Speech: Opportunities for UK technology companies in the US defence market

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  1. Introduction


    We couldn’t have chosen a better venue to discuss our US defence relationship than the Cabinet War Rooms.

    Because this is where Churchill would discuss the progress of the Second World War…on a daily basis with President Roosevelt…

    …providing a reminder that ours is a partnership based on the firmest of historic footings

    In World War Two…that unique combination of UK/US expertise…was perhaps personified in the Tizard Mission which produced a paradigm shift in radar technology.

    During the Cold War…it was our special relationship that enabled us to strike the Polaris… and later Trident… agreements …that strengthened both our nations in the face of the Communist threat.

    And today co-operation continues in all areas …whether in intelligence…in force protection… in airborne ISR…or in the interoperability of our force structures.

    Today’s relationship


    Of course, given the US’s technological pre-eminence in many areas it is inevitable that we still purchase a significant amount of equipment from our American friends …from Huskeys and Harpoons to Ridgbacks and Reapers

    But this relationship is as deep as it is broad.

    Yes, we buy capability from the US.

    But often, as in the case of Rivet Joint, we find new and innovative ways to operate it.

    At the same time there are instances of reciprocity.

    So the C17 programme might be built by Boeing in the US but their high-tech international training centre is in Farnborough.

    While with the Chinook Fleet we get the best availability.

    At the same time the US remains one of our biggest customers.

    Official Statistics from UKTI DSO cite 12% of UK defence exports going to north America last year,

    In 2013 the Department of Defense procured $1.5 billion in supplies, services, fuel and construction from UK entities …

    Plus there is the unseen but growing British content in the supply chains of US defence companies, which draws upon a gamut of dual use technologies.

    And while the US rarely procures platforms and major systems from overseas… when it does…it often chooses British.

    Whether it is the US versions of the Harrier Jump Jet and the Hawk Jet Trainer in decades past.

    Whether it is our Rolls Royce MT30 engines or our Martin Baker Ejection Seats fitted in every F-35 which will come into service for decades to come.

    Some of the companies here today provide excellent examples of British success trading in the US defence market:

    ….Ultra Electronics, TMD, Cobham, Astute Electronics …. to name but a few.

    Each demonstrating that you don’t have to be a prime contractor to break into the market.

    Yet what has sustained our relationship and kept it fresh over the years is continual collaboration.

    Once upon a time we were pioneering jet propulsion

    Today we are working on the most advanced jet aircraft on earth in the form of the F35 …with the UK proud to be the US’s only level one partner.

    We’re also partnering today on a wide range of 100 other S&T projects.

    Working hand-in-glove to develop the Common Missile Compartment

    …the infra-red counter measures for aircraft… …and advanced night vision capability.

    New opportunities


    Yet you’re here today because that priceless prize of working with the US is growing.

    Like us … the US is looking to the future.

    As equipment technology advances exponentially… as advanced surface-to-air and anti-access area weapons proliferate.

    …as multiple potential adversaries increasingly compete to acquire fifth generation technology …the US has seen its technological advantage …the bedrock of its defence for the past 60 years …gradually erode

    So it is looking to make another giant leap forward …upgrading, developing and fielding breakthrough technologies and systems.

    That is why the US, last year, launched its new Defence Innovation Initiative, the Third Offset Strategy, which I discussed with Deputy Secretary Work in December.

    Bob Work is asking serious questions about how to improve US capability in a host of areas:

    How can it increase its resilience and reduce its dependence on space technology?

    How can it increase its underwater capabilities to counter anti-access and area denial, and focus on autonomous systems and underwater payloads?

    How can it maintain air dominance and continue to strike in non-permissive environments?

    How can it counter electronic warfare, maintain stealth and develop jam-resistant missiles?

    And how can it keep up to speed with emerging technologies and concepts such as autonomy and advanced manufacturing …when investment in the commercial sector is outstripping military research and development?

    The challenge for the US is that it must do all this while still driving down its costs… …something with which we’re only too familiar in the UK.

    Last year, Frank Kendall, the US Secretary of Defense for Acquisition, Technology and Logistics unveiled his acquisition reform program ‘Better Buying Power 3.0’.

    A strong sign that ….like us… in tough times ….our American counterparts see the virtue of cooperative research, co-development, and co-production.

    Why pay to duplicate technology solutions that already exist elsewhere?

    We believe the determination of the US to broaden its horizons… is now opening up new opportunity for its allies as I was discussing with Frank only on Sunday at IDEX in Abu Dhabi.

    This is especially so for those British companies, with the expertise the US is looking for.

    And that’s why you’re here today.

    A big challenge


    I’m not saying it will be easy to break into the American defence market place.

    I’m speaking as someone who spent some years working in the US myself, so I am under no illusion as to the challenges.

    I know the US Defence market is truly vast.

    10 times the size of our own in this country.

    For example, the US Special Operations Command, its smallest service, is roughly the size of the British Army

    And that the US Marine Corps, also regarded in the US as “small”, is the size of the whole of UK defence…and can muster a similar spectrum of capability.

    All this presents genuine challenges, especially to small businesses

    Yet at the same time it brings huge possibilities beyond anything we see in Europe.

