“REVERSING DECADES OF MANAGED DECLINE OF EUROPE’S DEFENCE INDUSTRY WILL TAKE TIME”

Do we need a European defence industrial base, or can we rely on allies and partners?

We definitely need a European industry, but I don’t think there’s enough discussion of why it matters. In a nutshell, having a strong industry makes us all safer, both by enhancing our military operational capabilities and ensuring our freedom of action. The type of industry also matters. It needs to be appropriately sized and have the wherewithal to design and develop most of the major capabilities our armed forces need.

We constantly hear the mantra: “We must strengthen Europe’s defence industrial base”. But European governments often make procurement decisions that are at odds with this. Since the full-scale invasion of Ukraine, many of the biggest procurements have been for systems from countries like the United States, Israel and South Korea.

Governments seem to prefer the easy option of buying from somebody else, rather than procuring European solutions or developing equipment nationally or collaboratively with others. Indeed, there’s a lot of lip service when it comes to collaboration. I can’t help wondering whether politicians and defence ministries really believe in it. The hard evidence suggests not - or perhaps not yet.

Given the difficulty of collaboration, could Europe stick to buying ‘off-the-shelf’ outside Europe?

In theory yes, but it wouldn’t be good for Europe’s long-term security. The United States is constantly pushing Europe to do more for itself, but a purely European approach is neither practical nor desirable. Equally, it can’t make sense to become even more dependent on the United States just as it’s pivoting to Asia. We’ve got to strike a sensible balance.

When a government buys a major platform from a non-European supplier, it’s typically making a commitment of 20 to 30 years. It’s also buying into an infrastructure and doctrine, plus a whole range of other aspects. These will be very hard and expensive to disentangle from subsequently.

What are the disadvantages of such an approach?

Firstly, there’s the issue of our conventional deterrence against potential aggressors, who will inevitably look at Europe and ask: “How credible are they as a military force, if they can’t lean into their own industry for most of their needs?”

Secondly, there’s the operational angle. As we’ve seen in Ukraine, military capabilities evolve incredibly quickly during a conflict. Our militaries therefore need to know where the vulnerabilities are in their equipment and where they can push performance. This is much easier when the equipment comes from your own industry. 

It also means they have the ability to rapidly innovate, to modify existing equipment and to install new subsystems. It can take an age to fit a European subsystem – a sensor or a weapon – onto a U.S. platform. Ramping up is also much more feasible when you have local production and it also provides much closer control and understanding of your supply chain.

Given what you have said, how difficult is it to ramp up defence industry capacity in Europe?

It’s not actually that difficult per se. But with the industry having been in managed decline for so long, reversing this will take time and it needs firm, long-term procurement commitments from governments. It’s been widely reported that if we were involved in a high-intensity conflict, using ammunition, missiles and armaments at the rates seen in Ukraine, we would run out of stocks in just a few weeks. We need to switch from being a just-in-time industry to one that can ramp up when required. Instead, we’re in this invidious position of scrambling around, trying to backfill a lot of what we’ve sent to Ukraine.

What, in your view, are some of the reasons for these capacity problems?

Managed decline of the industry has meant cutting capacity to match the lower demand, with some facilities barely producing enough to keep them running economically. Companies have also had to cut their workforces, with the resulting loss of highly skilled, experienced workers. Most governments have not taken the view that defence industrial capacity needs to be maintained at a contingency level – and also paid for. 

Companies obviously need orders. But what sort of response would you expect from industry?

The defence market is unique, with very few customers and a tightly regulated export market. Industry is highly dependent on their home market government, but those same governments have historically been very quick to cut orders when tensions dissipate. As such, industry can only be expected to do a limited level of investing in capacity expansion ahead of getting firm, long-term orders. 

How do you rate the response to joint procurement of ammunition and equipment so far?

It’s good to see the ammunition response picking up in Europe, but it should never have been in this dire state. Multiple approaches have been taken. The European Defence Agency has a new procurement role, so have individual lead nations. NATO has also weighed in through its NATO Support and Procurement Agency (NSPA).  To be honest, it all feels a bit uncoordinated, with some jostling for position. Perhaps it was inevitable in the circumstances, but it still feels like the firm orders now being placed are significantly below what’s really needed. Governments don’t seem to be pulling out all the stops or moving to a ‘war economy’. Indeed, they seem to be assuming the conflict in Ukraine won’t spread across NATO’s borders.

Given that Ukraine’s war is likely to be long, do you see more European defence cooperation?

The war has clearly led to significant hikes in defence budgets, but it’s been less helpful for capability cooperation. The missile sector is where we’ve seen the deepest cross-border industrial integration, and we ought to build on it. In European defence, we know who the big players are and where the money is. Yes, the European Commission has a certain amount of money, but the real money is in Member States. For big capability programmes, you really need to ensure that you’ve got most of the big players on board if you want things to be credible and not just fizzle out.

In terms of projects, how do you see progress on multinational European projects?

Lots of European countries are buying the (Lockheed Martin) F-35 combat aircraft, so we’ll soon have a lot of fifth-generation fighters in Europe. But this makes it more difficult to sustain an industrial base in Europe with the wherewithal to develop a sixth-generation combat aircraft. The SCAF/FCAS project involving France, Germany and Spain is under way of course, but it has been plagued by disagreements. Meanwhile, in the missiles sector, the huge German-led European Sky Shield Initiative (ESSI) project foresees the procurement of non-European missile systems for two of its three layers. Where does this leave the European missiles industry?

In short, Europe needs a comprehensive, strategic cross-capability assessment of what capabilities we want to be able to design, develop and produce in Europe, and agree which can only be done collaboratively. Should we focus more on battle-decisive equipment, and be less concerned about producing enablers like transport aircraft, for example? This comes back to the fundamental questions of why we need a domestic European industry at all and how much we are prepared to spend on securing it.