Northern Ireland Affairs Committee
Oral evidence: Defence Spending in Northern Ireland, HC 524
Wednesday 1 May 2024
Ordered by the House of Commons to be published on 1 May 2024.
Members present: Sir Robert Goodwill (Chair); Stephen Farry; Claire Hanna; Carla Lockhart; Jim Shannon.
Also attended: Gavin Robinson, on behalf of the Defence Committee.
Questions 31 - 69
Witnesses
I: Nick Laird, Managing Director, European Space and Defence, Spirit AeroSystems; David McCourt, Director of Strategy, Thales; and Ben Murray, Chief of Staff and Corporate Affairs, Harland & Wolff.
Written evidence from witnesses:
– [DSN0003] - Spirit AeroSystems
– [DSN0004] - Thales
– [DSN0006] - Harland & Wolff
Witnesses: Nick Laird, David McCourt and Ben Murray.
Q31 Chair: Welcome to the Northern Ireland Affairs Select Committee. Regular viewers will notice I am not Sir Robert Buckland; I am Robert Goodwill. I am chairing the meeting in his absence and very much looking forward to this session, continuing our report on defence investment and the industry in Northern Ireland. We are very pleased indeed to have representatives of the big three, as I think we have had them described. Leslie Orr, who is the ADS Northern Ireland director, described you as the “door to making a major dynamic change” as the big three investors. Perhaps we can start by asking you to introduce yourself, starting on my left with Ben, with a short description of who you are and who you represent.
Ben Murray: Good morning, everybody. My name is Ben Murray. I am the chief of staff and corporate affairs at Harland & Wolff. It has a 160‑year‑old history in the sector and in the space, but in its current form is just over four years old.
Chair: That is wonderful. You can’t miss your cranes.
Ben Murray: You can’t.
David McCourt: Good morning. My name is David McCourt. I am the director of strategy and marketing at Thales. Thales is quite a large prime. We have 80,000 people operating in 68 countries. We are quite proud that we are the only defence prime in all four nations of the UK, where we hire and employ 7,000 people, 700 of whom are based in Belfast, where I live and work. We have worked to establish ourselves as the centre of excellence for air defence and surface attack for the Thales group.
Q32 Chair: Yes. I think everybody became aware of your existence when the NLAW missiles were so effectively deployed against the Russian aggressors in Ukraine. They are an amazing bit of technology that I think probably saved Kyiv, to be honest.
Nick Laird: Thank you very much for allowing Spirit AeroSystems to come here and give oral evidence on defence spending in the region. The prosperity of the Province and the wider Northern Ireland economy is important to us. My name is Nick Laird. I am the managing director of European space and defence in Spirit AeroSystems. My background is that I spent 31 years in various senior appointments in the Ministry of Defence, both operational and capability programme facing. For the last six and a half years, I have headed up the defence portfolio in Spirit AeroSystems.
Spirit AeroSystems is one of the largest aerostructure companies in the United Kingdom. We employ over 3,600 people in our Belfast sites in and around the greater Belfast area, supported by over 240 Northern Ireland supply chain companies. We account for over 10% of all Northern Ireland’s exports. We have sovereign engineering and technology leadership in advanced composites and advanced materials. We continue to look at the dual use of aerospace technologies in defence programmes. We are very pleased to be here today.
Q33 Chair: Indeed, I visited Spirit with the committee previously, where it was making A220 wing sections with composite materials. It was very advanced manufacturing that we saw there. Perhaps I could start out the questioning by asking you to set out briefly—Nick, you have done a little bit of that already—the presence of each of your businesses in Northern Ireland and the contributions of each of your operations to the Northern Ireland and overall UK defence picture.
Ben Murray: As I said in my previous response, the company has a 160‑plus‑year history and is perhaps one of the most well-known shipbuilding companies in the world. Today, the group comprises, as well as Belfast, two sites in Scotland and north Devon, and activities in the US too. All of that is built upon the history and pedigree that we have in Belfast, which is well known.
When the current owners of the company, InfraStrata, as was back in 2019, took the yard out of administration, there were about 50 members of staff, 50 colleagues. Today, we have just over 1,300 across all four sites, about half of that within Belfast. You can see Belfast very much at the vanguard of the group’s development. That is 1,300 core members of staff and they are working there day in, day out. That ramp‑up from 50 to where we are now at 1,300 is primarily driven by the work that we are doing to get ready for FSS. We will come on to that later, I am sure, in terms of defence contracts.
As part of the work we are doing there to get the yard ready, there is a £77 million investment programme in infrastructure. If you are due to visit—anybody is very welcome to visit at any point—you will see steels now in the ground. You have fabrication halls going up. That is extending our already vast fabrication facilities to make that match-fit for future contracts—not just the FSS programme, but also commercial opportunities and future defence opportunities.
Q34 Chair: Are you 100% this big defence contract or is there other stuff?
Ben Murray: Absolutely not, no. We have five markets in which we play. The idea when we took Belfast on was that shipyards in the UK, but broadly elsewhere too, had been boom, bust, boom, bust. They had been too focused on one market and we decided to embed a strategy with five markets. Alongside defence, we have energy and renewables, and cruise and ferry. If you fly in or out of City at the moment, you will see two cruise ships in, two US cruise lines that are being completely refurbished, painted, gutted and made good for the commercial market today. We also have commercial marine. You see barges going up and down the river here. We have barges being built in Belfast, which are good projects to get skills back in place and to help transfer skills and expertise from some of the older guys and colleagues to those newer apprentices and others who we are bringing into the business. Alongside that, as I say, we have energy and renewables, which is anything from oil and gas projects through to renewables.
We are a pretty significant player already in Northern Ireland, but our ambition is to continue growing at the rate we are, to be able to demonstrate track record with FSS and other naval contracts we have, commercial contracts, more cruise work and getting into renewables. The ability is to continue to grow that, because colleagues will know that the yard used to be a lot bigger back in the day. We are quite pleased with the rate of growth and the trajectory we are on, but to be able to continue to do that we want to build upon this and be able to support the wider ecosystem that exists in Northern Ireland, of course working with the rest of the businesses we have across the group.
Q35 Chair: When you are at peak activity on this big defence contract, what proportion of your overall business in Northern Ireland will that make up?
Ben Murray: It will be the vast majority for that period of time in Northern Ireland. The FSS programme is creating 900 jobs in Belfast, 300 in Appledore and 800 further throughout the supply chain. We are already at 1,300 in Belfast. Not everybody who is currently with us will be working on FSS, so you will see an increase in that figure. We already have the vast majority of the production staff, the engineers and the managers, and we are slowly ramping up the blue-collar colleagues, if you like, to be at the level that we need when we need them.
You do not need everybody at once, obviously. You do not want to have people sitting around not working. When we bring in contracts, be it barges, cruise lines or the big FPSO contract we have at the moment from Canada worth around £60 million, we are ramping up slowly with work, so we are not in a place where we have the wrong people with the wrong skills to deliver the projects that we want to deliver.
Q36 Chair: David, I am guessing that you are pretty much 100% defence-based in Northern Ireland.
David McCourt: Yes, predominantly in the defence industry. Again, it is 700 people. A number of those are based in Crossgar, with Belfast, where the final assembly happens. It is predominantly defence: manufacturing and designing effects or missiles.
We have relied very heavily in the past 10 years on the export market, but we are developing more in that domestic. Our order books in 2023 and 2024 have grown exponentially as a result of what is happening in Ukraine, so we have doubled our production lines. We hope to double those even further.
We want to achieve long-term, sustainable endeavours with our customers. One thing that was touched on very heavily in the previous Select Committee was SMEs. We supply SMEs quite heavily. Our local supply into is 91% of SMEs, but we are looking to grow that a lot more. We are really looking at getting that kind of long-term relationship and partnering in the domestic market, developing that even further and then looking at the exponential growth in the export to really help with that also.
Q37 Chair: Nick, you have already touched on this.
Nick Laird: Yes, so 80% of our business is commercial aerospace and you have seen that. The remaining 20% is a mixture of maintenance, repair and oversight, and our defence and space activity. Within the defence and space activity, we have a number of sub-strategies. On next‑gen combat aircraft, we are part of the Tempest programme going forward, which I would like to maybe just unpack a little later on as a potential pipeline for investment in Northern Ireland. We have also been involved in the MoD’s large, unmanned Mosquito programme. We have a number of strategies on hypersonics where we are working with the Ministry of Defence, which I would not be able to go into detail on in this public domain.
We understand and recognise that the defence sector can pull a huge amount of activity into Northern Ireland, which is one of the reasons why we commissioned RUSI to do this independent report last year in order to highlight the untapped potential and how a lot of technology, not only at the primes, but at the tier 1s and SMEs, can be brought into the fore and utilised within the Ministry of Defence. We sense that there is a degree of regional industrial blindness. That has played out in some of the defence funding allocation over the last couple of years. I am quite happy to highlight a couple of areas of that later on.
