DEFENCE contractors across the UK have been assured by the Government it will not abandon them despite the expected cutbacks in spending and plans to renegotiate current contract rules.
Defence Secretary Liam Fox, speaking at the Conservative Party Conference in Birmingham, was quick to reassure SMEs which rely on Government contracts that there would still be work for them.
Addressing a fringe meeting on defence, he said far from shrinking back, the Government wanted these firms to expand and produce innovative new products that would not only serve the UK but would have the capacity to increase exports.
“We will be looking at how to expand the SMEs. The last thing the Government wants is to lose these firms and to see their intellectual property go abroad.
“We want to ensure the skills base remains in the UK – this is going to require some joined up thinking across Government in order to retain capacity but we will not shy away from that,” he said.
Dr Fox said more would become clear in December when the Government publishes a new Green Paper outlining its future proposals.
The defence sector is vital to the West Midlands and supports thousands of manufacturing jobs. Companies operating in the aerospace sector such as Rolls-Royce, GKN and Ultra Electronics have a particular exposure to the defence industry while firms such as Ricardo with its military variant vehicles are also vulnerable, although it has just received a boost with the Ministry of Defence backing its new Ocelot vehicle.
Despite Dr Fox’s words, the threat of massive defence cuts still looms large. The Secretary of State is trying to avoid making too many cuts but he spoke about the legacy of debt his party had inherited from Labour and underlined this by saying the interest on the UK’s debt for next year – around £47bn – was higher than the entire defence budget.
With firms such as QinetiQ shedding hundreds of jobs from bases such as Malvern there is still a great deal of current uncertainty around the industry.
The situation will not have been helped by the comments of Mid-Worcestershire MP and Defence Minister Peter Luff who yesterday said the MoD was to try to save millions by re-negotiating the current rules on defence contracts.
Mr Luff said the rules were last written in 1968 and a great deal had changed since then. He added that the current regulations were heavily weighted towards the private sector and needed revision.
This could lead to the MoD cutting its spending on new equipment.
Presently, the MoD contributes towards contractors’ office running costs, pensions and redundancy payments. But this is likely to change following the review.
