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The Defence Manufacturers Association (DMA) and the Society of British Aerospace Companies (SBAC) today (Monday) both held Extraordinary General Meetings at which their members voted to give a mandate to their respective Councils to merge the two organisations into one new trade association.

The merger aims to create an even stronger association for the membership, eliminate the duplication of roles in

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By Nigel Green - Research Associate, UK Defence Forum

Swan Hunter's giant cranes have sailed from the Tyne – taking with them the last hope of one of the world's most famous shipyards.

More than 1,600 ships were built at the Wallsend yard, including around 400 Royal Navy and Royal Fleet Auxiliary vessels. The long tradition of fine workmanship dates back to 1841 and the company also built up a worldwide reputation for equipping foreign navies. But Swan's last order for two RFA troopships ended in humiliation three years ago. The £160 million contract for the Largs Bay and the Lyme Bay was announced in 2000 and heralded the return of shipbuilding to Swan Hunter's.

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......but we couldn't resist this story.

Icon Polymer of the Midlands has just received a £79,000 order for rear mudflaps for the Warrior upgrade (tank guards in the parlance)

AND they are going to finish the job by the end of February

AND they are the only people in the UK who can do this sort of thing

AND their customer, the Defence Support Group, says "they will bend over backwards for us. We can't ask any more of them"

AND managing director Tim Pryce led a management buyout earlier this year

AND he came back from 14 years in Massachusetts in 2006 to merge three companies into Icon

AND his team turned an "extremely underperforming" group into a successful one (£20 million turnover this year)

AND they are about to stop being an SME as their workforce rises above 230

AND 10% of their sales go to China

AND they are part of the BAE Systems supply chain which has just landed an order for Viking 2 from France

AND their components are on Warthog and Challenger and CVRT and other armoured vehicles

AND they pride themselves on meeting customer requirements "in days not weeks" when required

So who says the Brits can't make things any more?

AND we can't compete with China

AND we can't grow manufacturing industry

AND the defence industry is in decline

AND we can't be innovative and responsive to customers?

Eat your hearts out you spivs, speculators and know-it-alls!

 

Down in the weeds is a new series for 2010 which looks at small quoted companies in the defence supply chain. Our first is Scotty Group, selected because the editor is a shareholder who bought them in the glory days when the company was a booming high tech media business. They've hung in, restructured, and now aim primarily at government, military and aviation markets. Maybe one day he'll get his money back......

The company has completed the research and development phase of a PV contract for Eurocopter, which culminated in delivery of three systems to equip two helicopters for flight test and qualification. In June 2009 they secured a contract worth 8.3 million Euros, with deliveries lasting up to 2011.

It is undertaking an upgrade programme for the Personnel Recovery System for Eurocopter's CH-53 GS helicopters. This enables the location of military personnel in the field to be monitored remotely so they can be rescued where necessary. It received a 1 million Euro contract in October.

In September the company started engineering and installation of its aero-certified beyond-line-of-sight communications system for government and civilian use. The $300,000 order was received from Stevens Aviation Inc with whom they had earlier signed a Reseller agreement.

At the same time the company announced a 700,000 Euro order for videoconferencing equipment for the German Armed Forces, which included remote telemedicine support for the German Navy. The first equipment was delivered in October and the order should be complete shortly. A follow on order worth 555,000 Euros was announced on 22 December.

In its last full year the company made a pre tax profit of £328,000 on a turnover of £5,426,000.
Share price over 52 weeks : high 70.5p low 29.5p

Website : http://www.scottygroup.com

 

The Minister for Defence Equipment, Support and Technology, Peter Luf MP, today laid in Parliament, a Green Paper entitled Equipment, Support andTechnology for UK Defence and Security: A Consultation Paper.

He said "The first duty of Government is the security of our nation. It is therefore
essential that the UK equips itself with the right tools to tackle current and
future threats. The convergence of defence and security that underpinned the
Strategic Defence and Security Review means that we should seek to bring together
our approach to equipment, support, and technology in both the defence and security
sectors. I have therefore worked with the Minister for Security in preparing this
Green Paper to reflect our new approach. We have also included cyber security as a
separate section because it is a new and fundamental challenge.

"Our default position is to use open competition in the global market; to buy
off-the-shelf where we can; and to promote open markets in defence and security
capabilities. We will take action to protect our operational advantages and freedom
of action, but only where essential for national security.

"The UK currently enjoys a strong industrial presence in the defence and security
markets and export success abroad in those markets; last year, defence and security
exports achieved around £8.5 billion revenue. We are committed to doing more to
promote exports of both defence and security products from the UK to responsible
nations, as well as to boost the role of small and medium sized enterprises, both in
their direct and indirect supplies to the Government and its agencies."

