Is the government about to start charging for the export licenses it grants defence companies? That was one of the rumours sweeping the floor at last week’s well-attended and bustling DSEi defence trade show in London.
Such a move would not be welcome, particularly among smaller firms who might be less able to bear the increased cost, and in the current climate of spending cuts, which many say have yet to make themselves fully felt in the industry, companies will be hoping ministers do not take steps with the potential to harm British exports – the bedrock of attempts to rebalance the economy.
Engineers PE spoke to emphasised the importance of overseas trade for smaller British defence firms, particularly when “there’s nothing doing in the UK” as one senior manufacturing executive put it. For a high-tech engineering company like Sherborne Sensors, which manufactures accelerometers and inclinometers, exports are the lifeblood of the business. Robin Butler, Sherborne sales and marketing director, says: “It’s very important that we have large customers all over the world.”
A customer base overseas – which includes, for example, Lockheed Martin in the US – continual introduction of new products, and selling into markets other than defence such as civil aerospace and general industrial are factors which underpin Sherborne’s growth, Butler adds. “It’s very difficult to rely purely on the defence sector and perhaps at this point in time that’s a dangerous strategy.”
At Faun Trackway’s stand, meanwhile, the Anglesey manufacturer of military grade aluminium runways and tracks was hosting delegations of military top brass from Malaysia and Peru. It’s been making products in North Wales since the 1940s but now exports to 30 different countries. Managing director Alun Jones emphasises that innovation in terms of products – the firm has just introduced a landing pad for unmanned aerial vehicles, for example – and the willingness to scope out new markets overseas have been crucial to its success.
For the government to consider charging companies to obtain licenses to export defence equipment would add a deleterious burden on already overstretched firms, some say, arguing that the process is tortuous enough as it is. For instance, ministerial interventions to get licenses granted in time to satisfy an order are not unheard of and the export licence office itself is said to be undermanned for the job it has to do. Some also say that banks, which have their own restrictions on which countries they will finance exports to, should bring their policies into line with the government, where the regulations are thought of as stringent enough. Particularly true, perhaps, of banks owned by the taxpayer.
The chief executive of defence and aerospace trade association ADS, Rees Ward, says British firms should be allowed to take advantage of the opportunities in the global defence market at a time when budgets at home are being squeezed. “We’re second only to the US in terms of our defence industry and it’s important to remember that,” he says.
“UK and European defence budgets may be decreasing, but overall global defence expenditure is increasing, and that is an opportunity for the British industry, which has an impressive 22% of the worldwide addressable defence market.
“But there are other nations around the world that would love to take our share. The message to government is we need to sustain this world class industry.”