Q38 Chair: Northern Ireland and Yorkshire and the Humber seem to come out quite badly.
Nick Laird: That is correct. I will segue very quickly into that.
Chair: Thank you. We will come on to that later.
Nick Laird: We have ambitions to grow our defence opportunities with the Ministry of Defence. Interestingly, from a defence perspective, we do more activity and garner more revenue from exports with another NATO nation than we do from the MoD. That is interesting because that country fully understands the novel and world‑class activity that we are doing in Belfast and is currently leveraging that technology. It is an interesting piece. We want to do more exports.
Q39 Chair: Is that the United States that we are talking about?
Nick Laird: No, it is a European NATO country. I would like to touch on the new medium helicopter programme at some stage, because that is a huge opportunity for Northern Ireland. Exports is very much at the heart of that. I will draw stumps there and we will maybe come back to that.
Q40 Jim Shannon: Gentlemen, it is a real pleasure to see you here. It is a special pleasure to see you, Nick, as a fellow Strangford constituent. I am very proud to be your MP, by the way. I understand the importance of this. There are three questions I want to focus on if I can. The first one is on the SMEs and is really important. The three big businesses have outlined what your role is, and that is really important. You are the pyramid that funnels out to all SMEs elsewhere, so your role and the relationship with them is the No. 1 question. That is probably for all three of you.
I am also very interested in the issue of apprentices. Harland & Wolff, I think that you did a presentation here maybe a year or a year and a half ago. That was a question I had asked that person who was presenting, so I know that there is a commitment to apprenticeships. I know that there is a definite commitment to apprenticeships in Spirit and in Thales as well. My good friend and colleague the Member for East Belfast has told me that there are more people from Strangford who work in Thales than there are from East Belfast. Our role that we play in Strangford is one to ensure that all the commitment to defence is important.
Chair: Well done for mentioning Strangford, Jim, by the way.
Jim Shannon: I have said it twice and I may even try to get it a third time, but I am coming to the reason for that.
The third thing I want to ask is a specific question to Harland & Wolff. You mentioned renewables and their importance. We cannot ignore that and you have a key role to play in that as well. You will know about the contracts for difference and the fact that Northern Ireland is not in that scheme yet. Now, with the Assembly up and running again, there is a real key opportunity to advance that.
I suppose, if I can, I will maybe just throw all these questions at once. I am sure you will not forget all the questions and the reasons. I feel that Northern Ireland does not have the potential or the encouragement perhaps from Government centrally here when it comes to procurement and increasing the defence activity of businesses in Northern Ireland. When it comes to our regional programme hub, I think that that is one that you probably, Nick, are particularly interested in. Could you perhaps tell us how you see the defence potential and explain the recommendation?
Sorry, I hope you can all follow those questions. Each person has a question and I can leave that with the gentlemen to respond accordingly. Thank you so much.
Nick Laird: I will maybe start by unpacking the regional spend piece, because it is really important to understand the context of that. We have seen over the last two defence spend rounds that defence spending allocation to Northern Ireland has moved from 0.5% to 0.76%. Despite the Government saying that that is a notable increase across all the regions, I would beg to differ.
That equates to about £100 per head in Northern Ireland in defence spend. The regional average across the whole of the United Kingdom and Northern Ireland is just under £400. If you look down at the south-east and the south-west regions, while the funding last year was £186 million to Northern Ireland, the south-east region garnered £6.3 billion and the south-west £5.8 billion. If you look at the south-west, that equates to just over £1,000 per person, so there is disparity in the regional allocation. This is not about Northern Ireland becoming a special case. This is all about parity of opportunity.
Q41 Chair: Is that just investment in equipment or is that the overall?
Nick Laird: No, that is defence spend.
Chair: It is big bases and all that.
Nick Laird: I will put this into context, because it is quite useful. It was £186 million for the last year. Last May, the Secretary of State for Transport announced £190 million in funding for the allocation of creating 121 miles of cycling tracks in the UK. When you compare allocations of money, that is quite stark. Why do I think it is like that? It is like that for a whole host of reasons.
The first one is the tyranny of distance. Northern Ireland, while it is only an hour’s flight to Belfast, is detached from policymakers and, more importantly, capability decision-makers. All three companies have spent considerable time and effort pulling decision-makers to come and see our capabilities and the high-skilled jobs, and how that can be leveraged across into the defence enterprise. We are very passionate about this.
There is a huge opportunity for the Province to really up its game, because there are plenty of high-skilled personnel in Northern Ireland. We have some incredible technologies that have yet to be fully leveraged by defence across the enterprise.
I have to acknowledge that I am ex‑military and used to run programmes within the Ministry of Defence. I would quite happily get on a plane, spend seven hours, and go and see an SME in America because it had a capability. I would very rarely go to Northern Ireland. It is shifting the prism and the optics associated with that. I personally think that some individuals have traded freedom of thought for a reassuring echo chamber with the normal people they do business with from a defence perspective.
I will pick up very quickly on SMEs, if I may. We see them as integral to Spirit. We work very closely with them. There are a number of barriers for SMEs working in Northern Ireland. For example, last week I was in London at an air capability conference. Not one SME company from Northern Ireland was there. There are barriers, whether it is cost, travel, IT or security clearances, et cetera, but we work very closely. That is why the big three, if you want to call us that, are really important, because we can pull those individuals and help them grow as companies.
On apprentices, to give you a view of what we are doing in Northern Ireland, over the last 18 months we have recruited over 800 people. We currently have 100 apprentices going through their various training packages. We are taking on another 40 in September. We have a graduate programme that brings in 30 graduates a year and an intern programme.
More importantly, set against all that are the upskilling initiatives that we run. We have 100 people going through that. It is an 18‑month period, which is really important. In-house, we also do upskilling of our own staff. Our semi-skilled workers over a three-year programme become skilled aircraft fitters.
We are doing more. We are very well positioned to take on more defence activity. We just need to open the aperture for decision-makers to fully understand the capabilities. As I said earlier, the advanced aerospace technologies that we have in Spirit have already been utilised and leveraged on some defence programmes, but not fully leveraged.
David McCourt: To elaborate on Nick’s answer, I guess, it is useful to point to the current state of the defence procurement in terms of us helping those SMEs and recruiting people. There is a definite shift needed from that competition by default, or global competition by default. That breeds real stop-start procurement and small-batch production. We are advocating that long-term strategic view. That means that we are able to embolden and invest in long lead times with SMEs, as Mr Orr pointed out previously. A lot of that is in subcontracting, so it means that we can secure that industrial base when we know we have much longer-term contracting.
In terms of the apprentices, that is something that we have really invested in. We have an advanced engineering skills academy. We currently have bespoke packages for around about 62 apprentices. The plan is to train in the next five years about 170. From that as well then, we have about 50 STEM ambassadors that go into a number of different primary and secondary schools. We sponsor PhD people in Queen’s University also. It is a case of really galvanising that, what is coming through and what is next, in terms of the apprentices.
Fundamentally, it is advocating that strategic importance of what Northern Ireland is. The case of Ukraine really demonstrated that and the immeasurable value that we were able to bring. We are trying, particularly at this Committee, to show the strategic imperative and strategic importance of Northern Ireland to the UK and the defence. It is a downstream investment in the SMEs because we are able to say to them for the next 10, 15 or 20 years, “You can recruit this number of people. You can invest in these technologies because it’s assured”.
Q42 Jim Shannon: I know that in Thales the Ukraine war, as the Chair has said, brought opportunities for defence equipment and contracts. Crossgar, where the missile section is, also has given opportunities for Thales. To go back to Nick’s point, which he emphasised very clearly, there are options for a lot more, and Northern Ireland can provide that in the skills opportunities for those who are interested and the workforce. If there was one thing, just one thing, David, that was asked for here centrally for procurement, what would you suggest that Government here need to do to make it happen?
David McCourt: Defence as a whole, and particularly in Northern Ireland, is infrastructure and people. It does not match the MoD’s ambitions. There is going to have to be a lot more investment in infrastructure, particularly from what we have seen, again doubling those production lines. They are going to need to be doubled again and then potentially more. It is quite exponential in terms of what is needed. To reiterate that point, it is more of that enterprise approach, rather than piecemeal procurement. We had seen that, when that crisis happened, looking into the stockpiles, there was not enough there, and that absolutely cannot happen. We had to rely very heavily on our international customers and our export in order to pull that through.
That long-term aggregated approach is the one thing that we would really advocate, because it means then we have line of sight to know what is potentially coming downstream in the next 10 or 15 years. It means then that we can invest very heavily into those people. We know where those 65 or 170 apprentices are going to go. It means that we can dissect them into particular programmes. Certainly that long-term strategic approach is something that fundamentally has to change.
