1. THE BIGGEST CONTRACT?
The most significant defence industry development of 2007 was the future aircraft carrier programme, known as the CVF, that will cost somewhere in the region of £3.8bn.
It will result in two new aircraft carriers replacing the existing Invincible Class ships that are expected to come into service in 2009.
The approach adopted by industry has been in the spirit of the Defence Industrial Strategy (DIS), with a joint venture created by BAE Systems and VT Group, with KBR, Thales and Babcock all having significant roles.
Partnering is likely to continue as a theme in the maritime sector throughout 2008 as the MoD Maritime Industrial Strategy seeks to achieve best value for money from a viable UK industrial base.
The other development that is of major significance to the defence industry is the Government’s announcement that it is committed to maintaining the UK’s independent nuclear deterrent.
2. THE MOST INNOVATIVE TECHNOLOGY?
A number of technologically advanced pieces of equipment have been brought into service over the last year.
In the land environment, the tactical UAV has come into its own, with the ‘desert budgie’ (Desert Hawk) providing a real boost to ISTAR at the battle-group level.
However, the type 45 anti-air warfare destroyer is probably the most innovative capability to be seen this year, and is considered to be the world’s most advanced warship with the ability to engage a large number of targets simultaneously.
HMS Daring has completed stage one sea trials and received glowing reports after performing above expectations.
3. THE BIGGEST ISSUE?
The tempo of current operations continues to dominate thinking across the MoD, with UK forces deployed on two medium-scale operations.
Issues include the vulnerability of Snatch, helicopter availability and the poor reliability of the airbridge into operational theatres. The impact on industry has been seen in the large number and value of UORs being purchased. An example of this impact are the 100 Mastiffs that have deployed to operational theatres with a further 140 Mastiffs and 38 Vectors ordered in October 2007.
5. PREDICTION FOR 2008?
The future is uncertain with the DIS 2 having been delayed and the entrepreneurial Lord Drayson having been replaced by Baroness Taylor.
However, we are likely to see a reduced spend on Urgent Operational Requirements (UORs) as the deployment to Iraq is reduced, coupled with the increasing likelihood that the Treasury may start to question whether it should be funding UORs for Afghanistan, when part of the criteria for a UOR is that it will fulfil an unforeseen requirement and British Forces have now been in Theatre since 2002.
In addition, PR08 is expected to take its toll on existing programmes as the MOD seeks to close the affordability gap. The British Defence industry will continue to look to the US, with firms such as QQ and BAE continuing to develop their US market share.
Increasingly, the higher profit margins achievable in the US will influence decisions on where firms look to expand their business and will drive shareholders to demand an increasing return on investments made in the UK market.