Written evidence submitted by Thales (SSF0004)

Scottish Affairs Committee

‘Securing Scotland’s Future: Defence Skills and Jobs’

Thales introduction

Thales is a global technology company operating across the aerospace, defence, digital identity, cybersecurity and space sectors. In 2024, Thales contributed £2 billion to the UK’s economy and supported over 23,000 jobs.

Originally Barr & Stroud, Thales in Scotland has been a key part of Scotland’s industrial landscape for over 125 years. Renowned for its world-leading optical systems, our Glasgow site is a centre of excellence for armoured vehicle sighting technology for the British Army; visual systems for the Royal Navy’s submarines; and search and track systems for the Royal Air Force. Under strict export controls we export this technology to our allies around the world. Today, Thales supports around 2,000 jobs across Scotland and contributes over £145 million to the Scottish economy.

Defence has a critical role to play in the new era of hybrid threats, protecting our country and our troops, at home and abroad. With a global presence, we are witnessing the different ways states are using defence investment to keep their people safe, drive economic growth and support high-skilled jobs in local communities.

We support the Government’s ambition to make defence an engine for economic growth across the UK, and Scotland has a vital role to play in this endeavour – from primes to SMEs, and across the supply chain.

Summary

• Long-term clarity and security around investment is required to sustain and create new high-skilled jobs and economic growth – in Scotland and across the UK.
• More apprenticeships are needed to develop the skilled workforce required by industry.
• Negative narratives and rhetoric around the defence sector can impact industry’s ability to attract talent in an already competitive skills market.

1. How can Scotland benefit from increased UK defence spending?

What can be done to ensure the economic benefits of increased defence spending be shared throughout Scotland?

At a time of global instability, investing in defence is critical to deterring aggression and keeping the country safe: fostering innovation in the UK and developing sovereign capabilities to give our Armed Forces the advantage they need in any potential conflict.

Increased UK defence spending represents a significant opportunity across Scotland’s economy, stimulating growth across the Scottish supply chain benefiting SMEs, technology firms, advanced manufacturers and academia.

Defence programmes anchored in Scotland – from frigate and submarine construction, systems development and production, to space manufacturing and cyber technologies – create high-value, long-term employment providing a basis for regional development and regeneration. The foundation for this is in the sustainment and creation of jobs, with a focus on early careers.

In 2021, we were awarded a £180 million contract to supply threat-detection technology for the Army’s Boxer vehicles, securing 700 Scottish jobs. In 2023, we were awarded a £169 million contract to supply optronic combat system masts for the Dreadnought class submarines, securing over 150 highly skilled jobs and reinforcing our role in UK defence. Most recently, and in concert with our Thales colleagues in Belfast, we are being contracted to supply our sovereign fusing technology under the HIRST contract for integration into missiles for Ukraine.

A reliable pipeline of programmes and opportunities, including through partnerships such as AUKUS, is essential to maintaining sovereign capability and the skilled jobs that deliver it throughout Scottish industry.

What projects showcase how the benefits of such investment can be spread, particularly in rural communities?

• Remote working: By utilising secure video conferencing and virtual working environments, some Thales employees work effectively from rural Scottish communities, spreading high‑value jobs beyond urban centres.
• Virtual work experience: Our partnership with Springpod delivers online placements in areas like digital identity, cybersecurity, and space. Because the programme is fully virtual, young people in rural locations can access diverse experiences and earn a certificate that supports applications and assessments, creating lasting value.
• STEM outreach through Primary Engineer: The “If You Were an Engineer, What Would You Do?” initiative is open to all primary and secondary schools, regardless of location. Thales builds a prototype of the regional winning design, giving students a tangible outcome and a direct connection to engineering.

Together, these projects demonstrate how investing in digital platforms and accessible outreach can extend opportunities to rural and isolated communities, fostering interest and opening pathways into engineering and other critical fields.

How can increased investment ensure the creation of highly skilled and highly paid jobs?

Scottish defence roles are inherently high-skilled and high-value reflecting the complexity and sensitivity of the technologies involved. With a longer-term view of investment, industry can plan for:

• Expansion of engineering, digital, cyber, and systems integration roles
• Growth of apprenticeship and graduate schemes
• Modernisation of facilities, creating specialist positions in testing, simulation, and advanced manufacturing
• Expansion of further education offerings advancing not only the defence sector skill set but the wider Scottish Engineering offering.