Ben Murray: Shall I start with apprenticeships? This is something that we are most proud of. I have an anecdote. When we first launched our apprenticeship scheme, perhaps because of the history of the yard and its boom, bust, boom, bust historic cycle, the number of people who applied was massively under what we had hoped for. Then, having been announced as part of Team Resolute for FSS, we went out for our next cohort of apprentices and the numbers that applied were massively greater than we could accommodate.
That shows you, in terms of a defence inquiry or thinking about defence spending, the power of procurement, where you have long-term security and stability, not just for employers that are able to invest in people and infrastructure to be as competitive as possible, but, quite frankly, for people out there to go, “I have a choice, increasingly, as to what I can do with my career. Do I want to throw my lot in with a company that historically has not had that pipeline of work?” It shows you the real value of procurement. It gives us near 10-year work in Belfast and across in Appledore. It gives us that platform to go and invest in the other markets so that we can sustain this workforce.
You do not just want to build up a workforce that you find you do not have an opportunity for when the programme finishes. The ability to use that to channel investment, to develop skills and to reach out to people you have not reached out to before is really key. We have 150 apprentices today. It will be 200, we hope, in the summer. That is a huge proportion of our total workforce, but that is deliberate because you have that long-term security. You are not going be able to find everybody you want waiting around for a job, so you need to develop that. You need to train that.
I think that it is fair to say that, if we had not got this contract, you would have probably found that a lot of the more experienced colleagues—let us call them that—would have not had the opportunity to pass on their skills to the next generation. The ability to have that happening is fantastic. Apprenticeships allow you to do that because you have that balance between theoretical and on-the-job learning, so it is fantastic. It is something that the MoD has required through social value commitments, but not to the extent that we are delivering. Again, it shows you the power of procurement to provide some best practice on how this can be structured and how others have done it, but then you can build on that.
Chair: We are going to come on to social value later in the session.
Ben Murray: That is apprenticeships. On SMEs, we have 535 on our roster. I think that it is 170 in Northern Ireland. There is a balance between what we can control as a subcontractor on FSS versus and MoD and the prime are able to choose and deliver. I will give you an example of where we have had total control of who we procure with: the recapitalisation of the yard—so, £77 million of investment in new buildings, technology and machinery. For the civil work for that, 100% has been spent in Northern Ireland with SMEs. Through the contracting for that 50 jobs have been created locally, which is fantastic.
Having had that throughput of work on the civils, that company is able to be match-fit for future work that we want to do. We are able to strengthen that supply chain for future work too. We are working, as both colleagues here do, through the trade bodies and cluster organisations to build, and through meet-the-buyer days and so on to get to know the supply chain, the SMEs, and support them. When we are going back out to bid for future contracts, we have our own teams. We know our supply chains. We know where they are. That can only happen when you have work coming through so that you can spend the time, invest the effort and demonstrate a track record. SMEs are absolutely vital across all of the sites, but in Northern Ireland in particular.
You asked about renewables. However we get to this point is not really for us, in terms of the incentives, but I know that there are reforms we are looking at in GB in terms of sustainable industry awards.
Q43 Chair: We are straying a little bit from defence. It is Jim’s fault for introducing it.
Ben Murray: We have a little bit. I can follow up on it, but there is a point here. If you are taking a national perspective on this, the procurement that is being delivered through defence is allowing us to then compete in renewables too, so there is a link there. It is perhaps not the primary focus.
Q44 Jim Shannon: No, it is not the focus of today. Mr Chair, if you do not mind me saying so, this Northern Ireland Affairs Committee is doing an inquiry on the contract for difference and our role, so you might want to feed into that.
Ben Murray: We will keep in touch.
Q45 Jim Shannon: Nick, quickly, what is one thing for us to do on this Committee that would make things better? It is the same question that I asked David and Ben.
Nick Laird: Pressure from this Committee back to the MoD to establish an effective regional capability programme hub in Northern Ireland is absolutely essential. I mentioned earlier about how the SMEs struggle to get traction with MoD and I go back to that distance and the various barriers. They need a regional hub. Some of the single services have started that, but it is not a joined-up effort. There is an RAF innovation cell, which is one person part-time. If you really want to move that dial from 0.5 to 0.7 and beyond, you need a regional hub.
I will give you an example of regional hubs that work for another allied nation. I am a great believer that nobody has a monopoly on good ideas. However, in France there is a body called the Directorate General of Armament. It has 25 regional hubs throughout France. Ten of those sites are test sites, but the 15 other regional sites are there to ensure that defence understands sovereign capabilities that are out there. They are also there to help those businesses, whether they are SMEs, tier 1s or primes, win business with defence. They have very close links with the engineering universities, so they help shape courses to ensure engineers fall into what is the required skillset for future defence.
If you look at the detail in the DGA, the average age of the DGA is 46. They are either retired or very experienced military or ex-military civil servants who have been involved with capability planning. If you really wanted to change the way that central Government looks at the capabilities in Northern Ireland, a joined-up regional capability hub, staffed with appropriate and qualified people, would have a transformational impact on Northern Ireland.
Chair: That sounds like a recommendation we will be looking at very soon. I want to bring Carla in, but can I take Gavin first because he has to get away? We are very pleased to welcome Gavin Robinson, who is leader of the DUP contingent here in Parliament and sits on the Defence Select Committee. I think you might want to declare an interest before you ask a question, if that is alright.
Q46 Gavin Robinson: Thank you very much for your welcome. Welcome to all of you, if I can, as a guest, welcome you. You are welcome. All three companies are based in my constituency.
Chair: That’s a bit greedy, isn’t it?
Gavin Robinson: It is a bit greedy, but I am known for that.
Jim Shannon: Strangford supplies the workers.
Gavin Robinson: More particularly, I launched the RUSI report that Mr Laird referred to, commissioned by Spirit AeroSystems, here in Parliament. I declare that I launched the events around the publication of that report as well. It is important to have that on record, lest there be any suggestion that it was not. I suggested that this Committee do this inquiry to your former Chair, Mr Hoare, so just to put that out. You are all very welcome. Thank you for coming, and thank you for what you do.
Nick, you referenced the Royal United Services Institute report on defence spending in Northern Ireland and you gave a figure of a slight increase, but the report when published was accurate when it suggested that Northern Ireland had one-fifth of the average spend. That starkly illustrates the point. It has slightly increased, but we are still well beneath the average. There is a question here about effectiveness of spend, which is slightly different from the quantity of spend. Even though what we receive at this moment in time is one-fifth, or slightly increased, of the average across the United Kingdom, is MoD spending that money wisely?
Nick Laird: I will take that before my colleagues. The MoD is a challenging place to work as a capability and programme manager. I have been there, so I have scars from it.
Your point is well made. For example, if I look at the Mosquito programme that Spirit ran for two years, we invested heavily in that as a company, so we put our own PV into that as well. We ran a very effective team. That was a demonstrator programme for the low-cost, affordable, novel combat aircraft, an unmanned platform that was going to work alongside future fighter aircraft from about 2035 onwards.
There was a huge amount of knowledge capture and exploitation. I would come back to you with a school scorecard and say, “Knowledge capture: yes. Exploitation: could do better”. I will pick two of the technologies, because Mosquito was a classified programme, so I cannot go into detail. I will pick two areas that clearly demonstrate where MoD has yet to fully leverage what it has already paid for and gained in knowledge.
We developed in that programme—Chair, you have seen and visited—the A220 wing, a large composite wing that is world leading. We took that technology not one step forward but about four steps forward and created a single-shot, all-composite, one-part wing. Nobody had ever done it before for a platform. It takes a huge amount of time, cost, single part et cetera. It was a huge advance in technology.
We also did some very clever technology jumps on tooling. Tooling is the largest non-recurring cost in any aircraft programme. We developed tooling where multiple parts of the aircraft could be done on the single tool. No other manufacturer is doing that. There are two clear examples that I can talk about in a public domain that have yet to be fully exploited by defence going forward.
We are part of the Tempest programme. We joined Team Tempest in July 2020 and we have brought our detailed design, manufacturing and test capabilities. While we are working on the demonstrator aircraft with our key partners on Team Tempest, there are technologies that we have developed in Northern Ireland that have a rightful place in the Tempest programme going forward.
Your point is well made. There is more to do. Some of that activity can be leveraged on to other future programmes. The key thing from my perspective, and my colleagues have highlighted this, is ensuring a pipeline of activity going forward. We need continuity. That Mosquito team that I ran—I will not go into detail of how many were on the team—was a substantial team. When that programme came to an end, they were absorbed back into commercial aerospace programmes. The good thing within our company is that those skillsets between commercial aerospace and defence aerospace are very similar. Maintaining people on defence aerospace programmes is really important, because it builds corporate knowledge et cetera going forward.
