The UK’s defence industry, which is essential to both economic stability and national security, is now dealing with issues that affect its manufacturing capabilities. The most urgent of these are the intricacies in its supply chain and a skills shortage that is thought to represent 10,000 jobs across industry.
The industry’s particular requirements, regulations and complexity set it apart from other industrial sectors. Defence manufacturing often involves the fabrication of highly specialised and technologically sophisticated equipment – such as military vehicles, aircrafts, naval ships and armament systems. Strict safety, reliability and performance requirements apply to these items, necessitating a strict adherence to regulation, certification and legal requirements.
In addition, government policies, fluctuating budgets and geopolitical events all have an impact on the defence industry. Because of these factors, manufacturers operate in a dynamic and frequently unpredictable environment, requiring high degrees of flexibility and adaptability.
For example, the effects of Brexit impacted the sector and turned the UK into a third-party nation for any EU R&D investment programmes. These projects are tendered to EU nations first and a third-party nation only gets involved if there is no solution within the EU. This is a relationship that is beginning to be rebuilt, especially with the new Government looking to secure a UK/EU Defence Security Co-operation Agreement.
“We need programmes that the government will commit to for the long term,” states Samira Braund, defence director, ADS Group – the national trade body for aerospace, defence, space and security. “Under the last government it has been feast and famine.”
Braund explains that government contracts typically require a certain number of a products to be built which only provides manufacturing, production, resources and skills for a set period before stopping production again. “Then, when they want industry to ramp up, it’s very difficult because we might have lost the skills from that sector or manufacturing areas, and therefore you’re potentially taking skills from other sectors which ultimately damages the broader ecosystem.”
Unlike commercial manufacturing, where demand and supply can be forecasted with relative certainty, the defence industry must constantly adapt to changing threat landscapes and evolving technological requirements. “The MOD is currently mapping supply chain bottlenecks to see where they lie and where we might be able to provide some resilience,” she says. “Working with international allies, such as the recent agreement signed with Germany, gives the opportunity to build resilience in the supply chain by developing security cooperation agreements that will harness the relationship and be equally beneficial to both parties.”
SUPPLY CHAIN COMPLEXITIES
The intricacy of the UK defence industry’s supply chain is one of its biggest problems. The defence industry depends on a wide range of suppliers, from small, specialised companies to major global conglomerates. Although this variety fosters innovation and increases resource availability, it also adds a degree of complexity not seen in traditional industrial industries.
Dependencies and lead times can pose serious problems when a broad range of suppliers is used. Numerous highly specialised components needed for defence manufacture may only be available from a small number of vendors, occasionally even from outside the country. This makes it possible for any disturbance to have a domino impact across the whole manufacturing chain, regardless of the cause – political unrest, trade restrictions, or logistical problems. Requirements for specific materials and components often have lengthy lead times, which can compound delays and make it challenging to stick to production timelines.
In addition to the logistical challenges, the defence supply chain is highly controlled to guarantee security and adherence to national and international legislation. Strict criteria must be met by materials and components used in defence production to guarantee their suitability for use – and suppliers frequently must go through stringent screening procedures to guard against security lapses and preserve the integrity of defence capabilities. These specifications raise the bar for supply chain management complexity and demand a high level of supervision and coordination.
However, Braund adds: “Security is one of the UK’s biggest strengths. When we partner with international allies, especially outside of our traditional EU partners, we take them on the governance journey, the learning and understanding of what needs to be adopted and why – and the rigour that sits behind that to bring other nations up to the standards that the UK has adopted.”
Effective inventory management is crucial in defence manufacturing, where the cost of components and raw materials can be higher than in other sectors. This is often due to the specialised nature of the materials used, such as advanced alloys, composites and electronic systems.
“A lot of our members are companies that might be headquartered overseas,” says Braund. “Depending on the requirements components may flow through the UK supply chain, EU, or US supply chains. This is why the SME community is really important and why we hold our ‘meet the buyer’ events with the large defence primes so they have visibility of what’s created in the UK.
“It’s really important, when we’re contracting with UK partners, that we’re looking at UK prosperity, UK jobs, UK IP creation so that the supply chain only falls outside of the UK when either there’s a bottleneck or the solution doesn’t exist.”
To help with this, the MOD has created a supply chain mapping tool with the capability to map down to
Tier 3 and in some programmes to Tier 4 to identify risks and areas of fragility. The software imports data from a range of external sources, suppliers and internal information, providing a 360° view of the supply chain from the financial health of a supplier to its environmental and social governance (ESG).
If risks are identified, action can be taken to support those vulnerable companies with a unique capability within the supply chain that cannot be delivered by other suppliers. It also provides information on where suppliers are based and to track the social, economic, and environmental impact of projects.
SKILLS GAP
The skills gap in the UK defence industry represents another formidable challenge. The industry currently employs around 164,000 people, but it is facing a shortage of approximately 10,000 skilled workers. This shortage is driven by several factors, including competition for talent with other high-tech industries.
“We are only going to reduce that gap if we have a demand signal for long term investment,” admits Braund. “We also need to build up the attractiveness of defence and demonstrate that defence is a sector that is worth investing in.
“There’s a broader public attraction piece that the new government needs to address around Homeland Security,” she adds. “Unless the government invests in the long term which, due to budgetary pressures, it doesn’t look likely, we’re not going to fill that skills gap.”
A skills campaign is set to begin within the next six months, according to Braund, to attract new individuals into the defence sector from academic institutions or from other sectors with transferrable skills. This campaign will promote the unique benefits of a career in defence manufacturing, such as the opportunity to work on cutting-edge technologies demanded by Tempest, the UK’s next-generation fighter aircraft, or programmes to do with space, as well as contributing to national security.
“The generations coming through are looking for experiences, not jobs for life,” Braund states. “The exciting programmes such as the Global Combat Air Programme (GCAP) and AUKUS will give the opportunity to move across three nations. So, rather than taking a year out to go travelling, you could go on a graduate scheme that supports AUKUS and have rotations in all three nations. It’s about coming up with innovative ways of attracting people into the sector.”
The Global Combat Air Programme is a strategic partnership between the UK, Italy and Japan to deliver Tempest, which the Royal Air Force will operate.
AUKUS is a trilateral security partnership between the UK, the USA and Australia to secure the Indo-Pacific region. The three nations are cooperating on key defence capabilities, including submarine technology and advanced capabilities such as artificial intelligence and quantum technologies. “The risk with AUKUS is that we lose skills from the UK because Australia is more attractive to work in,” says Braund. “We want interchangeable skills.”
She points to welding as an area in the UK where there is a big skills gap. However, Australia has an abundance of welders, therefore there is an opportunity for Australian welders to come and work in the UK. The trade-off would be that the UK is able to provide engineers to work in areas in Australia where they are experiencing a skills gap. Braund says that this kind of equitable skills transfer is something that happens more commonly in the defence sector than in other sectors.
“On the GCAP, each partner brings different qualities and requirements that complement each other which is seeing the UK work with Italy and Japan in the design and concepting through the exchange of knowledge to address common challenges,” she reasons.
International programmes such as these are key to managing production issues, says Braund, adding that there are likely to be more in the future. However, from a skills perspective, it’s early days and though there are huge benefits they are only just starting to be recognised.
The UK defence sector has potential for innovation and advancement despite constraints related to skills shortages and complex supply chains. Through prioritising the improvement of workforce development, supply chain resilience, and modern manufacturing technologies, the sector can effectively manage current difficulties and maintain its position as a crucial and resilient part of the UK economy and national security framework.