Oral statement to Parliament

Consultation Conference on the Equipment, Support and Technology for UK Defence and Security Green Paper

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Introduction It’s a real pleasure to join you for today’s conference. It is great to see such a broad mix of companies, of all sizes, represented…

Introduction

It’s a real pleasure to join you for today’s conference. It is great to see such a broad mix of companies, of all sizes, represented here today.

Defence companies drive much of our research and technological innovation; you fuel growth and productivity; and, ultimately, you bolster our national security.

But I know you are facing some real challenges. The tough decisions that this Government had to take in the Strategic Defence and Security Review, are having an impact on the domestic market.

However, let’s not forget that over the next four years the defence budget will rise in cash terms. The UK will still have the fourth largest military budget in the world.

And the British Armed Forces remain one of the main as arbiters of quality by nations around the world. They know that our focus on capability means the kit we buy meets high standards in all areas of performance. “In use with the UK Armed Forces” is a significant selling point, in a highly competitive export market.

So there are still plenty of opportunities out there for nimble firms with innovative products - here at home and around the world - and we are committed to helping business grasp them.

The business environment

That’s why Government is working hard to transform the business environment in this country, which too often hinders rather than helps enterprise.

We started with firm action to tackle the record public sector budget deficit and restore confidence in UK Plc - because confidence is the bedrock of economic growth. But our plans are carefully designed to protect vital investments in Britain’s economic fabric.

So we are ring-fencing the science budget and holding it at £4.6 billion a year. This is good news for defence given the vital role of science and technology in the sector.

We are committed to investing in UK infrastructure in order to help UK businesses keep on the move. We will create the best super-fast broadband network in Europe by 2015. And we will build the next High Speed rail link, to increase connections between London, Birmingham and the North.

Corporate taxes are being overhauled so they are lower and simpler, and reward endeavour. Corporation tax rates will fall to 24% by 2014, one of the most competitive rates in the G20; while the small firm’s rate is being cut to 20p.

We are also increasing the entrepreneur’s relief rate for Capital Gains Tax from £2m to £5m - a real boon for the hard working SME owners who are the bedrock of the UK defence and security industry supply chains.

And we are getting a grip on the unnecessary red tape and bureaucracy that weighs so heavily on business in this country, choking innovation and stifling growth.

But this is just the beginning. We realise there is a still a way to go before the UK business environment allows our firms to be as competitive as they could be.

SME support

Defence prime contractors play a huge role in the delivery of our military capability - but SMEs have an important contribution to make too. They help fuel innovation, keep supply chains moving, and really focus on the needs of customers.

The importance of SMEs in the defence and security sector mirrors their importance in Britain’s economy as a whole, where they make up around 99 per cent of our companies and provide jobs for about half of all our workers.

That’s why we want to help them play their part in galvanising future economic growth.

Access to finance is a major concern. So the enterprise finance guarantee scheme will be extended for the next four years, making around £2billion available to around 6,000 viable small firms a year.

We are also committing a further £200million to enterprise capital funds, supporting equity investments in the highest growth potential businesses over four years.

And as a result of the Project Merlin agreement recently struck with the major banks, we have secured £190bn of new credit in 2011, £76bn of which will be new lending capacity for SMEs.

It’s also important that SMEs with the ability and ambition to grow get the backing they need. Our new approach, modernising and improving business support, harnessing the expertise of experienced business men and women to provide expert support.

New facilities will include online business information, a national contact centre and a 40,000-strong national network of experienced business mentors, to offer business coaching and practical advice.

Smarter Government purchasing

Of course, in an industry like defence, Government is not just an enabler - we are also a major purchaser.

So we are committed to being a smarter customer, and using our purchasing power to create more opportunities for small firms.

We are overhauling the system to make it easier for all companies to do business with Government. That includes cutting through the red tape associated with bidding for public sector contracts - identifying where they are unnecessarily complex, demanding or slow, and doing something about it.

This is clearly a big issue in the defence sector, where the Ministry of Defence is a major customer.

The MoD is working towards adopting standardised and simplified templates for the pre-qualification questionnaire and for lower value contracts. It is also signing up to the cross-Whitehall website being developed to advertise Government contracts.

It is also exploring ways of involving the defence industry, including small companies, early on as projects are being developed. That is often when smaller firms can provide innovative ideas that make a real difference to the final costs and specifications of a scheme.

In short, this Government is committed to harnessing the full potential of our defence and security companies - of all sizes - to help the MoD and other public bodies become more efficient, and to help the UK economy grow.

Trade Policy White Paper

The Trade Policy White Paper, published last month, is another important step forward in realising that ambition.

My colleague, Gerald Howarth, will be talking about export opportunities in the defence sector shortly, so I won’t intrude on the area too much.

But I would like to highlight the backing we intend to help companies firms looking to grasp the opportunities in overseas markets. The paper outlines plans for four products designed to help businesses all of sizes get access to credit and insure themselves.

  • An Export Enterprise Finance Guarantee scheme will make available finance worth up to £1 million for individual small firms.
  • The Export Credit Guarantees Department is setting up an Export Working Capital Scheme, offering finance worth over £1 million.
  • The ECGD is also providing a bond support scheme to share the risks with banks issuing contract bonds.
  • And ECGD will share credit risks with banks offering foreign exchange hedging contracts to SMEs.

Conclusion

So Ladies and Gentlemen, we recognise that these are challenging times for the defence and security sector.

But the UK remains a major customer for the defence industry, while the equipment used by our armed forces is acknowledged globally as a benchmark for quality and performance.

And, as I hope I have made clear today, the Government is committed to creating the right business climate, so companies of all sizes may flourish.

We intend to give the sector our full backing, and we will do everything we can to support defence and security companies in selling to responsible and legitimate customers across the world.

Thank you.