Q47 Gavin Robinson: Mr Murray, you have benefited from quite a significant contract recently with fleet solid support ships and the outworkings of the national shipbuilding strategy. It is welcome that that is a boon for Belfast, as it were. How far along the path are you? Do you feel that MoD is engaging productively and using the allocation of the overall spend in a purposeful and effective way?
Ben Murray: It is probably worth recalling the reasons that the contract was given to the team that Harland & Wolff was in. If you look at delivering on a policy objective of ensuring that spend at that point is more widely spread and that levelling up, as it were, is delivered elsewhere, it was to support the Harland & Wolff group more broadly. It was also about bringing additional sovereign capability into play.
The Prime Minister announced—was it last week?—the increase in defence spending. From a naval perspective, you can do that only if you have more capacity. If other shipyards across the UK are full, you need to have somewhere else to be able to deliver that. The strategic imperative to bring Harland & Wolff back into play was precisely for that reason, so that we can support our domestic customers, but also other navies that exist. Quite frankly, if you do not have a big dry dock, big fabrication halls and a quayside, you cannot do it. That was a really important imperative.
Not only was MoD keen to deliver upon that objective; it was also keen to ensure competition among the other yards in the UK, for various reasons—I will leave that to the MoD to determine—but primarily to ensure that projects were delivered on time and on budget. You can be sure that, in the relationship and reporting we have, that remains a top priority. With increased geopolitical tensions since the time of the award, deliverability and programme schedule is king.
I do not think that we are in a place to comment on broader value for money in other parts of what MoD is doing, because our experience is so far focused on FSS in terms of Belfast. There is a good tension to ensure that delivery is where it needs to be and the consortium as a whole is on track. We are on track for our part.
There are probably three parts to that. There is the civil upgrade, which, as I say, is the extension to the main fabrication hall, with new panel line equipment going in, which will ultimately mean that Belfast is one of, if not the most, technologically advanced shipyards in the country, and up there in terms of Europe.
Clearly, MoD was keen to ensure that it did not just have a project delivered, but it had a legacy available to it, we hope, for future programmes, as well as for commercial customers and other navies, quite frankly, potentially, if that is something that we are able to compete on. That is well on track.
The ramp-up, as I said earlier in a previous response, is on track. We have the people. We need to cut steel early next year, which I think is a real testament to the work that colleagues have done but also the work that the city council, Invest NI and others have done to help signpost, champion and find those people. We are on track with the procurement of the various bits of equipment that need to be integrated into the ships when they are built too. That is our part.
The wider programme is focused on production engineering, looking at design, making sure that is where it needs to be. Obviously, there is a close relationship with us. You cannot build what you do not know the design of, so it is hand in glove and that is working well.
The MoD set key objectives with this procurement of increasing sovereign capability, giving options, reducing cost and ensuring on-time delivery. Part of that, of course, is around knowledge transfer from Navantia, ensuring that our existing teams and new teams are up‑skilled and benefiting from the first-rate expertise that Navantia has. That knowledge transfer is underway. We have teams over in Cadiz at the moment and later in the year, focused on procurement, engineering and all manner of different systems integration technology, to ensure that not only can we deliver this programme properly, but we are in a place to be able to deliver future work too.
Q48 Gavin Robinson: Mr McCourt, DE&S, Defence Equipment and Support, at times comes in for some criticism, but then I have seen first hand its relationship and co-operation with Thales in Belfast. Does it help with the effectiveness of MoD spend in Northern Ireland? Having seen what it does with you, could it be doing it more broadly?
David McCourt: We have a representative in DE&S. It sits in Belfast.
Q49 Gavin Robinson: I did not want to say that. I let you say that.
David McCourt: I know that that whole infrastructure is going through a little bit of soul searching in order to improve. How do they put things into the system and get it out much more quickly, efficiently and cost effectively, to get it into the hands of the war fighter? I think that we will agree that there is much room for improvement. I know it particularly helped on our export side.
Certainly moving forward, we have been working very closely with that transformation. We have had people on the floorplate, two people in particular in our exec, making sure that that transition moves a lot more smoothly. There is always room for improvement. We always push for much closer collaboration, but we need to understand that DE&S is of particular importance within this whole procurement cycle. I know that there will be some antagonism in terms of us as the supplier and industry speaking directly with frontline command, but there is a recognition of that now. That is something that we are particularly working on with DE&S. There is room for improvement, but it is moving in the right direction.
Q50 Gavin Robinson: I am going to pivot slightly with this next question, Mr McCourt. Thales has for some time now been trying to develop a relationship with Ministry of Defence that recognises exactly what you said earlier about long-term strategic view and longevity to orders that give surety to supply chain, confidence to employees and throughput for end use of the systems that you are producing. It has been suggested, and I think that there is good reason for believing it, that what has occurred in Ukraine has accelerated those discussions and they are gathering at pace. This question is really about Ministry of Defence priorities, how they change and how best Northern Ireland can maximise its place when those priorities change.
I know from my perspective that, in 2015, we had a strategic and security defence review. In 2018 we had a modernising defence programme and a national capability and security review. In 2021 we had an integrated review and in 2023 we had an integrated review refresh. We are very good at reviews, but there is an opportunity now, I believe, in looking at priorities to benefit Northern Ireland. Knowing that we do not want just another review and another outcome that changes the cover page on what MoD is doing, how best do you believe that we can take advantage of the opportunity, with Government changing their priorities, to benefit Northern Ireland?
David McCourt: Certainly the case study in Ukraine is showing the value of Northern Ireland and we need to capitalise on that. Particularly in that kind of short-range air defence, there is no one out there who can do what Thales in Northern Ireland can do. We need to bank that. We need to make sure that that is contractually committed to.
It is really about onshoring each of the different capabilities. If we look at some of the subsystems, the obsolescence management of it is probably one of the first things we can look at in terms of a practical thing and committing to that long-term supply. When Ukraine happened and you were looking into those stockpiles, some of the product through-lives had not been managed for about 10 years. It meant that even some of the equipment and subcomponents that we needed in order to make those actually were not available anymore. Some of them were not even environmentally compliant anymore.
It is, again, looking at each one of those product lines. That is the first thing, but then how does that translate into contracting? That is important from industry as well. When we are looking at a multiyear business case, that makes things a lot easier for us then to go and get that investment for it. Leveraging what has happened and how we responded to Ukraine is something we need to use.
Nick Laird: I have three words: sovereign strategic partnerships. That is what Northern Ireland needs. A move away from purely transactional activity with us would give confidence to industry. That would help us with early forecasting, not only on capital spend, but on our workforce and how we train them. The Tempest programme is ultimately a national endeavour across this country for a sixth-generation aircraft. A sovereign strategic partnership with companies in Northern Ireland, whether it is Thales, Harland & Wolff or us—we are all in very different areas—would be a huge step forward.
That plays into a pipeline of activity and those are very few and far between. There is a lot of this famine and feast activity going forward. That is not going to configure companies to be able to ramp up quickly. We know that Russia is spending circa 6% of its GDP on defence. The recent announcements by the Government are welcome, but, in order for us to prepare for any potential ramp‑up in activity, sovereign strategic partnerships would work, in my view.
Ben Murray: I would echo all of that. Partnership is key. If you take what is happening with our programme, you would want to be able to have that kind of stability and confidence outwith a programme and in terms of an enterprise approach. We have a pipeline presently as part of the national shipbuilding strategy. It is not all defence, but many are publicly procured and many of them are defence vessels. We have a pipeline but unfortunately we do not know necessarily when those vessels are coming forward. Even if they are coming forward, there is then that dynamic. Is it competition? Is it collaboration?
Picking up on what colleagues have said previously, we want to have more of an enterprise approach, where we are able to efficiently—and, quite frankly, in a quicker manner too—deliver the capability that we need, having a closer partnership where we can say, “This work will be done here. This work will be done by a collaboration of these companies”.
We need a bit more of an industrial strategy, almost, where you are able to plot that work. It allows us to continue that ramp-up, to plan the workforce and to think about the other investments that we want to make. I mentioned the £77 million of investment that is being unlocked through FSS. That is only a drop compared to the other investment that we are having to make, and have made, to get the facilities ready. It is about partnership.
We heard about the uplift in defence spending. We do not yet know, quite understandably, what that means for specific programmes, but that needs to happen sooner rather than later, so that, when we are looking at what we do with our workforce, we can think about whether we are going to be in a place where the future auxiliary vessels that the MoD wants to build are going to follow what is happening. It would make a lot of sense to us, certainly, but you would also think that, having made that investment in those facilities, there would be that continuity, that workforce can be brought across, and you can develop more of that capability here.
