The Defence Investment Plan is not investable as it stands, because it sets out themes without the contracts, programmes and procurement detail industry needs before it will build factories, according to evidence given to the Defence Committee.
Stephen Phipson, chief executive of MakeUK, was giving evidence alongside Kevin Craven of ADS, Julian David of techUK and Arnab Dutt of the Federation of Small Businesses.
Phipson said: “I have been doing this for a long time, to say the least, and, as Kevin said, there is not sufficient detail. It is nothing like an equipment plan. This is not investable as it stands at the moment. It gives you a thematic direction of travel in many areas, a lot of which is welcome and is great news, and attracts a lot of new companies into the market, but the questions are then around where the contracts, the programme and the procurement are. We do not have that yet, and that is the problem.”
Craven said the plan concentrates on the first four years to 2029, where the old defence equipment plan set out a granular acquisition pipeline over ten years. He said: “We can see that the rough shape of the DIP is around 50% to 55% of the total spend over the 10-year period, so some spend has been brought forward to improve the readiness of what we are doing, but there is not enough granularity to provide certainty to industry. Intent is not the same as a commitment that is suitable for investors in defence.”
Asked whether the plan leaves more questions than answers, Craven said there is a clear shift in strategic direction but that “the lack of certainty over that 10-year period is a real problem. Headlines do not make for good investment.”
Ian Roome, the Liberal Democrat member for North Devon, asked how damaging it would be if the next spending review failed to provide a funded pathway towards three per cent of national income, and whether industry would still invest on the strength of the current plan.
Phipson said: “The answer is that it will not. It is only going to invest when there is certainty on what the programme looks like, and we have seen this for decades in defence. It has to be around a certain programme. The thematics that we have are all good and welcome.”
He added: “To your earlier point, industry welcomes the new technologies and innovation, but, until we see certainty, no one is going to invest a penny. We need to see where those contracts are going to come from. We will play with all the innovation that is happening with the MOD, which is good, but we need to start building factories and capability.”
On the backloading of the funding profile, Craven said: “You cannot switch on industrial capacity and production lines overnight. You need a strong demand signal over a long number of years to be able to do so, so a ramp-up towards the back end of a period is not helpful. It creates a future bottleneck where firms will compete for the necessary skills, monies and other industrial requirements at the same time, so it is not a helpful profile in any way.”
He told the committee that building a new production line from scratch takes between two and four years depending on what is involved.
David said the delay itself carries a cost, telling MPs: “this costs the country money, because delay in an inflationary context and, particularly in tech, an availability crisis of certain components means that what you are going to do costs more when you get around to doing it.”
