Written evidence submitted by ADS

ABOUT ADS

ADS is the premier trade association advancing the UK’s Aerospace, Defence, Security and Space industries. ADS comprises over 1,000 member companies across all four sectors, with over 900 of these companies identified as Small and Medium Size Enterprises (SMEs). Together with its regional partners, ADS represents over 2,600 companies across the UK supply chain.

The UK is a world leader in the supply of aerospace, defence, security and space products and services. From technology and exports, to apprenticeships and investment, our sectors are vital to the UK’s growth – generating £72bn a year for the UK economy, including £37bn in exports, and supporting around 900,000 jobs.

INTRODUCTION

1.             The UK’s defence industry is world class. It is strategically important, helping to protect the country and its citizens, and contributing to national prosperity by sustaining high-value jobs, driving skills development, and delivering high-tech exports.

2.             In 2016, the UK’s Defence industry generated a turnover of over £23bn and secured export business work £5.9bn. The industry directly sustains around 142,000 jobs, including some 4, 300 apprentices and trainees, which are distributed throughout the length and breadth of the country, and across thousands of companies – from major Prime contractors through to small and medium enterprises (SMEs).

3.             The UK’s decision to leave the EU following the referendum result in June 2016 has caused a significant amount of uncertainty throughout industry about what type of future relationship the UK will have with the EU post-2019.

4.             Nevertheless, even after Brexit, the UK remains a fundamental part of Europe’s wider security and defence architecture. British and European defence and security are defence by common challenges, which are severe and complex, and where coordination and cooperation are mutually beneficial.

THE UK’S POSITION WITHIN THE EUROPEAN DEFENCE AGENCY

5.             The UK currently plays a leading role in EU defence and security matters. Irrespective of what form Brexit takes or what new deal is negotiated, the UK’s geography, squeezed defence budgets and commons interests mean that the UK will have to remain closely tied to the EU for our national security and defence.

6.             Increased cooperation on defence and security matters – both between EU Member States and between NATO and the EU, is likely to occur in the future. Indeed, NATO’s July 2016 Warsaw summit gave rise to a joint EU-NATO declaration that identified key priorities for cooperation.

7.             The UK makes a significant contribution to a number of EU missions and is a full member if the European Defence Agency – an intergovernmental agency of the European Council which aims to support the Member States and the Council in their effort to improve European defence capabilities.

8.             Currently, 27 countries participate in the EDA. They are all Member States, except for Denmark. The Agency has also signed Administrative Arrangements with Norway (2006), Switzerland (2012), the Republic of Serbia (2013) and the Ukraine (2015), enabling them to participate in EDA projects and programmes.

9.             Through the European Defence Agency (EDA), the UK benefits from membership of the Military Airworthiness Authorisation Forum, the Helicopter Training Programmes and the Single European Sky Initiative, which support interoperability through harmonisation of military airworthiness regulations across Member States and de-risk future combined operations. Membership provides the UK with the opportunity to influence European Defence industry initiatives. It also enables industry access to EDA programmes and helps to build confidence in cross-border procurement – all of which help contribute to reducing the cost of Defence capability and the delivery of the most effective capabilities to UK armed forces.

10.         ADS believes that the UK Government should seek to negotiate ‘Associate Plus’ membership of the EDA which would be less that what is provided for by its current full membership, but more substantial than what is provided for under the terms of existing Administrative Agreements with other states.

11.         Going forward, the EDA will provide an important institutional structure within which the UK can seek to exert its influence on defence and security matters. Since 22 EDA members are also NATO members, continued membership of the EDA will be yet another means of ensuring continued coordination and collaboration with our primary defence alliance.

12.         The potential impact of losing participation following Brexit could see a loss of influence over EU defence priorities and activities, both through the EDA and more generally.

UK INVOLVEMENT IN EUROPEAN DEFENCE FUND 

13.         In June 2017 the European Commission launched its proposals for a European Defence Fund (EDF) which has two strands: 1) Research and 2) Development and Acquisition.

RESEARCH AND DEVELOPMENT

14.         The UK plays a leading role in research and development within the world. However, given the rapidly evolving and changing security environment, collaboration across countries often achieves more.