It is about partnership. It is about a close relationship. It is about openness and transparency in what we are trying to achieve and who needs to play a role in doing that. That is a slight shift from a competitive procurement approach and a lack of clarity about what is coming when and even the period of time that you have to respond to some of these, affecting the opportunity to then plan. Dates slip to the right, so what does that mean for the ability to plan and, more importantly, to ensure that we have the capability we need?
Q51 Chair: Thank you very much, Gavin. I appreciate your visit with the expertise it brings from your Committee, as well as the fact that you have your three most active and innovative employers there.
Ben, how big are these ships that you are building going to be? When they are sat on the dock, on a scale of Titanic being 10, how big are they?
Ben Murray: If there were four, you could fit them all in the dry dock. The dry dock that we have in Belfast is, as I said, one of the biggest in Europe. They are significant. They are designed to support the Queen Elizabeth class aircraft carriers. They are huge. When you are driving around the corner in Belfast, you will see the vessels in between the cranes, and that will give people, hopefully, a huge boost and a sense of what is possible and of people’s opportunity within that. They are massive.
The ability to then follow that with other, similar sorts of projects is significant, but not just vessels. The MoD looks at floating dry docks, for instance, and fabrication. It is the same skillset that you need. You need vast facilities, the right people and the right technology, so we can apply that to non-vessel projects as well. Scale, people and facilities are what matter.
Q52 Stephen Farry: Good morning to all of our witnesses. I just want to pick up on Gavin’s point at the end. You have probably largely touched upon it anyway, but I would like, first of all, just to ask you to look at the revised defence and security industrial strategy perhaps from the MoD perspective, and talk through the change in mindset from a purely market-driven approach to procurement to a situation where other considerations come into play.
Nick Laird: I would also pull into the defence and security industrial strategy the defence command paper refresh, because it is very important. Especially from a Spirit perspective, those papers very much put exportability at the heart of every stage of the decision-making on a future procurement programme. That is really important, because, from a UK defence perspective, the numbers of equipment that we buy are relatively modest. Therefore, exports are key to this.
This also comes down to the industrial and social value scoring of new programmes, where things such as social value are there to incentivise support into the industrial base. The emphasis on exports is absolutely key, because, in many ways, that will give long-term activity. If I can give you just one example of that, Spirit has been involved for the last two years in team H175M, which is a bit of a mouthful. It is the new medium helicopter replacement, which is going to look to replace a number of helicopters in the UK inventory, headed up by Airbus UK in Oxford. We are part of the partnership, along with Boeing Defence, Babcock, and Pratt & Whitney.
The number of aircraft for UK military defence is circa 30, and we have just gone through an extended invitation to tender and are now in an invitation to negotiate period. When the Minister for Defence Procurement launched the ITN a couple of months ago, he placed importance on the exportability on the programme. Airbus Helicopters has looked at the size of that aircraft and has done its analysis across the globe. It can see a global requirement of about 1,500 aircraft. It believes, as does Airbus, that it can capture about a third of that, so 500 aircraft.
The key thing from an exportability perspective is that Airbus Helicopters UK has already said that every military variant of that platform will be built in the United Kingdom. Its headquarters are in Oxford. We, as Spirit, have facilities in Prestwick and Belfast. The Airbus final assembly line is in Broughton, in Wales. That is a four-nation levelling up opportunity that will provide decades of work and bring in hundreds of jobs into this.
It is a huge opportunity and would provide possibly one of the biggest pipeline activities for defence, outwith the Tempest programme, for Northern Ireland. It is a huge prize. We are currently helping Airbus put in the submission, and we look forward to seeing the outcome of that. From our perspective, that ability to drive costs down, because you are tying it to exports, and the UK becoming the launch customer for it, will encourage a whole host of other countries to adopt that platform.
The interesting thing from our perspective is that we would be involved in the detailed design activity and the manufacture of major component assemblies in Belfast going forward, subject to a number of ongoing discussions, but we certainly have a significant role to play in that programme. That is where the DSIS paper and the defence command paper come in, and I welcome the Government recognising the sovereignty of the union and its ability to put defence back into the heart of Northern Ireland.
David McCourt: Returning to the export thread that Nick talked about, it brings incredible value for taxpayers’ money, because, if we bake it into the export from the onset, it means that we are then able to share product costs. We referenced the Saab-designed NLAW, which consolidates Finland, Sweden and the UK under one framework. We know the success of what has happened there. We are also able to supply that kind of secure supply chain.
For our export, that pipeline puts Northern Ireland’s defence on a global basis, which has really helped with talent attraction. That is one of the things that we have to look at, and I know that Ben mentioned that in terms of really making this industry attractive for talent. Certainly, the export aspect helps with it.
What has come out of the DSIS is that it really gives us the confidence to invest in home-grown skills and in a much longer supply chain. Certainly, on the sovereign aspect, what has happened in Ukraine has really shown the need for sovereignty. It is the reason why we were able to act quickly and help with the UK Government’s support on that restock and resupply.
Ben Murray: We are, hopefully, pretty well aligned with this and, as I mentioned previously, with the national shipbuilding strategy and other sister documents and strategies. The point about exports is where we are probably a little more immature in terms of where we are at the moment on the defence side.
We have FSS as the big new-build programme. We have an export defence contract at the moment for the Lithuanian navy. It is not in Belfast, but it is being delivered through Appledore, which is in north Devon. That is for the refit and rejuvenation of the naval minesweeper HMS Quorn, which is going to the Lithuanian navy, and colleagues from Belfast are involved with that. That was one of those early projects that were secured by the business, enabling that follow-on, ramp-up and recruitment. Where we are as a business at the moment is about demonstrating that track record to be able to go and talk to others about what export opportunities exist.
On the commercial side, however, there is a significant pipeline of export opportunities. You have probably seen it in terms of SeaRose, cruise ships, Korean vessels and so on. We are trying to bring some of that learning and expertise, whether it is around delivery or a commercial approach, from the commercial realm into defence. It is not always totally relevant, but there is learning that we are trying to offer to the customer that is particularly useful.
On some of the other changes, we are seeing a significant increase in the role of social value in contracts. I think I am right in saying that FSS was probably the first to have put such great focus on social value.
Chair: We will come back to that in the very next question, which is about social value.
Ben Murray: I will leave that, then, but I welcome that. Clearly, that is something that we are all heavily involved with, but the ability to create the signal that allows us and others to then also work together in responding to those, so that you are not doing just the basic requirement, is certainly very welcome.
In terms of Belfast, there are significant export opportunities from Dublin. Our ability to offer an island of Ireland solution is something that we are particularly excited about. Again, utilising the investment that would come from those programmes for other programmes allows that reciprocal investment. There are opportunities there that we are keen to support.
Q53 Stephen Farry: I am very conscious of the commitments made last week to the £75 billion defence spending ratcheting up over the next number of years. In terms of opportunities and threats for Northern Ireland in that regard, is there a danger that, with our relatively small base, we may be getting left behind in terms of what is a fairly dramatic ramping up? Do we need to take some sort of action to try to mitigate that?
As a flip side of that, it often strikes me that the lead-in time for some of the MoD procurement decisions is quite lengthy. Last time we talked about Tempest, we were talking about that coming to fruition in the mid-2030s. Overall, should that process be much more streamlined in some sense, or can it be streamlined?
Nick Laird: I referred to regional industrial blindness or blind spots. There is more activity that can be done with decision-makers, and that is about an education process. When we have pulled capability decision-makers across to Northern Ireland, they see the enthusiasm of the workforce. They see the technologies and the capabilities. They get it. That is a constant. It harks back to my bit about the tyranny of distance. The Irish Sea is a difficult thing for people to understand.
You mentioned ramping up and the Tempest programme. Some of the procurement processes can be challenging. They are challenging for us. They are, basically, a significant barrier to SMEs running and competing for a bid, as well as the invitation to tender and the invitation to negotiate, et cetera. That all costs money. SMEs will struggle with that, and so it is a huge barrier. Can that be compressed? Yes, it can.
Just going back to the new medium helicopter programme, that has seen further extension of invitations to notice. We are still not at a decision point and will not be at one until next year. How could that be compressed? I will maybe pivot to the scoring of programmes, because that comes down to suitably qualified and experienced personnel being in those decision-making areas.
We know that the MoD and DE&S suffer from a shortage of personnel in certain areas. In one area that we were working with them on, Mosquito, in the period of three years, they lost every commercial officer in their organisation. That is not great for continuity. I know that there is work ongoing inside MoD and DE&S to look at new frameworks to help that. That really does need to be taken forward quite vigorously; otherwise you are going to see these extended periods and reviews of capability.