Companies are already acting through the creation of internal skills academies. These academies help fill the gap between academia and industry and make retaining and transferring organisational knowledge easier, which feeds Thales’s skills pipeline for critical jobs, ensuring that Scotland remains at the forefront of the UK’s sovereign industrial capability. In Glasgow, we are ensuring that hard-earned expertise is passed on to the next generation through our Optronics Skills Academy – especially vital as 20% of our engineers approach retirement.

Thales works closely with several partner schools in and around Glasgow. The criteria for working with a school is based on the percentage of free school meals to actively promote our apprenticeship opportunities to young people that would traditionally be underrepresented in our workforce. Thales in Scotland currently supports 98 early careers employees with this number set to grow in 2026. We have 14 modern apprentices in manufacturing, 28 graduate apprentices across engineering and business, 48 engineering graduates, and 8 business graduates.

All the above opportunities and activity require long term commitments and security of investment, on both a regional and national level. Business decisions – from infrastructure to training and skills – are positively influenced by greater certainty, allowing for longer term projections and providing the confidence for increased private investment.

Defence exports also provide sustainable revenue that can then be reinvested in Scotland and the UK more widely, flowing through the supply chain and driving innovation while sustaining and developing jobs and regional prosperity.

2. What are the key skills gaps in Scotland’s defence sector, both now and in the future?

What are the main barriers to attracting and retaining talent in Scotland’s defence sector?

Apprenticeships in Scotland are under tension. Nearly 9,000 fewer apprenticeships than required by education and industry were funded in 2024, resulting in fewer placements and the risk of key skills being lost from one generation to the next.

Perceptions of the defence industry in some quarters can make recruitment of talent difficult, impacting innovation, production and prospects, leading to national and local economic impacts.

Negative narratives and rhetoric around defence and nuclear contribute to the public’s perception of defence companies, impacting appetite for careers in these industries. Aerospace and defence companies are amongst the largest contributors to STEM outreach activities across Scotland. However, initiatives that restrict aerospace and defence companies from engaging with schools on STEM topics make this more challenging, if not impossible, to do so in certain cases.

Perception gaps among students and early-career professionals regarding defence careers are particularly acute. Protests and encampments at universities are a clear indicator of the challenges defence companies face in attracting early careers talents.

These perception gaps result in intense competition with other high-growth sectors such as energy, FinTech, and advanced manufacturing – Glasgow is a hub for software-based companies which are driving academia course changes, running the risk of sidelining skills and development critical for the defence industry.

At a time of increased geopolitical tension, we welcome the UK Government’s positive narrative around the crucial role the defence sector plays in securing the nation. We and would urge the Select Committee to lend its support to developing those narratives in conjunction with all layers of government and society.

Additional challenges include:

• Lengthy security clearance processes are a barrier to recruitment agility, making it harder to go through the hiring process within a reasonable timeline after the offer is made.
• A reluctance to relocate to defence-oriented regions, limiting the candidates pool.
• SMEs struggling to compete on salary or flexible working conditions: the battle for talent makes attracting and retaining skilled workforce more complex and challenging, particularly for smaller organisations.

How are these skills gaps inhibiting the full potential benefits of increased investment and defence spending?

Skills shortages restrict Scotland’s ability to fully capitalise on defence spending through programme delivery delays; reduced innovation capacity; inflationary pressure on labour; and bottlenecks within the SME supply chain.

Industry is challenged to produce at capacity and meet increased demand when there is a shortage of skilled, specialised workers – potentially leading to an erosion of sovereign capability in the worst instance.

The skills gap is a result of a long-term decline in defence funding that has only recently been reversed, which means ramping up and addressing gaps will take time.

What role can the UK Government play in ensuring the skills and training needs of Scotland’s defence sector are met?

A coordinated and strategic approach is required to meet the skills requirements of industry in Scotland and more widely.

Skills and training investment initiatives could include:

• Expansion of co-funded apprenticeship, graduate, and reskilling programmes. Thales has a positive relationship with Skills Development Scotland (SDS) and we utilise SDS for all apprentice and graduate positions within Scotland.
• Supporting degree apprenticeships in systems engineering, Software, cyber, autonomy, and advanced manufacturing.
• Incentivising upskilling for mid-career professionals seeking transition into defence and utilising apprentice funding through SDS for those looking to upskill or reskill.

