Oral statement to Parliament

UKTI DSO Symposium

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

Introduction I am very pleased to join you for today’s symposium. The UK’s defence and security industry is one of the great success stories…

Introduction

I am very pleased to join you for today’s symposium.

The UK’s defence and security industry is one of the great success stories of our economy, and it is one we should celebrate. Your companies enjoy a global reputation and contribute hugely towards generating jobs and wealth for this nation.

Thousands of small businesses flourish alongside established multi-national corporates. Defence companies drive cutting-edge research and technological innovation; they fuel growth and productivity; and, ultimately, they bolster our national security.

The products made by the sector - everything from the Typhoon jet, to police barrier tape - have found markets here and abroad. Indeed last year, defence and security companies generated exports worth £8.7 billion, and that was in the depths of the worst recession for sixty years.

Our biggest partners continue to be the US and Saudi Arabia, but our companies are moving into burgeoning markets across Asia, the Middle East and Latin America.

Creating the right business environment

This is an outstanding track record and the Coalition is committed to helping you achieve even greater success in future.

But I recognise that companies are grappling with a business environment that all too often stifles, rather than stimulates, entrepreneurship.

I believe the job of Government is not to tinker and meddle in how businesses are run. It is instead to create a stable, long-term framework, within which companies can have the confidence to plan and invest for the long term.

Not to pick winners, but to create the right business environment, in which the best will flourish. So this Government wants to be a real partner for the defence And security sector.

That’s why we acted decisively in the recent Comprehensive Spending Review to tackle the UK’s record budget deficit and restore confidence in UK Plc. Because confidence is the bedrock of economic growth.

We have also carefully calibrated our deficit reduction plans so they protect vital investments in Britain’s economic fabric.

Our decision to ring-fence the science budget and hold it at £4.6 billion a year, over the next four years, is good news for defence - a high-tech sector that depends on innovation to thrive.

We are committed to improvements in UK infrastructure which will help UK businesses succeed in a global economy. We will create the best super-fast broadband network in Europe by 2015. And we will build the next High Speed rail link between London, Birmingham, the North West and Yorkshire.

We have set out plans for a simpler, more predictable tax system that rewards endeavour. Corporation tax rates will fall to 24% by 2014, one of the most competitive rates in the G20. And to aid entrepreneurs we are cutting the small firms rate to 20p.

We have increased 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.

Finally, we are getting a grip on the unnecessary red tape and bureaucracy emanating from Whitehall, which chokes innovation and stifles growth.

So, from September, we have adopted a new ‘one in, one out’ system of control. It means that before a Minister can introduce a new regulation, he or she must first demonstrate that they have cut the existing burden.

It’s a comprehensive approach which will first cap then reduce the burden of bureaucracy on business.

Supporting SMEs

Of course, this is just the beginning. We realise there is still a way to go before we achieve our ambition of making Britain one of the best places in the world to start and grow a business.

Small businesses matter hugely to the competitiveness of our defence and security sector. They fuel innovation, keep supply chains moving, and really focus on the needs of customers.

On Monday, Vince Cable and I set out a new package of support designed to help our small firms flourish and continue to keep our economy supple and competitive.

Access to finance is a major concern for SMEs. 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 committing a further £200million to enterprise capital funds, supporting equity investments in the highest growth potential businesses over four years.

We will also hold talks with the banks about establishing a new lending code, and a £1.5billion business growth fund to be provided by six of the leading high street names.

But we also need to be a smarter customer, and use our purchasing power to create more opportunities for small firms. So the Prime Minister has asked Lord Young, the former Secretary of State for Trade and Industry, to conduct a thorough review.

Lord Young will look carefully at what needs to change to make it easier for SMEs 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 recognises that and is looking at 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 in the development phase of projects. This is exactly when SMEs can typically offer innovative solutions that make a real difference to the final costs and specifications of a scheme.

This Government is committed to harnessing the potential of our SMEs - to help the MoD and other public bodies become more efficient, and to help the UK economy grow.

As part of that push, the Defence and Security Organisation has been examining how best to help the UK’s 8,000 small firms specialising in defence, as they expand their business and seek out new markets overseas.

So I am pleased to announce today that the DSO has designed a new model of business support for the defence sector’s SMEs, which has at its heart a new website offering a wealth of information and advice. The online resources available will include market advice and new business opportunities

When it is up and running, the site should meet the needs of 95% of the sector’s SMEs - whether they are completely new to exporting and wanting initial advice, or already on the way to market.

The new business model is expected to launch by the end of the year. Before then, the DSO will be consulting with the defence sector’s small firms to make sure it will meet all their needs.

Commercial Diplomacy

Of course, the other side of the coin is doing our bit to ensure those export opportunities are available in the first place. So we are putting a new focus on creating new commercial openings with our international partners.

That means a cross-Government effort to win new business and investment for the UK. And putting the UK’s commercial interests at the heart of all our bilateral relationships.

Especially those with developing economies, such as Brazil and Russia, India and China. I know that when Stephen Green joins the Government as Minister for Trade and Investment in January, he will be pursuing this agenda energetically.

Bribery

But we recognise, too, that there are challenges when operating in some overseas markets. We believe the best way to forge successful business relationships is to confront local cultures of corruption where they exist. It is essential British companies play their part in this effort.

The UK defence and aerospace industry has shown the way here, not just in developing a robust anti-corruption code, but also in promoting the adoption of this code throughout the supply chain and across Europe.

Your expertise in this area will also be invaluable in ensuring the effective implementation of the Bribery Act. So I would encourage you to respond to the Ministry of Justice’s public consultation on the Bribery Act guidance, which closes this week.

It is a good opportunity to identify problems of legal and practical uncertainty and propose ways in which the Government can help manage these risks.

Conclusion

Whatever challenges your company faces in seeking to grow and search out new business, the DSO exists to provide practical advice and information.

It is a valuable resource, and its people understand the particular challenges you facing in the defence sector, so I would encourage you all to take advantage of their expertise.

Because, as I said at the beginning, this Government understands the crucial importance of the UK defence industry to the wider economy.

You are already a British success story, and your achievements show how you respond to changing circumstances with creativity, innovation and flair.

I am confident you have the skills, dynamism and know-how to grow and become even more successful in future. I look forward to working with you all to make that ambition a reality.

Thank you.