LONDON — Britain's upcoming refresh of its defense industrial policy needs to take better account of the impact that procurement decisions have on national economic prosperity, according to the head of the UK's second largest defense company.
"Value for money needs to be defined by the value to the UK taxpayer, and this means looking at the impact of MoD procurement decisions in terms of UK economic prosperity and growth," Norman Bone told reporters during an announcement marking the start of Leonardo's restructured business in the UK.
Resolving issues over retaining intellectual property rights in the UK would also be important, the executive said.
Bone was recently appointed chairman and managing director of Leonardo MW, where the M stands for Marconi and the W for Westland. On July 28, Leonardo's Board of Directors voted to create the UK company to represent "the total strength of our business in and from the UK."
The Ministry of Defense (MoD) tends to pay lip service to the idea of generating local economic prosperity, but with equipment budgets under continual stress it prefers to buy capability where it can strike the best deal, say analysts.
The MoD policy rethink moved forward late last year when the ministry announced a consultation period with industry and others. That consultation closed last week with Leonardo being among those responding to the MoD’s request.
The government announced in its 2015 Strategic Defence and Security Review that it would "refresh" an MoD industrial policy that has been in place since 2012.
The move is part of a wider commitment by the Conservative government under Prime Minister Theresa May to implement an industrial strategy for industry as a whole.
Separately, in November, senior industrialist John Parker delivered recommendations to the government on how to sustain Britain’s naval shipbuilding capabilities.
The government commissioned Parker’s report into a national shipbuilding strategy, but by the time the document was published, it was being emphasized by the MoD that its status was merely advisory.
It remains open to doubt just how many of Parker’s recommendations become policy. The government has previously said it will publish proposals in the spring, but some analysts here wonder whether the shipbuilding strategy has much of a future at all.
The industrial policy refresh follows a period when the impact on the British economy of procurement of foreign weapons systems has been in sharp focus after the MoD agreed to multibillion-dollar deals to buy Boeing P-8 maritime patrol aircraft, Apache attack helicopters and General Atomics Certifiable Predator B remotely piloted vehicles with little industrial offset in return, other than support work.
Things may change, though. British Defence Secretary Michael Fallon told Defense News TV in a recent interview that going forward he wants to see more work coming back to the UK from overseas procurements in order to boost job creation and skills here.
Bone’s remarks about UK defense industrial policy came as the newly restructured Leonardo MW operation opened its account with the announcement of a five-year £271 million (US $331 million) deal with the MoD here to provide support and training deal on the fleet of Wildcat helicopters now in service with the Royal Navy and the British Army.
Leonardo MW is also expected to sign a second major contract with the MoD in the next few weeks, this time to equip British air, land and sea forces with a new Mode 5 identification friend or foe (IFF) system.
The British government selected the UK arm of Leonardo, along with its partner Airbus Defence and Space, as preferred contractor in July. Negotiations to firm up the deal have been underway since then, and a Leonardo spokeswomen confirmed that the contract signing was "imminent".
Leonardo has yet to announce a value for the deal, but speaking at the Farnborough air show last July company CEO and general manager Mauro Moretti said the IFF agreement could be worth "hundreds of millions of euros."
The restructuring, which became effective at the start of the year, amalgamates AgustaWestland, Selex ES, Finmeccanica UK and DRS Technologies UK under the single Leonardo MW brand headed by Bone.
The company is second only to BAE Systems in the UK defense sector, employing more than 7,000 people and generating a revenue of £2.3 billion, more than half of the sales coming from export markets like Saudi Arabia, the US and Italy.
Andrew Chuter is the United Kingdom correspondent for Defense News.
