
the maintenance of trust between public, military and political decision makers, especially
when the country is at war.
• As a way of cutting cost on conventional capabilities and free up resources for specialist
capabilities, the UK MOD should look at the possibility of sharing more expensive
strategic capabilities with the neighbouring allies (such as the United States and France).
These include sharing of strategic nuclear strike capability (the like of Trident), strategic
air strike capabilities (the likes of Euro fighters and F-35 JSFs) and blue water naval
capabilities (the like of Aircraft Carriers).
16. 16
Strategic Recommendations (Contd…)
• The UK defence industry participants should closely monitor what the MODs and the
Think-tanks across the Atlantic perceive of the 21st century defence needs, so that they
better align their resources and capabilities to fulfil the changing requirements. They
must believe that traditional concerns about losing domestic jobs or skill sets might no
longer pursue the MOD from cutting many conventional capabilities in favour of specialist
ones, which is crucial for the ongoing and future wars. Therefore, they should be
sufficiently flexible and responsive to carry out internal restructuring, and pursuing
technologies, skills and capabilities that better fulfil the war fighter needs of the 21st
century.
• The UK MOD might have to closely monitor the developments across the Atlantic with
respect to ongoing restructuring efforts in the US DOD. It might consider reviewing daily
business process to bringing in the sense of urgency in procurement process, so that
the war fighter needs could be met in time and without influence of interest groups.
• A UK-US-EU joint initiative towards wiping out nuclear arsenals altogether from the
global face might look something radical in short term, but would be good for the
comprehensive security of the world in the longer term. This has the potential to free up
significant resources for investing on the research and development of futuristic
specialist capabilities.
18. 18
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19. 19
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21. 21
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