Merlin Weekly Macro: Urgency and energy needed on Defence spending

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Defence contractors are enjoying a purple patch. UK and European companies led by prime contractors BAe Systems, Babcock, Rolls Royce, Rheinmetall (German), MBDA (consortium), Thales (French) and others are beneficiaries of NATO’s scurry to expand defence spending. For Germany, it is not only to expand its military capability, but under the leadership of the remarkably effective defence minister Boris Pistorius it also reflects a concerted programme of making up for what should have been spent over the past 30 years on military capacity and wasn’t.

UK National Armaments Director: a big job

The UK 2025 Strategic Defence Review is slowly but surely being implemented. After a prolonged search, the UK’s first incumbent to the recently-created position of National Armaments Director (NAD) has been appointed: Rupert Pearce, formerly CEO of satellite communications company Inmarsat will be in post for a fixed term of five years. He leads a team which, directly to quote the mangled English of the MoD website, “includes delivery agencies of the MOD included (sic) DE&S will change how defence partners with industry to grow the UK economy, create jobs across the country and deliver UK exports. This will drive economic growth while bolstering national security – a foundation of the government’s Plan for Change.” (DE&S: the Defence Equipment & Support function within MoD). Pearce’s wide-ranging brief includes the promotion of defence innovation and development, through adoption, specification and sourcing to front-line delivery. His is a formidable task: against stiff opposition among Whitehall departments, the Ministry of Defence has been a byword for institutionalised torpor, dysfunction and atrophy; it is where dynamism goes to die.

Hopefully no longer! Dynamism is exactly what is needed. The highly concentrated and rapidly changing nature of warfare in the 2020s arising directly from the conflict in Ukraine demands urgency and energy. Pistorius again: “We need to get faster. We need to become more effective. We need to throw rules overboard when it comes to procurement and planning. The mindset change [in Germany] is in full swing”.

The military landscape of the 2020s is immensely dynamic

Military attitudes have been galvanised by the advent of full-scale state-on-state war in Europe since February 2022. Seduced by the relatively quick and easy wins in the two Gulf Wars against Saddam’s low-grade forces in the 1990s and early 2000s, most post-Cold War UK strategic thinking was conditioned by paring defence budgets to the bone and the military being structured for unconventional, small-scale, low-intensity out-of-theatre interdiction or counter-insurgency operations (e.g. Afghanistan and the Balkans). At the sharp end of military appreciation, Russia’s attack on Ukraine, and the Ukrainian response, has changed all that; it has taken the supply chain but mainly the governmental apparatus a long time to catch up.

To give an idea of how rapidly thinking is changing and how plans are having to be reshaped, consider the British Army’s Future Soldier Programme. A derivative of US military strategy conceived in the 1990s, UK Future Soldier was launched in 2021 in response to a slimmed-down professional army whose principal role in NATO is the spearhead of the Allied Rapid Reaction Corps (ARRC). ARRC is a multinational expeditionary force that can be quickly deployed anywhere as an initial response to an act of aggression. Its purpose is to stabilise the battlefield until the heavy forces arrive from the US to secure victory. Future Soldier required agility, mobility, self-sufficiency and strong leaders capable of independent thinking. What it delivered was a flexible, lightly-armed, relatively small force with limited armour and artillery. Its infantry battalions were to be reconfigured around a “platform” named Boxer. Boxer is an eight-wheel armoured personnel carrier (APC), mobile and fast. But for the five battalions among the infantry cadre designated “armoured”, Boxer is very different from the tracked Warrior Armoured Fighting Vehicle (AFV) equipped with a turret-mounted quick-firing 30mm cannon which Boxer replaces. As a result of Ukraine, the latest thinking as reported in the press is that “light” infantry will proceed to convert to Boxer, while the “armoured” infantry who were due to lose their Warriors and be replaced with Boxer, will now receive Ares, a derivative of the “new” Ajax family of AFVs and a near-Warrior equivalent.

Why place apparently cynical quotation marks around the adjective “new”? Because while the first vehicles are being delivered to operational units, the projects to get them there are almost as old as the hills. Ajax and Boxer are shining examples of dysfunctional planning and procurement and egregious financial waste. Neither is fully operational and yet both projects for what are well-tried concepts, even if sophisticated versions thereof, have been respectively a decade-and-a-half and more than two decades in gestation. Even today, and years behind schedule, there are new delays to the UK’s procurement of Boxer: reported in the Daily Telegraph ironically on Armistice Day, supply chain issues are preventing the timely delivery of Boxer wagons; as for Ares, the unplanned but reactive switch from Boxer based on new operational exigency creates both a production hiatus for Ares variants and puts additional strain on the worn-out and now largely unsupported Warrior fleet with all its operational risks and consequences.