The UK Government could also support through enhanced policy and programme stability, such as:

• Providing long-term programme visibility to give industry confidence to invest in talent.
• Streamlining and modernising security vetting to support timely recruitment.

Action to strengthening the education–industry Interface could include:

• More alignment of defence workforce requirements with Scottish universities, colleges, and training bodies to develop courses that would develop critical skills for the industry and enhance the pool of talent.
• Supporting joint curricula and research partnerships focused on digital, maritime, and space technologies

What role can defence innovation and collaboration clusters play in developing skills and jobs in the sector, and how can the UK Government support them?

Scotland is well-placed to host strong defence innovation clusters in maritime and maritime autonomy, space engineering, data exploitation, secure communications and digital defence.

Developing such clusters could bring a wide variety of benefits, through shared R&D facilities and advanced test infrastructure. Collaboration could also help develop stronger links between academia, SMEs and primes. The clusters could create more attractive environments that would support attracting and retaining early careers and specialists’ talents. Innovation and collaboration clusters can also support the accelerated development of dual-use technologies and export ready capabilities.

The UK Government could support the development of these clusters through targeted funding for innovation centres, incubators and shared facilities, and supply continued support for the Defence and Security Accelerator (DASA) and Catapult Network in Scotland. Promotion of clusters nationally and internationally could help attract inward investment and global talent, while promoting the positive contribution of the defence industry in terms of high-skilled jobs, regional economic growth and regeneration.

How can collaboration with other sectors, such as energy and advanced manufacturing, enhance the impact of these initiatives on jobs and skills?

Scotland is home to several highly innovative and valuable companies in aerospace (at the Prestwick Hub), space, offshore energy, robotics, and digital industries, creating significant opportunities for cross-sector collaboration. Defence can benefit from technology transfer from energy, AI, and advanced manufacturing sectors using the National Manufacturing Institute Scotland (NMIS) Catapult capability.

Developing shared training pathways would help reduce the cost of developing critical skills. A great example is the ‘Engineering: Design & Manufacture’ degree apprenticeship from the University of Strathclyde, which was created through collaboration by a cross-sector employer forum.

Collaboration between different sectors – such as technology, defence, and energy – will drive innovation in dual-use technologies, especially in autonomous systems, advanced sensors, and sustainable solutions. By working together, there is an opportunity to create a leading Scottish AI champion focused on computer vision to develop solutions to help protect Critical National Infrastructure from immediate drone threats faced not just by the UK, but also its allies. This effort would benefit from partnering with the energy sector, which is a key part of national infrastructure.

The innovations needed go beyond just AI algorithms; they also include advanced detection systems. These systems would leverage the latest optronics and thermal imaging technologies, much of which is being developed in Scotland, to identify and respond to drone threats more effectively.

Cross-sector collaboration would also facilitate rapid repurposing of manufacturing in case increased production is needed due to a changed threat level. Shared training pathways would also ensure that the workforce can transition from one production type to another with minimum downtime dedicated to training.

What impact is skills and workforce competition with other sectors having on Scotland’s defence sector?

Defence increasingly competes with high-growth sectors – such as AI, energy and FinTech – that draw from the same talent pool. This competition results in difficulties securing digital (software, cyber, data) and systems engineering experts and leads to increased attrition to sectors with more flexible or higher-paying roles (in FinTech, for example). Perceived negative connotations of working in the defence sector make this competition much more difficult. This ultimately leads to delays in programme delivery and supply chain capacity growth, due to workforce shortages.

What are the potential benefits and limitations of a Defence Skills Passport?

We would welcome greater detail on what the proposed Defence Skills Passport initiative will entail. However, potential benefits of the initiative must be considered alongside potential limitations.

Potential benefits include:

• Creation of a standardised competency framework across the sector
• Enhanced mobility of cleared, skilled workers across primes and SMEs
• Decreased duplication of training and accelerated onboarding
• Support for veterans transitioning into defence industry roles

Potential limitations:

• Security classification constraints limit the portability of certain specialist skills. There is an increasing number of UK Eyes-only contracts and tighter Security Aspects letters, making recruitment harder as many dual nationals and other candidates are ineligible.
• Variability across defence domains may challenge universal adoption
• Success depends on widespread industry and government alignment

A skills passport would provide value, but must be part of a broader, long-term, UK-wide skills strategy to boost defence as an engine for growth. Developing a framework with a modest quota allowing individuals with strong CVs but without existing right to work, such as graduates, to apply could help further develop the pipeline of talent.