A lot of the work that we are involved in is in highly complex platforms. Very rarely can you run those very quickly. From inception, an aircraft in commercial aerospace takes at least seven years. On the Mosquito programme, we were demonstrating a clear pathway to get that down to three years. There are measures that you can take. There is a lot of work on things such as digital twinning, where we can help the process of maturity in programmes to get to a point where executive decisions can be taken, but it is complex.
David McCourt: That uplift was welcome, particularly in the subsection of the munitions strategy, where they are looking at having always-on missile supplies. That is, again, something that we have been advocating.
There is certainly an education piece. What we are really looking at is leveraging and reinforcing that category or the portfolio approach. In Northern Ireland in particular, the MoD would be quite platform-centric and looking at the much larger air vessels or land-based systems. In fairness, there has been a shift to looking at more of the critical sub-systems, so the likes of sensing and effecting. It is really a case of reinforcing that in terms of Northern Ireland and in particular owning that category that they fit in.
Ben Murray: As I said earlier, the uplift is very welcome for various reasons, but hopefully there is work within that further down the line as well. We do not know which programmes that might be able to turn from possibilities to certainties, so we are waiting to hear detail on that.
In terms of how you can speed this up, which is an imperative, you spend years and years working on these, and I understand that. That is the competition approach. There needs to be rigour and robustness, but there have also been within industry conversations about facilitated consortia. We have the aircraft carrier model, where everybody got a role and you were able to design something that was, therefore, quicker. That was certainly the plan, and you were able to bring everybody in, so you are also not giving all the work to one yard. You can spread that out. Of course, that works only if you adopt that model for other programmes. Otherwise, you are not going to get away from that pipeline issue that we have spoken about at length.
In terms of whether we are match-fit or well placed to benefit from any increase, I am not able to comment on behalf of colleagues here, but, from our position, we are in the best place that we have been. One of the reasons why, on the naval side, defence spending in Northern Ireland has been so low is that there has not been a significant player to spend it with. There are supply chain businesses, but you need a prime or similar to be able to take a decent chunk of that and move the dial in terms of figures.
The investment that is going in from our perspective means that we are in a much better place to deliver future programmes than we would have been previously. We have a workforce that we would not have had previously, and we have a greater understanding. As colleagues have said, the people who visit get it. They understand it. They love the place. They get the uniqueness and they see the opportunity to respond to some of the other programmes that they are aware of. That is something that we are able to excite people about.
It is not a perfect position, but is certainly, on the naval side, a much better one, in recent history, than we have been in. We need to continue to work hand in glove with the customer to understand what they need and when. If there is a role for Government in facilitating some of that collaboration to deliver outcomes more quickly and cut out the need for that competition on every particular occasion, we can shorten the time and give that certainty for employers and for the workforce, but also for the customer.
Q54 Chair: Nick, you mentioned Tempest and opportunities there. Will there be opportunities for you with the GCAP project or is that solely BAE, Mitsubishi and Leonardo? Will there be some spinoffs?
Nick Laird: We are working with the four key partners on Tempest. We have had a detailed design team in place since early 2021. We continue to do work on manufacture and testing. I cannot go into the detail of that work, but we are very much involved in that.
Coming back to my point about sovereign strategic partnerships, between now and 2035 is a very long time, and so we need to maintain and sustain some of the skillsets and the people on that programme. Tempest has a number of funding gates to go through, some of which are this year. The GCAP programme is really important from an international perspective. There will be future workshare discussions with the other partners, but it is a national endeavour. It is possibly the biggest air defence programme in several generations.
Looking back to Typhoon, which was multinational, BAE Systems is still building Typhoons for international customers 40 years on, so there is huge opportunity. We are trying to place ourselves within Team Tempest to ensure that we have a positive outcome from that going forward. It creates a pipeline of activity and then plays into all of the highly skilled jobs that we want to retain to improve the GVA in Northern Ireland and really move the dial.
Chair: We have touched on social value a couple of times and I have stopped them.
Q55 Claire Hanna: Yes, and you are chomping at the bit to discuss social value. Ben, to what extent does the Ministry of Defence consider local prosperity and levelling up when making procurement decisions? Is the social value criterion in its procurement clear enough?
Ben Murray: As I said earlier, I think we are right in saying that we are the first naval programme to put such a weighting on social value within the contract. What does that mean in reality? It means that we have to report on that in the same way as we do other milestones and metrics that exist.
From our programme perspective, it is treated incredibly seriously. We have a team of colleagues working on this. In the reporting packs with all the metrics that have to be produced and submitted, it is there alongside recapitalisation, procurement and ramp-up. It has parity of esteem, if you like, whether or not that is an indicator of how seriously it is taken. We can do more on it, because you have the intent, which then sometimes comes into conflict with some of the other parameters, which might be about cost.
If you are looking at procurement of a piece of equipment, and one supplier is able to deliver that more quickly and cheaply than another, the rules often lead you to go for that option, which means that you are perhaps not hitting some of your content objectives in the way that you might want to. There is a policy decision about which of those should take priority.
It is very difficult to say that, if you want to make sure that you have operational capability and vessels in the water, you are going to delay that in order to find a local provider of those things. That is one area where, as we continue to ramp up capability, not just in Northern Ireland but elsewhere too, we are going to be able to have local providers for those services and products in a way that we perhaps do not at the moment on a competitive basis.
In terms of elsewhere, it is handled and regarded seriously. In terms of what it means for us, I have spoken about apprenticeships. Recapitalisation comes into social value, as do our internships and our graduate programmes with the universities, and the work that we do with Northern Regional College, Belfast Met, Ulster University and Queen’s University Belfast. Getting children around the yard sounds so basic, but we all know the power of inspiring people early. All of that is quantifiable. All of that is reported on. All of that is work we would want to do anyway, but we have the resource and the capability to do more of it.
Quite frankly, all of us take that more seriously when we realise that it is something we have to report on as well. That is good, but we can certainly do more of that. That is a decision for MoD in terms of, ultimately, what trumps what. Is it cost? Is it time? Is it social value? Probably as one of the guinea pig programmes for this, we are very happy to help shape that. You can grow and scale that in a way that delivers that ripple effect far more widely than focusing just on the core programme.
Claire Hanna: Carla is going to pick up on some of that skills and engagement part.
David McCourt: The intent is certainly there, particularly on the land area that I am active within. It is up to 20% of the bid, which is incredible. That can completely change things. In terms of the understanding of the criteria, it is complex, because it has to be proportionate in terms of the social value to a particular area or region, as well as the bid value. While the intention is there, the execution still needs a little more work. That is from the MoD side.
On the Thales side of things, we have implemented social value by design. It is an area quite close to my heart. When Thales originally rolled it out, they looked at a socioeconomic study across the four nations of the UK. Belfast, quite naturally, had come out on the worst side, although it was a point of pride, because in the red-flagged area I could see exactly where I was born and raised. That speaks to what defence can do for me personally, and what I have been able to do for my family and community.
Thales has implemented social values by design and looked at a UK framework. It has fundamentally changed how the business does business, particularly on the recruitment aspect and making it more inclusive. We have completely changed our recruitment criteria even, looking at certain areas to make sure that they are completely inclusive. We have hit about 18,000 volunteering hours in the UK, 900 of which in Belfast. Even for me, I am incentivised as an employee in terms of those volunteering hours and how I can add to them.
Certainly on the MoD side, while I am not going to say the criteria are ambiguous, the execution of that needs to be a lot more proportionate and appropriate. On the Thales side, it is something that we have embraced really quite significantly.
Nick Laird: I will possibly go a little further on that. The social value criterion is well meaning. However, it is clunky. What do I mean by that? Social value is supposed to incentivise a commitment to the industrial base, et cetera, looking at a whole bunch of parameters. In a programme, if I split it into three and do not give percentages, there will be the technical scoring for the programme and the capability, for the industrialisation, and then for the social value.
Especially within social value and industrialisation, it is an evolving process, and some of the scoring needs to be looked at far more carefully. If you reach a threshold within a certain percentage—say it is 10% or 15% of the scoring, just making it up, and you get to 5.5%—you score all the points. If a company gets to 8%, it scores no more points. It is very clunky, and that may be a question for representatives from the MoD.
There needs to be far more finetuning on it. It is about the industrialisation elements of it. The technical piece is pretty straightforward: when you look at a programme, can it do x, y, and z? There is always a trade with some of those, whether it is performance, range, endurance or payload.
On industrialisation, being absolutely honest, it is not a level playing field. If you reach a threshold within the limits, you score all the points, and there is no incentive for you to do anything more, so more work and development could be done on the scoring mechanisms.
Q56 Carla Lockhart: I have just a couple of points, and then I will move very quickly on to skills. You talked about the regional hub. In the last evidence session, Les was certainly floating that idea and its importance. That is definitely a big ask, and this Committee should be advancing that, even ahead of any report coming out from this inquiry. You can pick this up offline, but I would be keen for some more thoughts around what the shape of that would look like and what the feed-in would be from business and Government. I would be really keen to get that from you at some stage, whether today or later.