    So you need to know where to start..

    …how to find the right route to market …and how to establish good local partners

    You need not just the ability to grow…deliver at scale …and at the pace such a large customer demands.

    …but to get to grips with an unwieldly procurement machine that is considerably more complex than UK MOD …where the preference for domestic suppliers is enshrined in law …and where export controls and the infamous International Traffic in Arms Regulation control the proliferation of US technology.

    Don’t be put off


    But don’t be put off.

    If you’re already concentrating your business on exportability, modularity and innovation….

    …and we’ve rewritten our policy to ensure ‘exportability’ must be actively considered from the very beginning of our own acquisition cycle

    …then you’re in the right place

    And today’s sessions will help you with some of the practicalities.

    The US experts in this room

    …from our MOD staff in Washington, ….UKTI’s Defence and Security Organisation, …and BIS in London …stand ready to use their excellent local knowledge …to help you disentangle the complex web of regulation …decode the unfathomable jargon …and navigate around the labyrinthine US procurement structure

    I would also like to thank the experts from law firms Crowell & Moring, and Stoock

    …as well as from Bloomberg Government for the time they have taken and the interest they have shown in supporting UK industry.

    …by travelling from the US to share their professional advice with you today.

    Bilateral agreements


    Yet their advice alone isn’t the only thing that should give you the confidence to go to America.

    We’ve also drawn up a raft of bilateral agreements to help your cause.

    In December I renewed the Reciprocal Defence Procurement MOU

    It is designed to create a level playing field for UK and US companies accessing each country’s market.

    We’re also coming up to the second anniversary of the Defence Trade Cooperation Treaty which eases the export control burden for certain categories of technology.

    Colleagues in MOD are now working with authorities in the US to ensure the treaty retains its value in the wake of reforms that have begun easing US export control regulations in some technology areas.

    And we also have the Science & Technology communiqué that I signed with Frank Kendall last year.

    It is there to accelerate our joint programmes of research in disruptive technologies …whether in situational awareness, satellites and communications

    And it is already paying dividends.

    There are currently around 100 distinct R&D programmes underway between the UK and the US.

    …an increased number of US exchange scientists and engineers in the UK.

    …and a new scheme for short term exchanges between UK and US scientists.

    The value of the Communiqué has been affirmed by the development of co-operation into quantum technology, autonomy and directed energy.

    While the recently signed master submarine research agreement, and related agreements on undersea technologies mean greater opportunities in those areas as well.

    Inevitably, the names of these agreements matters less than what they will do for you.

    Again our experts here today can give you chapter and verse.

    Defence Growth Partnership, new solutions centre and DSIEP


    But today’s event isn’t the only place you’ll find advice to help your business succeed when crossing the Atlantic

    Our Defence Growth Partnership now provides a collaborative environment for the best brains from industry, academia and government to come together.

    …making the UK defence industry more sustainable and more competitive …and assisting industry in providing leading edge capability for our armed forces around the world.

    Our new Defence Solutions Centre is designed to act as a fulcrum for international requirements.

    By utilising the latest market data and making the most of its understanding of the UK’s value chain… it will create capability and technology roadmaps to respond to future international opportunities.

    Undertaken in an environment where the UK remains a leader in academic research.

    …let’s not forget the UK still publishes 16% of the world’s top quality research

    … still punching way above our weight

    …it will help British business make the most of its great potential

    Meanwhile, our Defence and Security Industrial Engagement Policy is encouraging overseas companies…including several US primes…to work with the UK’s defence and security sector.

    We are working with UKTI DSO to offer showcase events for non-domiciled primes to meet the UK defence and security supply chain, engineer to engineer, I have attended 2 such events in the past year, with Boeing and Raytheon, where each met over 100 UK supply chain SMEs, and real business has resulted.

    We are seeking to use this policy to help our industry become better placed to secure exports as well as support front line capability.

    Investment in innovation


    Bi-lateral agreements and top quality advice will help you punch above your weight when competing in the American market.

    But the government is also helping you in another way …we’ve put aside investment for innovation…the lifeblood of defence

    We’ve protected our annual investment in S&T…so it remains at least 1.2% of the defence budget…

    And we’re channelling that money into our Centre for Defence Enterprise…

    …which is already developing novel high risk, high potential benefit innovations …such as game changing quantum technologies …new advanced materials …and a powerful neutron microscope …that will allow us discover materials for faster planes, new and better computer chips and feather lightweight kit for our military

    Conclusion


    So my message to you today is that when it comes to the US market …the market is changing

    Becoming more transatlantic.

    In both directions.

    So please enjoy the day.

    Chat to the experts.

    Share your experiences.

    Make the connections who can help you break into this market.

    The US accounts for almost 37% of worldwide defence expenditure … in a market estimated back in 2013 to be over US$1.7 trillion

    That’s a massive opportunity

    And we’re keen to do what we can to help you get your share.

    As for those concerned the journey ahead might seem a long one …let me leave you with a bit of sage advice from Churchill himself:

    “You can always count on Americans to do the right thing, after they’ve tried everything else”

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