3. What role should Scotland’s Defence Growth Deal and Defence Industrial Strategy play in creating and sustaining high quality jobs in Scotland?

How can local economies best benefit from the Defence Growth Deal?

How can the Defence Growth Deal and Defence Industrial Strategy ensure the retention of digital and cyber talent in the defence industry in Scotland?

Already 11,000 people in Scotland are employed due to MOD spend with industry. Scotland’s defence industry, especially its cutting-edge maritime and space capabilities, is a unique advantage that Scotland should leverage and encourage.

Scotland’s Defence Growth Deal should promote industrial clusters in support of national priorities by leveraging existing local strengths and creating a framework for skills, infrastructure, and innovation funding. It should also seek to support and develop SMEs – reprising efforts to match Scottish suppliers with Scottish Tier 1 defence companies, for example, would benefit local economies.

4. To what extent are Scottish-based suppliers integrated into defence supply chains, and what impact is this having on jobs and investment?

Many Scottish suppliers are well integrated into defence supply chains particularly via prime contractors. While collective demand is driving growth, it is also straining the supply chain, which requires further investment in order to produce at pace and at capacity.

How effective are current Ministry of Defence (MOD) and industry engagement mechanisms with SMEs in Scotland?

As signposted in the recent SDR, there is a clear ambition for the MOD to make it easier for SMEs to be effectively utilised within the defence industry. However, current engagement mechanisms with Scottish SMEs are considered only moderately effective. While access routes such as through DASA, trade associations, or prime contractors exist, many SMEs experience limited direct engagement with the MOD beyond these channels. Smaller and newer SMEs often lack the resources and knowledge to fully utilise these mechanisms, limiting participation and growth opportunities.

There is a notable absence of clear, consistent engagement pathways. Many SMEs feel uncertain about who to approach within the MOD and what topics are appropriate for discussion. Establishing a nominated industrial liaison with a defined engagement charter could provide clarity and improve interaction. Additionally, localised MOD engagement has declined; procurement has largely been centralised or outsourced to third parties, typically based in southern England, removing regional touchpoints that once helped forge direct connections with Scottish SMEs.

An enhanced and more visible MOD presence in Scotland, even on an ad-hoc basis, coupled with more proactive communication, could strengthen relationships and build trust with the SME community. Active partnering programmes between primes and SMEs should also be considered to encourage joint working.

What barriers do Scottish SMEs face in engaging with the MOD?

Scottish SMEs face a variety of significant barriers when working to engage with the MOD. One major challenge is the complexity and length of procurement procedures, which are often made harder for SMEs by the heavy administrative burden required for certifications such as cybersecurity credentials, quality assurance like ISO 9001, and FAIR documentation under AS9102 standards. These processes can be extremely resource-intensive for smaller companies. Furthermore, SMEs often lack the resources needed to quickly prepare compliant bids, which is crucial given the fast pace of some procurement processes.

Security and vetting requirements are often both lengthy and costly, while facility security requirements can exclude SMEs that do not have access to secure premises from bidding on certain projects.

Export licensing regulations that are both complex and rapidly evolving further stretch the limited capacity of SMEs to provide adequate training and monitor compliance. There is also a lack of clarity regarding the appropriate routes for engagement with the MOD, and the centralisation of procurement functions has reduced SMEs’ direct access to MOD decision-makers, making it more difficult to build strategic relationships.

Finally, many SMEs are unsure about the MOD’s current technology needs and future direction, hindering their ability to align their innovations and respond with agility.

Collectively, these factors undermine the ability of Scottish SMEs to compete, innovate, and grow as suppliers to the MOD. Greater facilitation of communication between SMEs and the MOD would help reduce these barriers and the establishment of the Defence Office for Small Business Growth will be a positive step forward.

How can Scottish SMEs in rural communities better collaborate with the MOD?

Expanding the use of digital platforms would allow more virtual engagement and facilitate remote participation, ensuring that location does not become a barrier to involvement. In addition, encouraging the formation of local clusters and fostering partnerships among SMEs would enable companies to pool resources, share capabilities, and collectively manage compliance requirements.

Investment in shared, secure facilities would be a significant enabler, helping rural SMEs overcome facility-related security challenges that might otherwise prevent them from accessing MOD projects. Targeted funding focusing on skills development, innovation, and readiness for compliance and exports would further empower rural and urban suppliers alike.

December 2025