Procurement is a very difficult area, and it is difficult to change it. Again, I am just keen to really crystallise what it is around procurement that you feel is needed, so that that longer pipeline can be established.
Another comment would be around making sure that Northern Ireland has that seat at the table. It has been evidenced throughout today that Northern Ireland struggles to fly the flag or be at the events. Is there something more that Government can do to make sure that Northern Ireland is involved in those, given our skillset and given what we have the ability to do and what we are currently doing? I am keen to explore that.
Finally, on the skills side of things, does Northern Ireland’s workforce have the skills? You have talked about your apprenticeship, but I am keen to understand about the apprenticeship levy and the impact of the fact that Northern Ireland gets it in the block grant and it does not actually go towards apprenticeships. That is something that the Chair has been very interested in and very keen to push. What steps can the Northern Ireland Executive and/or the UK Government take to better support skills development and address any gaps that exist?
That is a bit of a gallop through, but you can pick them up as you go.
Nick Laird: Very briefly, a hub could be created relatively quickly. It needs to be a joint hub. Speaking from an aerospace perspective, I know of military personnel already in Northern Ireland with capability backgrounds that could be seconded into that, but it should not be a part-time endeavour. It needs to be full-time and to have a regional champion in support of it in order to link back into policy and capability decision-makers.
“Education, education, education” is a constant. I spend a lot of my time pulling senior capability decision-makers to Belfast, and I have stressed that point. We all need to do more of that as an industry, as a trade body and as a local executive, et cetera. That is how we are going to indicate that we have a rightful place at the table and can do more.
We are pretty well placed on skills. One thing that we have not touched on today, which I will very quickly highlight, is our interaction with both Queen’s and Ulster on the R&D side of things. The skills piece is really important. When the Committee comes to visit in due course, we will show you some work that we have been doing with Queen’s. It is a whole new skillset and a capability that I cannot go into in this public forum, but we have been working on the programme for three years and have just moved it into industrialisation. I am confident that we are going to be successful with the programme. It is going to transform defence activity, and it is all being created in Northern Ireland. There is a lot that we could do. I am conscious of time, so I may pick the rest up with you offline.
Q57 Chair: Ben, you have touched on this, but just for the record what proportion of the fleet solid support contract work will be undertaken in Belfast?
Ben Murray: There are 21 blocks that will be manufactured, and 14 of those will be across Belfast and Appledore. In Appledore, we are doing the bow sections, and the rest will be in Belfast. I will check whether we are able to share the diagram that we have with you. It just shows you which blocks are being built where, but you can see there the majority. I know that there have been some unhelpful murmurings from some quarters about the fact that there was not much work happening in Belfast, but the majority of work is happening in Belfast. The majority of work is happening in the UK.
Q58 Chair: There are 1,200 jobs split between Appledore and Belfast.
Ben Murray: There are for FSS. There are a further 800 through the supply chain, and that 1,200 may increase if there is a make-buy decision. Do we want to subcontract for some services and, therefore, that figures in the supply chain, or do you choose to do that in-house, and that number increases?
Q59 Chair: You mentioned subcontractors. You have some Spanish experts who are going to be based in Belfast. Is that a big team or just management?
Ben Murray: This is Navantia, which is the prime contractor for the contract. We are the subcontractor to Navantia. A big part of the selling point, if you like, for MoD is its ability to extract knowledge and expertise from these guys, who have a tremendous track record of building vessels across all sectors, including naval. They will have a team of people on site to support us in that process and ensure that not only the manufacturing of that process is going well, but also the integration, the test and the commissioning of those vessels. We already have a Navantia crew on site, but mainly management, for the reasons that I set out. The trades are Harland & Wolff trades in Belfast and Appledore.
Q60 Chair: Will that be people flying in for a few days or will they be buying houses and setting up shop in Northern Ireland?
Ben Murray: Some will be here for the duration, but, for the majority of the knowledge transfer that we are doing, for instance, we send people over and they stay in hotels and so on, and vice versa, for short periods. It is a combination of both.
Q61 Chair: You are setting up a new fabrication and welding skills academy. What is the timeframe for this being established? Will it be based in Belfast? I assume that it will.
Ben Murray: That is right. With Northern Regional College, within the fabrication hall that is being extended and redeveloped, we have a skills school on site, which is where the apprentices are trained. If and when the group visits, there will be an opportunity to see that and to meet colleagues who are leading that. We have that in place today.
We want to go beyond that and make it a facility that is available to others too. We are working with Invest NI to see what appetite there might be from others to make that more than it is. At the moment, it is serving our interests, and we have done that. We have that in place. It is delivering the skills that we need. Rather like the rest of this programme, we wanted to have a legacy that is broader than just our interests. If we can make that available to others in the supply chain too, that is great.
Q62 Chair: I hope that you will show them how to rivet as well, just for old time’s sake.
Ben Murray: When you come along, you can have a look at it.
Q63 Chair: We have talked about how some of these big contracts ramp up, and then there can be a gap at the end. I remember, when Bombardier was in the train business, there were some big problems in Derby because it had finished a contract. Are you hopeful that there will be a continuing stream of contracts coming through? Do you have any irons in the fire in terms of cruise ship work and all that sort of thing?
Ben Murray: That is very much the business model. We want to secure further MoD and, as I have mentioned, Irish naval service work too, and we want to be able to deliver that. The facilities are suited to that in the short to medium term. We are not relying on defence contracts, though, because that way trouble lies in terms of timelines. What are you going to do with your workforce and having them sat around?
As you alluded to, we have other contracts, such as cruise ship contracts. We have a significant contract at the moment to refurbish a Canadian FPSO. That is in the dry dock at the moment, and it is helping us bring people on and slowly ramp up to that figure. There is no point taking on all the people we need for a year’s time and have no work for them. There is the barge work, the FPSO work and the cruise liner. If anybody goes down to the ship repair end in Belfast, you will see two cruise liners belonging to two US companies. One has just been painted and is ready to leave. The old Braemar has arrived and is ready for refurbishment.
They are different markets, with similar skillsets and the ability to have people deployed across the piece. We have the multisite group as well. Where we need people, or if there are perhaps periods of time where work is less, we are able to move people around the group to flex that. That is also for the customer. If the customer wants to be able to deliver a project more quickly, we can bring multiple facilities into play, so that we are not relying on finite space in one location. Both of those allow us to give stability and certainty to the workforce as well as to the customer.
Q64 Stephen Farry: I have a few very quickfire questions as we try to reach a conclusion on this stuff. Just picking up a number of random themes, starting with the apprenticeship levy, I assume that we take it as read that all of you find what is happening in Northern Ireland to be incredibly annoying and frustrating.
Ben Murray: Yes.
Q65 Stephen Farry: We do not need to elaborate any further. I will ask three questions together and you can all come back and choose which ones you want to pick up.
On the skills piece, you have mentioned working closely with Northern Ireland universities. I am conscious of the particular pressure on the number of engineering graduates who are coming through. First, what more can be done in that regard? Secondly, once they graduate, we are also conscious that too many are diverted into finance and other careers rather than pursuing engineering. Is there more that could be done in that particular regard?
In terms of research and development, investment flows from the Northern Ireland funds via the Executive and the local universities. There is also a lot of UK spend on R&D. What we are seeing in terms of procurement, we are also seeing replicated in terms of research and development. We are very conscious, for example, that there is a research triangle between Imperial, Oxford and Cambridge. Is there a need to try to break through that in terms of the R&D spend?
Finally, probably a fairly significant area is the SME sector in Northern Ireland. Given that some of my colleagues have done some constituency plugs, I cannot omit plugging Denroy in Bangor, which is a major supplier to Spirit and others. How much of your own organisations’ and your supply chain’s procurement would be in Northern Ireland compared to elsewhere? Is there more that we can do to develop the local SME base? How is that cluster of SMEs growing? Is there more that we can do to encourage that?
Nick Laird: That is quite a smorgasbord there. On the engineering side of things, we have two great feeder universities, as you are aware. I talked about the numbers that we take in on an annual basis. If I can just come slightly further to the left of this, what we do at a STEM level with the schools is really important. We are very active, as are my colleagues, I am sure, in terms of STEM activity, school visits, workshops, mock interviews, et cetera. Getting that out and into the consciousness of the next generation is really important. Over the last year, we conducted 32 of those engagements, with 20 of those in schools. It is about getting right at the heart of that in order to prep that pipeline coming in.
It is a very challenging environment. There are lots of people looking for very high-skilled jobs. In Northern Ireland, as some of the colleagues around the table are fully aware, we have a very young, highly educated workforce, possibly the highest educated workforce in the United Kingdom as a population. I say that because, when my daughter left school, her whole class left with three A-level stars, which is not unheard of in Northern Ireland.