The Green Paper is available online at http://defenceconsultations.org.uk/. The
formal public consultation period will run from January to March 2011 The Government plans
to publish a White Paper on these issues in 2011.

Defence Viewpoints will publish further comment and analysis shortly

 

The US-UK Defence Trade Cooperation Treaty has passed its final hurdle towards ratification on both sides of the Atlantic with approval coming from the United States Senate and House of Representatives.

The Treaty was signed in June 2007 by then UK Prime Minister Tony Blair and then United States President George W Bush. It aims to streamline and improve defence export processes and allows for the export of defence articles, without a license or other written authorization, from the US to an "approved community" of recipients in the UK and US and the subsequent transfer of these articles within that community without further US authorisation. This has the potential to boost trade between both countries and benefit the economies of both nations by retaining control of such transfers but speeding up the process for sales of equipment with US-made components to the UK Ministry of Defence and UK-sourced equipment to the USA.

Ian Godden, Chairman of the defence indutry body A|D|S, said: "The approval of the Treaty by the Senate is most welcome news. It has been a long journey but we sincerely hope that it will be worth the wait given the potential benefits that could now result.

"The Treaty reflects the close working relationship of our armed forces and the industrial collaboration of our two countries and it should deliver clear benefits for our troops. The UK is the largest international supplier of defence equipment to the US and is second only to the United States in the global defence export market. Therefore, the long-term significance of this new defence export control regime should not be underestimated."

Aerospace Industries of America President & CEO Marion C. Blakey said AIA that welcomes passage of the U.S.-UK and U.S.-Australia Defense Trade Cooperation Treaties by the full Senate.

"Ratifying these treaties will provide important benefits to both our national security and our economy.

"The treaties will streamline the licensing system for defense exports to our staunch allies, the UK and Australia. AIA has long advocated that we should do everything possible to ensure that their troops and our troops are able to fight shoulder-to-shoulder with the best equipment available.

"Passage of these treaties is in concert with the Obama administration's plan to modernize export controls. Our industry, with about 820,000 employees and 30,000 suppliers from all 50 states, strongly supports efforts to adjust outdated restrictions on American companies as we work to equip our closest friends and allies with the technology that allows our militaries to defend our mutual interests.

"We congratulate the Senate for passing the U.S.-UK and U.S.-Australia Defense Trade Cooperation Treaties, and thank both the House and Senate for passing the accompanying implementation legislation."

 

As the Prime Minister prepard to chair a National Security Council meeting to discuss the options around the Strategic Defence and Security Review Ian Godden, Chairman of A|D|S, the UK's aerospace, defence and security trade
organisation, highlighted the significance of decisions on defence spending

The Government needs to bear in mind that as well as the decision-maker on defence
it is also the customer.  Its decisions have a profound impact on our armed forces
and the 300,000 people who work across the UK in the defence industry to support our
troops.  The defence budget has been relatively flat with little in the way of
increases over the last 20 years while other Government departments have seen their
budgets double or even triple over the same time period.  With our troops constantly
being asked to do more with less, the Government keen to increase exports and
defence able to deliver enhanced returns on investment - a £100m spend yields £227m
in returns - it makes no sense on any level to be cutting investment in defence
because of this knock-on effect on our armed forces and economic recovery.  Defence
is 10 per cent of UK manufacturing and Britain is currently number one in Europe and
second only to the US in terms of the global defence exports market but this
position would be under threat if investment is cut, leading to a dearth of new
programmes to export.

Furthermore, the proposals for a greater reliance on high-technology equipment in
the future do not align with the cuts of over 20 per cent in the MoD research and
technology budget over the last three years - that have already cost hundreds of
high-skilled jobs in the industry.  This budget, of less than 1.4 per cent of the
total defence budget, must be reprioritised within the MoD to deliver the future
capabilities for our armed forces.

There is of course room for reform within the armed forces, the industry and the
MoD to deliver even greater improvements and we are committed to playing a full part
in these changes that will also deliver savings.  But the implications for any
further cuts in defence spending in terms of their impact on our troops, our
national security, our global trading position, our economy and on the long-term
capability of our industry to continue to supply the best possible equipment to our
armed forces cannot be ignored.

 

The voice of Britain's big defence companies, the Defence Industries Council today released public opinion polling data showing that both the UK Armed Forces and the British defence industry that provides them with their equipment are both highly regarded by the public.

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By Deba Mohanty

The post-mortem has begun on the recent visit of US President Barak Obama to India. Preliminary autopsies suggest a heavy leaning towards optimism and even braggart assertions about the bilateral relations. A fairly balanced assessment, however, will come much later once promises and pronouncements are actually tested on the ground. Obama and his team have emphasised 'shared values, shared benefits and shared vision' between the two great countries. While shared values and visions do exist at the core of two democracies, with varying degree and often complementary, it is worth examining the 'shared benefits', which would put things in larger realistic perspectives.

