The Defence Marketplace 2021: Key trends for the year ahead

Land January 8, 2021

As we enter 2021, Defence Online takes a look ahead at the key trends we can expect to see over the next 12 months in the defence marketplace.

Back in November 2020, the Government’s Spending Review announced biggest increase in defence spending in over 30 years.

This means a £16.5 billion increase above the government’s manifesto defence investment commitment over four years. The original commitment pledged to increase defence spending by 0.5% above the inflation rate, which is currently at 0.7%, for every year of the current Parliament.

Overall, this is projected to be a cash increase of £24.1 billion over four years compared to last year’s budget.

Alongside the announcement of this significant rise in defence spending, the Prime Minister highlighted investment in cutting-edge technology that would position the UK as a global leader in domains such as cyber and space.

This included a new agency dedicated to Artificial Intelligence, the creation of a National Cyber Force and a new ‘Space Command’, capable of launching its first rocket in 2022.

SPACE

The UK will set up its own Space Command, falling under the command of the RAF.

It will lead on UK space operations, space workforce, training and growth, and space capability in delivering space equipment programmes.

The Ministry of Defence have described space as ‘a growing capability across the globe’ and that investment is ‘critical’ to remaining a leading 21st century power.

Air Chief Marshal Mike Wigston recently warned of anti-satellite weapons, built by rogue states, having the potential to wreak havoc on society.

Echoing the comments of the MOD, he said the UK is ‘critically dependent on space’ and ‘any loss or disruption to our satellite services would have a disastrous effect on people’s day-to-day lives.”

This rhetoric and more importantly, investment, show just how vital this capability is to protecting the UK’s space assets.

Internationally, if we look at the United States – the biggest spenders on defence in the world by some distance – in the past 12 months we have seen the US Space Force signed into law to become the 6th independent US military service branch, tasked with missions and operations in the rapidly evolving space domain.

With the transition from President Trump to President-Elect Joe Biden, it’s natural to wonder whether the new administration will be as committed to something that was often seen as a flagship defence project for President Trump.

However, the creation of a Space Force was something of a cross-party effort from inception and given Russia and China continue to make technological advancements in space, the creation of a Space Force will still be very much a priority for the US Department of Defense.

Staying with the international market, France is to invest a further €700 million in military space by 2025 to bolster its surveillance capabilities and create its own defence capabilities in space.

This sum is in addition to the €3.6 billion previously slated for military space programs in the 2019-2025 Military Program Law.

For companies looking to break into in this marketplace, investment is expected to heavily increase with more opportunities available in the fields of space research, exploration and industrialisation.

Technology

The exploitation of technology continues to be critical to the Ministry of Defence and covers many aspects of the defence marketplace.

In November, we saw the publication of version 4 of the RCloud framework – with a total contract value of £400 million.

This is a route to the Defence Science and Technology Laboratory’s marketplace and offers research contracting opportunities across Dstl’s priority Science & Technology capabilities.

Capability areas within the RCloud include: C4ISR, Chemical, biological, radiological and nuclear, Counter Terrorism and Security, Cyber, Human Capability, Integrated Survivability, Platform Systems, and Weapons.

From the Spending Review we know cyber capabilities are another key priority of the MOD.

High-profile cyberattacks are never far from the headlines. Most people will remember the WannaCry attack which caused severe disruption to the NHS in 2017.

More recently, Manchester United had their cyber security defences tested by what was described as a ‘sophisticated attack’.

The Spending Review announced the creation of the National Cyber Force, which has the remit of disrupting terrorists, hostile state activity and criminals and transforming the UK’s cyber capabilities.

This Ministry of Defence and GCHQ partnership will conduct responsible cyber operations ranging from countering terror plots to supporting military operations.

The NCF brings together personnel from intelligence, cyber and security agency GCHQ, the Ministry of Defence, MI6 and the Defence Science and Technology Laboratory under one unified command for the first time.

It’s a domain that is often described as the new battlespace but is an issue that can potentially cause severe problems for businesses of all sizes, public sector bodies, as well as individuals and families.

Traditional routes to market

While those are the headline trends from the Spending Review, we can expect to see significant investment in more traditional defence areas.

We have already witnessed this with the recent £2.4 billion contract to equip UK Armed Forces. In fact, the Next Generation Munitions Solution (NGMS) will sustain 4,000 jobs around the UK over 15 years.

The NGMS will see BAE Systems manufacture 39 different munitions for the Royal Navy, Army, Royal Air Force and Strategic Command to use on the front line.

The agreement will also allow BAE Systems to invest £70 million on the refurbishment and upgrade of manufacturing lines, with 75% of this value being invested by 2026.

Over the course of the contract, BAE Systems estimates it will spend £350 million with UK-based companies on raw materials and machine components.

There will also be more than £70 million invested in refurbishing and upgrading manufacturing lines, including £32 million at Glascoed, £27 million at Washington and £12 million at Radway Green.

The government estimates a further 1,500 roles will be supported along the supply chain.

Another significant contract announced following the Spending Review is a £184 million investment in the joint Maritime Mine Counter Measure (MMCM) programme, which will create new systems to combat sea mines and keep ships and personnel away from danger.

The contract will support 215 jobs across the UK at Thales sites in Somerset and Plymouth, as well as in the wider supply chain, including L3 Harris in Portsmouth, Stonehaven in Aberdeenshire and Alba Ultrasound in Glasgow.

Infrastructure

Infrastructure will also remain a key area of investment for the MOD through the Defence Infrastructure Organisation.

With an annual spend of around £3 billion on construction and infrastructure services on behalf of its customers, DIO represents a massive opportunity for both current and potential suppliers.

Last year saw DIO release its Procurement Plan – marking the first time the organisation has outlined its priorities to existing and potential suppliers.

The Plan explains how suppliers can navigate the procurement and approvals processes, and what DIO will be buying on behalf of its customers in the coming years.

This includes work to construct new buildings, such as housing and accommodation, and the refurbishment of current facilities as well as services such as catering, waste management and cleaning.

The good news is that supporting SMEs is integral to the MOD’s goal to meet its target that 25% of procurement spend should go directly and indirectly to SMEs by 2022.

By listing all the organisation’s major projects and contracts, the DIO Procurement Plan makes it easier for existing and potential suppliers to plan ahead by offering advice on bidding for this work and greater transparency about working with the MOD.

These measures will particularly help small businesses, which don’t necessarily have the skills and prior experience of working with the MOD in such areas.

Opportunities outlined in the Procurement Plan include the £1.8 billion Army Basing Programme, the £3.5 billion Defence Estate Optimisation Programme and the £1.6 billion Clyde Infrastructure Programme.

When DCI published its recent report UK Infrastructure – Opportunities in Defence, the top five construction notices in the defence sector were awarded by the DIO.

In top spot was the Overseas Capital Framework with a total value of £560 million.

Taking this Framework as an example, this is the proposed commercial vehicle to deliver construction and civil engineering projects and programmes across the Ministry of Defence Overseas Built Estate.

It covers various construction projects including housing, buildings relating to industry, military, transport, leisure, sports, culture, education, health, and emergency services.

The framework is for an initial seven-year period. The potential value of this contract is £560 million and it will create a range of different types of works throughout the supply chain.

While frameworks make up a relatively small proportion of contract opportunities published, they are very influential.

Not only are they often valuable as can be seen from this example, but they offer opportunities to multiple suppliers to win places on the framework, and, with that, potential work for several years.

Frameworks are also an ideal way for new suppliers and SMEs to bring themselves to the attention of Prime defence contractors.

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