Q66 Chair: Are they all doing engineering or other subjects?
Nick Laird: They are doing other subjects as well. It plays to that bit about engineering. We are not the only industry looking for high-quality people, so it is challenging. There are other sectors in Northern Ireland. There are what I would classify as unicorn activities, where we find it challenging to hold on to or get people. As I said, we have taken on 800 people over the last 18 months, which is fantastic.
For those who live in Northern Ireland, you possibly hear on the radio most weekends about recruitment fairs, where we are taking on more fitters and upskilling people into that workforce. The key thing from our perspective is that those skills in commercial aerospace are directly transferable into defence aerospace. That is key. There are challenges, as I have highlighted, around security clearances and all the rest of it.
If I pivot to your SME question, we work very closely with SMEs. We have worked hand in glove with Denroy over the years. It is a very agile company and one that it is very good to work with. It is that inter-dependability on us as either primes or tier 1s to ensure that we take those companies, because we want them to be successful.
When Leslie Orr gave evidence to you in the previous session, he highlighted that Northern Ireland, from a supply chain and an SME perspective, has more silver and gold standard Supply Chain 21 companies—that is a criterion around efficiencies, et cetera—than any other part of the United Kingdom, so we are well placed.
This comes back to my point about leveraging more of defence spend into Northern Ireland, because we can do it. We have an extensive R&D programme. Most of that is focused on the commercial aerospace side of it and the next generation of advanced composites, and we are a significant way down that path. Some of that activity will support defence activity. In some niche areas, which I alluded to earlier, we are conducting some really interesting work. The work of ECIT in Queen’s is fantastic. They are great people to work with in a very collaborative environment, only a stone’s throw from my office, which makes it even better.
David McCourt: Just to compound it even more, in terms of the defence skillset, it is an ageing population. Where we have a challenge is around knowledge transfer. Particularly with the type of competency required in engineering, I can assure you that it is no mean feat to hit something, essentially, the size of that while controlling something going at about 2,300 miles per hour. It is incredibly difficult and takes a lot of investment.
We cannot hire and place someone into that level of competency, so there is a long-term aspect that we really need to think about. It is about how we retain, and that is one of the real outputs of this Committee that I would like to see. How do we keep graduates there? I am of a generation where third-level education became more accessible, but, on the other end of it, if we wanted to work for a Fortune 500 or large company, we typically left. It is really a case of how we keep our home-grown talent there and attract talent from the UK as well. That is one of the challenges that we are looking at.
On SMEs, there are two things, visibility and connection, when we talk about practical outputs of how the big three primes can help. It is about looking at long-term strategic value for SMEs. I do not want us, by any means, to pay lip service, but how do we slot them in through the lens of the customer who wants operational independence or a much more efficient and effective military advantage? What is the strategic value of those SMEs? That is where we can certainly help etch out.
This Friday, we are working with ADS and have 30 SMEs coming to a “meet the buyers” event in order to help with that. We are oversubscribed because we had so much interest. As Leslie said in the previous session, the hunger is there, so it is a matter of how we really leverage and facilitate that.
Ben Murray: I do not disagree with anything that has been said, so that is good. Hopefully, you will take those recommendations and they can go in the report, but I would just make a couple of points.
I will send a further note on the skills piece, because there is a UK shipbuilding skills taskforce report that is UK-wide but has a focus on different parts of the UK. It has some universal recommendations and some specific ones in Northern Ireland, where we touched on the levy. The apprenticeship requires guys working in the yard to specialise earlier than they do in England. We all know that, if you specialise too early, you might not settle on the area of work that you want to be doing. The modules are not particularly flexible or reflective of what industry needs.
Some of that is not Government’s role. It comes back to the pipeline. If you have a pipeline of work, educational providers know that it is worth their time and effort in investing in and improving the qualifications. We have the time to spend, knowing that we have the forward look. Some of that is partnership; some of it is regulatory. I can send that across with some points in there.
On SMEs, I touched earlier on the “meet the buyer” type of activity for FSS in particular. One of the ways that we are trying to get to know and support the ecosystem of companies is through a new organisation called NIMO, or Northern Ireland Maritime & Offshore. It is not solely defence, but we are playing as strong a role as we can in supporting that. It has supply chain development as its number one area of work alongside skills. Those sorts of groups have a really important role to play in creating connections that have not organically happened.
A lot of the supply chain and SMEs have heard what is happening and seen a buzz of activity, but there will not be an opportunity for everybody on this programme. When we have the confidence through the pipeline, we can do some of that forward look work with them and bring them into future work. At the moment, about 13% of our spend has been with SMEs in Northern Ireland. We are reporting on that, and can monitor and hold ourselves to account on that.
On the R&D side, we have set up a unit of the business called Harland & Wolff Technologies, which is primarily focused on integrating existing solutions into our marine platforms, but that has so far been focused on the commercial side. The sub-procurement for FSS has required engines that are as sustainable as possible, and that has been placed as a contract.
We have the catapult network in particular, which is very keen to lean in on some of our production processes. I mentioned the £77 million of new equipment. Autonomy is one of the drivers for that to increase productivity and competitiveness, working with universities and the catapults to make sure that we do not just buy off the shelf, but that we integrate best practice into that and look at how we can do things differently on the ground.
It comes back to the pipeline. You do not want to waste everybody’s time. If you have that pipeline of work, you know that you have that certainty to go out and say to them, “We might be able to do this. We might be able to do that”. If you know what your forward look looks like, you can invest, alongside others too. It is a pretty simple recipe. To a certain extent, if you get the pipeline sorted, with tweaks and refinements to regulations or things like the levy, everything else will look after itself.
Q67 Chair: Is there any point in trying to recruit in GB for jobs in Northern Ireland? Do people see that as somewhere they would go and work?
Ben Murray: We have done for FSS in particular, where there are group roles, so people need to be across the piece. Some have moved to Belfast and we have not had any problem encouraging people to do that. We have not had a problem so far in finding the people we need for the programme, full stop. It is an incredibly rich talent pool in and around Belfast.
We need to ensure, hence all the work on future talent pipeline, that there continues to be the talent pool that we need. That is why putting the effort into apprenticeships, into internships and into the qualifications and curriculum is essential. It is not a “nice to have”. You have to do that. All of our ambitions are being realised, but once we get our first, second and third vessels done, and beyond, the ability to know that you can draw upon a reserve of workforce is going to be absolutely critical.
Q68 Chair: Do you find, at Spirit and Thales, that other companies poach your trained people? I know that, when I was up at Wrightbus, some Bombardier people had gone up there and they were very pleased with the skills that they had brought with them. Is that an issue?
Nick Laird: I do not think that it is an issue. There is a subtle flow of personnel back and forth between Thales and us. My chief technologist worked for Thales for 30-odd years. Some of the programmes that we were running were really interesting for him, and he came across to us. We are not in open warfare at all. The pool of talent in Northern Ireland is extensive. It comes back to my point about unicorn appointments, whether they are legal or finance. Those are the ones that are possibly more challenging to keep a hold of, for obvious reasons.
Going back to your point, Chair, about whether we have a problem recruiting people from the mainland, it really depends on those individuals and the optics that they have of Northern Ireland. I am classified as a blow-in, as they would say, originally being from the east of Scotland. As a place to live and work, I do not think that there is anywhere better. Once people come across and see the level of work, the skills and the projects that we are involved in, they are keen to stay. I highlighted the benefits of the education system for people who have young children.
Q69 Chair: A lot of people say that. Obviously, they are people who have not been to Yorkshire, I might add. As a final bite of the cherry, we heard what you said about following the French model of hubs. Is there anything else that the MoD could do and that we could recommend that would improve the situation for defence investment and innovation in Northern Ireland? This is your last chance.
Nick Laird: We are very interested in the “Safeguarding the Union” Command Paper, which talks about incorporating Northern Ireland into the defence network. We are very happy to contribute to that discussion going forward, and maybe that is a question to take to your senior MoD representatives in your next session, Chair.
Chair: You mean the Minister himself.
Nick Laird: Yes.
David McCourt: I just wanted to reiterate the positioning of Northern Ireland in terms of the category approach. We are the flagship or the centre of excellence for a particular competency that you cannot get anywhere else in the UK. I just wanted to reiterate that in terms of strategic partnering, really.
Ben Murray: We would all say this, wouldn’t we? It is all well and good having a commitment to increase spending, but on what? The investment that is being made at the moment on the naval side and the broader supply chain is something that we do not want to lose. We want to follow up on that. If there was a commitment within that recommendation that you are looking at all parts of the defence space, that would be welcomed.
Chair: Thank you very much for that very useful evidence and for coming to give the Committee the benefit of your thoughts.