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EXPORTS DEFENCE

Achieving defence export sales of £9.8 billion in 2013 –up 11.4% on 2012’s £8.8 billion – in a global defencemarket characterised by budget constraints and a 14%

reduction in spending, reflects a strong focus at bothgovernment and industry level on finding footholds in newand emerging markets worldwide.

By region, the most important market for UK exports in 2013 wasthe Middle East, which commanded 67% of all orders received frominternational customers. This was led by on-going work on contracts,including the sale of Hawk and Typhoon aircraft to Oman.

North America was the second largest market during thisperiod, generating £1 billion; while AgustaWestland helicopterorders from Norway and the Republic of Korea placed them asthe third and fourth most important markets respectively.

Orders from Europe accounted for 12% of UK exports; whilethe Asia-Pacific region figure was 9%.

During the period 2004-2013, the aerospace sectordominated UK defence exports, far out-ranking the land andsea domains. Aerospace platforms and support accounted formore than 80% of all UK defence exports.

While aerospace remains in demand from customersworldwide, the UK also has niche technologies in land and seathat have potential to grow.

In total, 70% of the UK’s defence industry revenue wasgenerated from domestic sales in 2013.

Research from ADS, released in July, said that around 70% ofUK defence companies planned to increase investment indeveloping, designing and delivering new export opportunitiesover the coming 12 months.

A number of initiatives are under way – not least the defencegrowth partnership (DGP) – to ensure that the sector has thesupport it needs to maximise opportunities in competitiveexport markets and maintain its world-leading capabilities.

ADS is also working to support UK companies aiming toaccess international markets with its defence export focus group(DEFG), which reviews and prioritises export programmes andopportunities in the defence sector.

On behalf of its members, which range from SMEs to largecompanies such as BAE Systems, Finmeccanica, Babcock andThales, the DEFG aims to provide strategic guidance to identify

Main map: The BAE Systems Hawk

Advanced Jet Trainer continues to be

a successful UK export, with nearly

1,000 aircraft ordered by 18 countries

worldwide.

Far left: The £1 billion sale of 16

AW101 helicopters, plus support and

training to meet the Norwegian all-

weather search and rescue

helicopter requirement, ranked

Norway among the biggest export

markets for the UK in 2013.

Right: The sale of the Typhoon

combat jet to Saudi Arabia will create

on-going support and partnering

opportunities for UK industry.

UK Trade and Investment (UKTI) figures show that the country’s share of the

global defence export market rose to 22% in 2013, making it the second largest

exporter of defence products and services worldwide. Claire Apthorp reports.

UK defence attacksthe global markets

EXPORTS

28

DEFENCE

priority programmes and markets and totarget opportunities that exist withinthem; to produce a regular internationalstrategy document; and to help toidentify and overcome barriers that affectmembers’ ability to export.

This involves ensuring that relevantlinks are maintained between the DEFGand the defence sector board (DSB) tounderstand government internationalpriorities and inform ADS lobbying onexport strategy; as well as ensuring linksare maintained with other ADS specialinterest groups to understand the exportneeds and interests of membercompanies in relevant sectors.

In October, the DEFG welcomed anew chairman, Luca Leone. His positionas business development lead - Europe atMorgan Advanced Materials - AdvancedCeramics and Metals, and hisinvolvement with the ADS maritimeinterest group, brings new insight intohelping member companies gain tractionin international markets.

“The DEFG is an important forum forSMEs to get across the problems they arehaving in exporting to certain countries,and to discuss potential opportunitiesand partnering arrangements that mightbe of benefit to access foreign defenceprogrammes,” said Leone.

“Everybody knows that the UKdefence budget has been constrained,while global defence budgets are growingin some other parts of the world, soexport is now a real necessity and as amatter of commercial survival ratherthan merely an opportunity. Tappingthose markets is something thatcompanies are going to have to do tosurvive.”

� � � � �

ADS has identified 13 priority marketsfor the 2013-2014 period as part of itsinternational defence market strategy tohelp the UK defence sector focus ongrowth, with top markets classified basedon their relative attractiveness,accessibility to UK companies and thesize of their addressable defencespending.