Shared benefits in this context include expansion and consolidation of trade in civil and military domains, among others. While civil trade is mostly done between companies from both sides with minimal state supervision and intervention, it is the defence trade that is more complex, state-centric and often a casualty of legal procedural complexities as well as strategic considerations. Government approval is necessary even in the most insignificant military item transaction, although bulk of military manufacturing has gone into private hands in most countries.

Prior to Obama's visit, prognostic analyses in India suggested three broad assumptions—rise in American military equipment sales to India, growing company to company collaborations and gradual easing of regulations—apart from India's 'soft power' rise, possible entry into the high table in international affairs and a counter-balancer in Asian geopolitics. It must be mentioned here that the Indian soft power—cultural, historical, ideological and economic—has already been deeply embedded in its larger strategic framework, while a seat in the UNSC will not be easy, whereby US stamp of approval would only be symbolic at best. Counter-balancing act or 'strategic stabiliser' role in geopolitics needs more 'hard power' attributes than 'soft power'. In sum, symbolism seems to have overtaken 'hard business and strategic decisions', especially in the fields of defence trade, between the two countries.

All the three broad assumptions on defence trade are most likely to happen. If one looks at India's arms shopping list, it includes sale of C-130Js, Harpoons, P-8Is, C-17s, GE-414 aero-engines, etc. A reasonable assumption would suggest follow-on orders in most of these equipment and a possible $30 billion plus sale could be in the pipeline for the next five years (excluding $10 billion worth sale already approved). Collaborations with American firms will also increase as companies like Tatas start churning out components of military systems in collaboration with Sikorsky or state-owned HAL in collaboration with GE locally produces the aero-engine required for the LCA programme. Removal of restrictions on many of India's defence scientific labs will pave the way for import of critical components and technologies.

While such assumptions paint a rosy picture, the reality is actually very different. Four scenarios are laid down for further debate. First, the American discomfort on sale of weapons without signing agreements like CISMOA, LSA and BECA is likely to culminate in system acquisition by India that will be without critical support. This poses a challenge to the Indian scientists how to make the systems workable with Indian solutions. Previous experience of avionics and sensor integration to Su-30 by the Indian scientists gives much encouragement in this regard. Second, the American discomfort about Indian 'direct defence offsets' and FDI policies. The Americans would prefer 'indirect' to 'direct' offsets and would be happy if the FDI limit is raised to 49% or beyond. It would be wise on India's part if it carefully refines offsets conditions and resists the demand to raise the FDI limit for the moment as the larger Indian military industrial complex, at the moment dominated by state-owned defence firms, has not yet reached a level of maturity and global competitiveness. Third, we do not know why President Obama used the word 'so-called' entities list when it is 'real'! It will be wise again to wait for a while till the Americans work out on the list and impact of removed restrictions. Bulk of the Indian scientific community is still suspicious, so are many of our military leaders and even some of our pragmatic political leaders on this issue. Last but not the least, while the American decision making works on a composite system through which executive decisions are executed in a relatively fast manner, the Indian system is vertically structured and virtually independent of each other. Thus, the latter not only is a major hindrance to speedy decision making, leading to delays but equally importantly it leaves little accountability if things go wrong. If India wants a workable military industrial partnership with the US, it has to not only bring in reforms in its higher defence management structures but also emphasise collective decision making in an open environment.

Dynamics of military trade have changed from 'arms and influence' during the Cold War era to 'arms and incentives' in current times. If India wants strategic dividends from arms acquisitions, it must craft its acquisition policy in a prudent manner with the aim of bringing in knowledge that necessitates a higher degree of trust with the US. It should go beyond economics to factor in larger strategic considerations as well.

This article was first published the Financial Express on the 22nd November 2010. The author is a senior fellow in security studies at the Observer Research Foundation, New Delhi.

 

By Nick Watts, Defence Correspondent, Great North News Services

The government's SDSR has set the framework for the next phase, a Green paper on the future of the defence sector in the UK. A White paper will follow in the spring. The CSR gives the context of a defence budgetary framework for the next 5 years to 2014-15. This is estimated to be a real terms cut of 8%. Beyond the headlines though, the key question for industry is: so what and what next? What does this mean for the relationship between MoD and Industry?

Industry must take a "glass half full" approach if it is to successfully weather the current state of affairs. The MoD and government are determined to ensure that a UK based defence industry continues to be viable. Not only to supply our armed forces with good kit but also so that it can continue to earn export orders. So its going to take two to tango

This process is going to have to negotiate a relationship between government and the defence sector which is beset with contradictions. The UK's defence sector competes in a globalized market. The UK is an open market for defence contractors, which stimulates competition. The defence sector needs both a predictable stream of income to sustain its operations, as well as markets into which it can sell its products. The taxpayer wants value for money and the services need good equipment.

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