Brexit’s Implications for UK Defence Industrial Cooperation with Europe

Since at least 2015, the government has increasingly recognised the importance of the UK’s defence industry, not just for generating growth, but also for the UK’s status in the world and the capability of its armed forces. The list of initiatives reflecting this awareness would include the continued operation of the Team Complex Weapons initiative from 2005, the generation of the Defence Solutions Centre, the Defence Growth Partnership, the National Shipbuilding Strategy, the Combat Air Strategy and the defence industrial policy document of 2017.

Hopes for Continued European Defence Cooperation

British governments have sought to restore the UK’s ‘sovereignty’ by leaving the EU, and have emphasised that this means the UK cannot be bound by EU regulations or the decisions of the European Court of Justice.

However, there was also initial and sustained recognition that defence cooperation with individual European countries and even the EU as a whole should not cease. The Lancaster House Treaties from 2010 with France were left in place and the Foreign Policy, Defence and Development white paper in 2017 said that ‘the UK seeks to develop a deep and special partnership with the EU’. It communicated UK readiness to be involved with the activities of the European Defence Agency (EDA) and European Defence Fund (EDF). The 2018 Political Declaration signed by the UK and the EU included a commitment to establish arrangements under which the UK could participate in EDA, EDF and even Permanent Structured Cooperation (PESCO) projects. This aspiration survived in the revised 2019 version of the Political Declaration.

The Deteriorating Political Context

However, trade talks in 2020 have struggled to progress and the government has abandoned at least part of the Political Declaration having become aware of its implications for Northern Ireland.

The UK aerospace industry (civil and military) is particularly concerned as the September evidence to parliament of the ADS Chief Executive Paul Everitt underlined:

We have had to downgrade our ambitions, and as we stand here today we already know that our businesses are going to face significant additional cost and complexity. That will have a longer-term impact on our competitiveness…We are already resigned to the fact we have two regulatory systems and there will, as a consequence, be more costs…On being a rule-taker, it is highly likely that we will have to accept a high degree of the decisions made by the European Aviation Safety Agency.

There are two elements that constrain the UK. First, defence, like many industrial sectors, is highly regulated as regards standards and safety and there are two blocs that are big enough to determine the regulatory content – the US and Europe (which sometimes coordinate their stances). Second, while collaborative defence projects such as Tempest, Typhoon and the A400M were generated among individual governments and outside any EU body, the establishment of PESCO and EDF arrangements have moved the EU into the generation and the financing of collaborative projects. Until late October there was no provision for the UK to be able to participate as a partner in PESCO or EDF activities, but on that date it was reported that the EU was about to agree to allow non-members that shared EU values to take part in PESCO EDF projects on an individual basis ‘under exceptional circumstances’ where they would add ‘substantial value’.  In principle, this could be an important door that has opened but there may be devil in the detail with regard to decision-making, project management, and technology control arrangements, and when this external involvement could begin. It is significant that collaboration with Europeans is what has made many indigenous aerospace platform and weapons programmes for the UK affordable and it is now moving into the land sector through the resurrected Boxer programme.

A further ingredient is that several of the companies that make a major contribution to UK prosperity and defence technological prowess through their technology, employment and taxes are based in Europe. The most prominent are Airbus (large aircraft wings, satellites/space and information security), Leonardo (helicopters, airborne radars, defensive aids and avionics) and Thales (defence electronics, communications equipment and sonar for UK submarines). Also MBDA is a joint venture in which BAE Systems has a 37% share and the focus for UK efforts to sustain industrial capability in the field of complex weapons, like missiles. These firms are less concerned about the customs and tax changes associated with Brexit and more about regulatory and future programme of work arrangements.

How will the home boards of these firms treat their UK subsidiaries – which may lack good access to cooperative European programmes – in the long term? Application of the UK-agreed rules for Galileo show what Brexit could mean: the UK lost access to its Public Regulated Service, announced that it would build its own system, but has now backed away from this commitment, presumably because of the cost. At the corporate level, clear risks are that European boards will be more reluctant to invest in the UK, especially if its economy and defence budget struggle with post-Brexit life, and that they may gradually move technology, production and even highly valued staff back across the Channel. Paul Everitt observed to Parliament that ‘there is a very strong risk that people will just opt to do their investments in their facilities elsewhere in Europe and not here in the UK’.

At least in its public discourse, Britain’s political leadership has shown little awareness, let alone concern, about such issues. An additional risk is that the US will demand even greater access to the UK defence market as part of an overall bilateral trade deal. The media has already made extensive reference to fears about the National Health Service and US food standards. Downing Street is unlikely to welcome any suggestions from the Ministry of Defence that defence should ease some of its financial pressures by cutting back on its extensive plans for the purchase of major US systems.

Conclusion

At the highest level, UK–EU talks appear to be marked by both sides playing the game of ‘chicken’, underlining their determination not to swerve from the single track road despite heading for a mutually destructive crash. The UK government’s apparent lack of concern with the loss of access to cooperation in the security and policing space is a sign of how defence could be treated. In the event of a no-deal Brexit, it is likely that the government would blame EU intransigence. The EU stance would be similar. Emotions may run high if there is significant economic disruption in 2021, making cooperation in the security and defence space even less palatable to political leaders.

In these circumstances, insofar as is possible with coronavirus challenges and restrictions, it would perhaps be helpful for senior representatives of European defence firms in the UK, officials from departments of industry and defence and personnel from the European Commission to get together for informal and private discussions about their needs, fears and ideas on progress. The logic for defence cooperation activities involving the UK and its continental neighbours has not changed since the UK paper of 2017, but the circumstances in which it could be applied are much more challenging.

The views expressed in this Commentary are the author's, and do not represent those of RUSI or any other institution.

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