June 04, 2012
Credit: Credit: BAE/Dassault
Robert Wall/London and Amy Svitak/Paris
Ask defense industrialists in France and the U.K. what they want most in the absence of larger military budgets, and they will say: some certainty and a sense of direction. Ask what has been missing in the past two years, and they will say: some certainty and a sense of direction.
There are certainly ample signs in both countries that questions about long-term spending priorities will persist. French parliamentary elections first have to be resolved this month, and then the new government plans to launch a major strategic review of defense needs and priorities, followed by a revised spending plan.
In that respect London is further ahead, having completed its strategic review two years ago and its spending plan update only recently. But more steps are envisioned, and the details of what has been decided are not fully understood. In its Planning Round 12 (PR12) review, the U.K. Defense Ministry cites the difficult choices it made to bring the program into balance, without spelling out what has been cut. “We simply don't know what has been struck out,” says Brian Burridge, vice president for strategic marketing at Finmeccanica U.K. and vice president for the defense sector at industry lobby group ADS. Some clarity could emerge soon as the government begins talks with industry leaders about possible contract adjustments.
Around September or October, the U.K. National Audit Office is also due to publish a report on the claim that PR12 represents a balanced budget. That is likely to be followed by the Defense Ministry's long-term equipment plan in which the ministry has promised greater transparency. But industry representatives are skeptical about whether enough detail will be included.
In parallel, the U.K. is exploring a major overhaul of how it buys military equipment, potentially opting for a non-department executive body that would try to control the Defense Ministry's appetite for costly shifts in requirements. But Burridge worries that implementing such changes could take until 2014 or 2015, creating more uncertainty.
One such source of angst for industry centers on the degree to which requirements will drive funding for future developments. The urgent operational requirement process during Iraq and Afghanistan funded many fast-track developments, says ADS's managing director for defense, Gordon Lane, but now the question is, “What happens next?”
This concern is amplified by the fact that much of the equipment budget in the next decade—around £160 billion ($246 million)—is already allocated for maturing programs, so development spending is in relative decline. In France, where newly elected President Francois Hollande is forming a government and awaiting the mid-month outcome of parliamentary elections, the predicament is not much different.