15.         The EU has greatly expanded its research and innovation budget over the last decade, while UK investment as a percentage of GDP has shrunk. Every year the EU funds almost £100m of UK R&D in aerospace, defence, security and space sectors – supporting well-paid jobs, innovation and high-tech exports in the UK.

16.         The Preparatory Action (PA) for Common Security and Defence Policy (CSDP) – related to the research strand of the EDF has a budget of €90 million until the end of 2019 with a budget of €25 million allocated for 2017. The UK has also been a driving force behind the PA, shaping its modalities, pilot projects and the focus of a technology demonstrator. If proven successful, the PA could pave the way for a considerable funding allocation for a European Defence Research Programme (EDRP) in the next multi-annual Financial Framework (MFF 2021-2027).

17.         If the UK is able to retain influence over and access to the PA and a potential EDRP, it can shape its focus in its national interests and industry will wish to capitalise on the benefits that will come from bringing technologies/products to market.

18.         A EDRP which is aligned with and complementary to national efforts could significantly enhance the UK’s and Europe’s security and help to reduce the fragmentation and duplication that are so prevalent in the today’s European Defence Technological and Industrial Base (EDTIB).

19.         International cooperation through a EDRP will act as a force multiplier for the UK, enabling us to take advantage of the technical knowledge and facilities of EU member states. 

20.         Since no single European country, including the UK, can afford to maintain a full-spectrum defence industrial base on its own, the Preparatory Action (PA) for Common Security and Defence Policy (CSDP) has been established in a bid to bridge the European defence technology gap and to strengthen the European defence technological and industrial base.

21.         Although the UK Government has committed to spending 1.2 per cent of the defence budget on science and technology and the Ministry of Defence will continue to invest in R&D in our national interest. However, if the UK continues to seek to influence the PA and EDRP, it will be able to ensure it focuses on technologies that we would wish to invest in nationally, thereby reducing duplication.

22.         ADS believes that the UK Government should seek to secure full and unrestricted access to any future EDRP funding and projects and should retain maximum influence, negotiating for full membership of the various Committees tasked with shaping it.

23.         International cooperation through a EDRP will act as a force multiplier for the UK, enabling us to take advantage of the technical knowledge and facilities of EU member States. In the long-term, it could lead to further collaboration and joint training which will enhance interoperability, strengthen our alliances and enhance our ability to mitigate threats. 

EUROPEAN DEFENCE INDUSTRIAL DEVELOPMENT PROGRAMME

24.         The EDF will also establish a European Defence Industrial Development Programme (EDIDP) which aims to encourage cooperation between member states and the defence industry and bridge research activity and the acquisition of defence capabilities.

25.         The current EDIDP regulation will last for two years, with a budget of €500 million in total for 2019 and 2020.

26.         ADS believe the EDIDP will strengthen Europe’s defence capabilities and the defence industry, as well as building cooperation between member states.

27.         However, there are concerns about the UK’s part in the EDIDP as the UK forges a new relationship with Europe, outside of the European Union.

28.         Currently the EDIDP funding will only be available to EU undertakings. Therefore there are concerns that the UK and the UK defence industry will be disadvantaged as future collaborative programmes may only be made up of EU member states.

29.         ADS therefore believes that the UK Government should seek full access to the EDIDP as the UK negotiates it’s withdrawal from the EU, to ensure the UK defence industry remain influential and competitiveness.

CONCLUSION

30.         The UK and EU share deep common interests in defence and security, and it is vital that we continue to work closely with our European partners as we forge a new relationship as the UK leaves the EU.

31.         Our defence and security sectors are the biggest in Europe and make a substantial contribution both to our safety and economic prosperity. These sectors achieved more than £10bn in exports last year and need to continue enjoying access to R&D programmes, as well as customers and suppliers that support their global competitiveness.

32.         Therefore, the UK Government should seek to protect the UK’s best interests and the wider European common interests when it comes to defence and security by attaining a bespoke membership of the European Defence Agency and securing unrestricted access to any future EDRP funding.

9 January 2018