Back to news

October 30, 2018 | International, Naval, C4ISR

UK MoD gets budget boost of more than $1B with three programs in mind

By:

LONDON — Britain's Ministry of Defence has been given a £1 billion (U.S. $1.28 billion) spending boost in the Treasury budget announcement Oct. 29, with Chancellor Philip Hammond suggesting the money would be mainly spent on three strategic military programs.

Hammond said the additional money would be available in the coming months. Cyber, anti-submarine warfare and the Dreadnought nuclear submarine build program all got named as destinations for the extra cash.

“As a former defense secretary myself I understand the immediate pressure our armed forces are facing, so today I will provide £1 billion to cover the remainder of this year and next to boost our cyber, and anti-submarine warfare capacity and to maintain the pace of the Dreadnought program,” Hammond told Parliament.

The increase caught many by surprise. Defence Secretary Gavin Williamson has been battling with Hammond for months for extra cash, but a massive funding commitment to the National Health Service made new funds toward security seem unlikely.

Jon Louth, the director for defence, industry and society at the Royal United Services Institute think-tank in London said the additional funding was good news, but fell well short of what is required.

“It's welcome, but comes nowhere near addressing the potential funding gap if you add up all the programs in the equipment plan. It does appear to be a significant increase in percentage terms, although the devil will be in the detail,” he said.

The RUSI analyst said the outcome was “better than we expected a few months ago. Politically people will be chalking that up as a win for Williamson in the context of the wider government budget. One billion pounds is a win,” he said.

Louth cautioned against getting too hung up on the chancellor's announcement about where the extra cash will be spent.

“I suspect when we come to see how the money is used next year it will potentially be a little different from the chancellor's headlines today,” he said.

Defense consultant Alex Ashbourne Walmsley of Ashbourne Strategic Consulting said the new money was a “sticking plaster, but it will buy the MoD a bit more time to work out how to do more with less.”

Earlier this year the MoD received a total of £800 million in funds to keep the program to build four Trident missile equipped Dreadnought nuclear submarines on track.

Some £600 million of that cash came from a £10 billion contingency fund set aside by the government for the Dreadnought program.

Ashbourne-Walmsley described the Dreadnought program as a “money pit.”

The MoD is trying to bridge a funding gap in its £179 billion 10-year equipment plan.

The black hole is put at anywhere between £4 billion and £20 billion by the National Audit Office, the government's financial watchdog. The final figure is dependent, in part, on how effective an ongoing efficiency drive is at the MoD.

The MoD budget for this year is £36.6 billion with 15.6 percent of that spent on equipment procurement and 18.7 percent on support.

The Conservative government is committed to increasing equipment spending in real terms by 0.5 percent a year until 2020.

A long running review, known as the Defence Modernisation Program, has been looking at how British armed forces can adapt and transform to meet the changing and growing military threat, while at the same time balancing the books — an effort that could require capability cuts in several areas.

Publication of that report has already been kicked down the road a couple of times. Although Williamson may announce something before the end of the year, analysts and industry executives expect little of substance ahead of a comprehensive spending review due to take place across all government departments next year.

Hammond appeared to say as much today when he told Parliamentarians the modernisation review will “form the basis for a comprehensive consideration of defense spending next year.”

“The Modernizing Defence Program is increasingly tied into the comprehensive spending review and the 10-year equipment plan in 2019. We might get a whitepaper in late winter or early spring to set up some of the themes but the details won't be out until beyond April,” said Louth.

Some industry executives though are starting to wonder if the modernization program could be published even by April. One executive who asked not to be named, said he wondered whether the comprehensive spending plan might be the trigger for a full blown strategic defense review, particularly if Brexit goes badly and the economy takes a big hit.

https://www.defensenews.com/global/europe/2018/10/29/uk-mod-gets-budget-boost-of-more-than-1b-with-three-programs-in-mind

On the same subject

  • Northrop sells IT business to Veritas Capital for $3.4B

    December 9, 2020 | International, C4ISR, Security

    Northrop sells IT business to Veritas Capital for $3.4B

    WASHINGTON — Northrop Grumman has struck a $3.4 billion deal to sell its federal IT and mission support business to Veritas Capital. The agreement, announced Dec. 7, is expected to close by June 2021. At that point, Veritas plans to incorporate the Northrop business units with Peraton, a Veritas subsidiary that supports government customers and specializes in technology products for the space, defense and intelligence markets. Northrop is expected to generate $2.3 billion in revenue, which will be funneled into share repurchases and debt retirement, the company said in a news release. “This divesture allows us to drive value and reflects our strategy of focus on growing core businesses where technology and innovation are the key differentiators,” said Kathy Warden, Northrop's CEO and president. “We expect to create compelling value to our shareholders through this transaction and execution of our capital allocation strategy.” Reports of the sale first surfaced in October. Byron Callan, an analyst with Capital Alpha Partners, said that the sale shows there is still isn't consensus within the defense industry on how to organize IT and services businesses alongside more traditional hardware business units for products like aircraft, vehicles or other weapons. Callan pointed to Lockheed Martin's sale of its information and global services business to Leidos in 2016; L-3′s sale of its IT solutions division to CACI in 2015; and Harris' sale of its IT business to Veritas in 2017, which later became Peraton. However, other major companies have acquired government IT companies, such as General Dynamics's purchase of CSRA in 2018. “We have believed that as DoD spending flattens in the 2020s, primes could seek to jettison ‘non-core' businesses that will still be profitable, but face declining sales or more intense competition,” Callan wrote in an email to investors. https://www.c4isrnet.com/industry/2020/12/08/northrop-sells-it-business-to-veritas-capital-for-34b/

  • MQ-25 Schedule/Costs May Increase If Navy Misses Install Windows

    June 9, 2020 | International, Naval

    MQ-25 Schedule/Costs May Increase If Navy Misses Install Windows

    Navy officials told the Government Accountability Office (GAO) the MQ-25A Stingray unmanned aerial tanker developmental schedule might be delayed by three years and increase program costs if the Navy misses windows to install the aircraft on aircraft carriers. https://www.defensedaily.com/gao-mq-25-schedule-costs-may-increase-navy-misses-install-windows/navy-usmc/

  • UK to lead NATO’s 2024 rapid response force

    December 28, 2023 | International, Security

    UK to lead NATO’s 2024 rapid response force

    From 1 January 2024, the United Kingdom’s 7th Light Mechanised Brigade will lead NATO’s rapid reaction force, placing thousands of soldiers on standby and ready to deploy within days. NATO’s Very High Readiness Joint Task Force (VJTF) was created after Russia’s annexation of Crimea in 2014 and was deployed for the first time for collective defence of the Alliance after Russia’s full-fledged invasion of Ukraine in 2022. The leadership position is rotated annually among Allies. The UK takes over from Germany, which led the force in 2023.

All news