The UK Government is being urged to channel the innovation in the defence sector across UK manufacturing, maximising the benefits and future technological opportunities for the rest of the economy, according to a major report.

The report Defence: Opportunity, resilience and prosperity produced by Make UK Defence in partnership with Raytheon UK highlights the dynamic contribution the sector makes to the economy, accounting for £12billion GVA and employing, directly or indirectly through supply chains, over 200,000 highly skilled employees. The sector is also heavily concentrated in areas which will be critical to the levelling-up agenda, as well as the wider Government agenda of increasing exports, creating good jobs and transitioning to net zero.

Furthermore, as well as the technological innovations in the sector and the opportunities which will come through adoption of digital technologies, the report highlights the socially responsible approach companies are taking to invest in people and clean, digital cutting-edge technologies.

However, significant barriers to expansion remain, especially for SMEs looking to win procurement contracts and enter overseas markets. In response, Make UK is urging Government to work with the sector to remove these and has made a number of recommendations to help provide firms with the confidence to invest in developing new technology, products and services, such as creating an Advanced Research and Invention Agency (ARIA) “spin off” for the defence sector. Make UK believes this will enable the defence sector to play a central role in developing innovations which will help address the many societal challenges we face.

Commenting, Andrew Kinniburgh, Director of Make UK Defence, said:

“The UK defence sector is one of the most dynamic in the world and is unrivalled in its ability to adopt and, invest in, cutting-edge technologies. As the adoption of digital technologies in particular accelerates, we now have a unique opportunity to harness the talents of companies right across the sector.

“By working closely with the sector and, freeing up the agility and dynamism of SMES we can cross-pollinate the success of the defence sector to maximise economic gains, seize export opportunities and build greater supply chain resilience. This will place an innovative defence sector at the forefront of helping address the many challenges society faces.”

Jeff Lewis, Chief executive at Raytheon UK and chair of the Defence Supplier Forum (Mid tier group),  stated:

“SMEs offer niche technologies and an agility that is essential to British innovation and the future of defence and aerospace. Around 96% of manufacturers are SMEs who help to drive prosperity across the nation. By working together we can ensure that with the right investments and technology the defence manufacturing sector brings a wealth of opportunities for highly skilled jobs and, access to new markets for long term work.”

According to the report, the prospects in the sector for young people is highlighted by the average salary being over £45k which is more than a quarter higher than the average salary in manufacturing which itself is higher than the salary for the economy overall. In the East Midlands, for example, the average salary in defence is 45% higher than the regional average.

The sector also invests heavily in people and is aware of its social responsibility with three quarters of companies taking measures to ensure a diverse and inclusive workforce, two thirds investing in apprenticeships and nine in ten in wider training programmes.

As one of the most innovative sectors of the economy spending almost £2bn a year on R&D, the report shows the sector is looking to the future with almost three quarters of companies (71%) investing in digital technologies in the last two years and almost half (46%) in green technologies.

Furthermore the defence sector is heavily committed to evolving technologies with more than a third (35%) exploring opportunities in autonomous robotics and vehicles, over a quarter (26%) in clean technologies and propulsion and almost a fifth in Artificial Intelligence and Augmented Reality. Make UK believes that, in the same way the defence sector invented GPS which was then translated into civilian use the same can happen with these technologies.

However, the report highlights some striking barriers that SMEs in face. In particular 85% of companies say it is somewhat or very difficult to obtain procurement contracts while a similar number (86%) find it difficult to access new markets, a situation not helped by the removal of the Trade Access Programme. There is also frustration with the UK’s Export Control process which causes delays while a third of companies cited the imposition of non-UK standards and regulations on the UK defence supply chain by overseas Prime Contractors.

Make UK has made the following policy recommendations to Government to support the defence sector and help free up the agility and dynamism of SMEs in particular:

Increasing Government and industry collaborations to export

• Minimising delivery risks and defining key roles for defence contractors in international arms collaboration programmes
• Maximising value for money (for UK taxpayers) via enhanced training and through-life government-to-government contracts.
• Reinstating the Trade Access Programme to support SMEs
• Supporting the development of UK manufacturing hubs
• Driving further integration of the National Technology and Industrial Base Integration

Ensuring defence manufacturers have access to talent now and in the future

• Introducing a digital skills account which allows employers to access digital skills provision at any point of their career
• Creating an apprenticeship system that is fit for purpose and meets the needs of defence employers
• Industry can help itself by utilising existing programmes that allow employees to easily transfer into the defence sector from other manufacturing sectors through incremental retraining

Building greater resilience in the supply chain

• Undertaking a supply-chain mapping exercise to ensure the UK has a greater understanding of supply chain vulnerabilities
• Introducing a process to identify critical products and ensuring that the UK has the domestic capacity to deliver these

Creating an ARIA “spin off” for the defence sector

Government should create a “spin off” of Advanced Research and Invention Agency (ARIA) for the defence sector to support innovations in autonomous vehicles, robotics, AI and additive manufacturing.