These markets, which specificallyexclude the US and most of NATO,include: Australia, Brazil, India,Indonesia, Japan, Malaysia, Oman,Poland, Qatar, Saudi Arabia, SouthKorea, Turkey and the UAE; all of whichpresent good opportunities for UKdefence companies, particularly drivenby a growing trend toward diversificationof platforms and systems suppliers.

“Big opportunities lie in the counter-IED facilities here in the UK, as many of

these countries are dealing withinsurgency threats, and the experiencethe British Army has had in Iraq andAfghanistan has given us a wealth ofknowledge,” Leone said.

“When we first went into thosetheatres we had fairly limited knowledgeof IEDs – something that was wellpublicised with the unfortunate results ofthe Snatch Land Rover deployment.Now the knowledge we have gained isinvaluable and it’s something manycompanies are looking to harness.”

Leone highlighted the work done byMorgan Advanced Materials in the areasof ballistic IED suits, helmets and bodyarmour, and protected vehicles; as wellas the mobile forensics facility MarshallLand Systems – another DEFG member– provides for forensic sampling, analysisand profiling of IEDs. These were keyexamples of the types of technologyavailable to export to countries dealingwith the IED threat, he suggested.

Other opportunities within thesemarkets are varied across the land, airand sea domains. Australia’s 2009Defence White Paper focused onstrengthening the Australian DefenceForce’s capabilities in the areas ofundersea warfare, anti-submarinewarfare, surface maritime warfare, airsuperiority, strategic strike, specialforces, intelligence surveillance andreconnaissance, and cyber security; anassessment that remained current for the2013 White Paper.

The Indian military is aiming for newcapabilities virtually across the board,including seeking new reconnaissanceand surveillance, VVIP and multi-rolehelicopters, and new artillery systems forits land forces.

Elsewhere in the Asia-Pacific region,Indonesia and Malaysia have a large pushto tackle piracy in the Malacca Straits,while the Republic of Korea is seeking anew fleet of aerial refuelling tankers,amongst other materiel.

Japan’s Defence White paper,published in August, will see thecountry’s self-defence force equippedwith a range of new equipment,including armoured and amphibiousassault vehicles, as well as maritime andcoastal patrol, observation and defenceequipment, including missile systemsand multi-mission helicopters.

Brazil is working on upgrading its landforce capabilities, as well as expandingits maritime surveillancecapabilities and upgrading theBrazilian Navy’s LynxMk21A helicopters.

Middle East nations havebeen a key growth area for

UK business over the past years, withmajor acquisition programmes in Omanand Saudi Arabia for Hawk and Typhooncontinuing to generate on-going trainingand support opportunities. Meanwhile,Qatar continues its maritime securityand missile defence build-up, while theUAE focuses on strengthening itshomeland security and cyber capabilities.

In Europe, Turkey is in the midst ofmodernising its armed forces withspending across a wide range ofplatforms, including plans to acquire andarm new aerial strike assets; while Polandseeks missile defence capabilities, andmulti-role and attack helicopters, amongothers.

One of DEFG’s major focuses is inproviding assistance in navigating theUK’s export licensing system, workingwith the government to gain clearerinsights into what barriers exist whenexporting to certain countries.

“We have one of the best and mosteffective export licensing systems in theworld. However, it is also one of thestrictest, which can be both a positive anda negative,” Leone said. “The challengeis to understand the government’sposition before companies invest moneyin targeting opportunities, becauseaccessing those opportunities canrequire up-front investment that can runinto the hundreds of thousands ofpounds – not an insignificant amount –so we are working closely with theForeign and Commonwealth Office onthe government’s attitude towarddifferent countries.”

The DEFG also works with the FCOto support SMEs in establishing

in-country agents anddistributors who

understand the cultureand the procurementprocess for improvedmarket access andpenetration.

Over the next 12months, Leone will

prioritise increasingDEFG membership

and raising the visibilityof the group. �

CONTINUED FROM PAGE 27

“Export is now

a real necessity

and a matter of

commercial

survival rather

than merely an

opportunity.”

LUCA LEONE