Putting the defence industry on a war footing

It is Rupert Pearce’s job to make sure the procurement shambles of such projects are consigned to history. There are so few examples of “good” procurement that a whole new blueprint needs designing on a clean sheet of paper: that must be at the very heart of the new Defence Industrial Strategy he is tasked to deliver.

The principal choke points in procurement have arisen from the merry-go-round of Defence Secretaries and dysfunction in the MoD, exacerbated by the three-year rotation of senior appointments in each of the three services. However, the defence industry is not blameless. Capacity investment depends on government orders but that does not excuse in-build unit production and delivery times being simply too long. It too must change pace and practice: simply, it must become war-minded.

The reported lead-time on a Javelin anti-tank missile batch is 32 months (the Lockheed/Raytheon JV reportedly has annual capacity to produce 2,400 missiles a year, increasing to 4,000 missiles by the end of 2026; a skilled anti-tank operator can lock the system onto an enemy tank and fire a Javelin in a minimum of 30 seconds and it takes less than half a minute to reload; given enough targets, soldiers can quickly fire off many more missiles than can be resupplied by the manufacturers, a situation with both tactical and life-threatening consequences).

For the Navy, the laying-down-to-commissioning time of the new Type 26 frigates will have been a decade, excluding nearly another two decades in development, for the first ship (HMS Glasgow is now scheduled to be delivered in 2028, five years behind target and 11 years after her keel was laid); Norway has ordered five Type 26s from UK yards with deliveries due to be complete by 2040. It will take six years longer than the duration of WW2 to deliver five additional ships. With three times the naval shipbuilding capacity of the US, China is launching a warship every month; they are not doing it for fun. They aim to control the seas: that is the threat.

Similarly, the new order for 20 Typhoons for Turkey is due to be completed by 2030, a production rate of five airframes per year: if you lose a couple on the first day of operations in a conflict, it will take BAe Systems nearly half a year to make you two new ones, assuming you’re still in business to use them when they arrive.

Investments by foreign contractors such as Rheinmetall (building a new gun-barrel factory in Telford) and successfully winning overseas orders such as those above and from Poland are vitally important to the health and duration of the UK defence industry. They are unquestionably good for the broader economy. Critically, they provide continuity of business and cashflow, innovation, capacity and skills in the sector when domestic orders are either absent or in a dip. The UK has begun retiring its older Tranche 1 Eurofighter Typhoons (nearly a third of the RAF’s Typhoon force) and is not replacing them. Challenger main battle tank hulls are being upgraded from Mk2 to Mk3 specification but the deployable MBT fleet will be fewer in number. Ship programmes are coming along but at a painfully slow pace. Exports fill the gap.

Drones & cyber: frenetic change

Away from the long lead and production times of big shiny capital kit, the pace of development and transformation in cyber warfare and drone technology is frenetic. In these spheres, it is a case of trying to keep up every bit as much as it is about stealing a march with technical superiority. When it comes to the multiplying of lethality which the Chief of the General Staff so urgently demands, the way ahead is with new systems such as Helsing’s HX2 kamikaze attack drone being trialled by the British Army and the German Bundeswehr. Based in Munich, as a company Helsing itself is only four years old. Similar to the Russian Lancet drone used in Ukraine, according to the Calibre Defence website HX2 is a smart, human-programmed, AI controlled launch-and-forget system; using ground-tracking photo recognition technology for self-positioning (i.e. it is not reliant on GPS satellite signals which can be jammed), it is programmed to fly to a pre-determined hunting zone at distances of up to 60 miles (100km). It loiters above the battlefield until it identifies a victim from a pre-programmed list of targets; when attacking, the kamikaze drone becomes a vertically downward trajectory HEAT rocket-propelled missile penetrating the top of an enemy armoured vehicle (the most vulnerable area) leading to its destruction. So smart, several can be released to hunt simultaneously as a wolf-pack, communicating with each other autonomously and deciding among themselves which targets to obliterate to the maximum effect, though as Calibre Defence points out, for playing-by-the-rules western governments requiring a “human-in-the-loop” control system, subcontracting control entirely to an AI “brain” for target selection is an ethical step too far.

Even if the UK does not adopt HX2, it and systems like it including Russia’s Lancet already exist. With nowhere to hide on the battlefield, they point to the potential protective shortcomings of our own APCs, AFVs and tanks. These then will need enhanced solutions such as smart reactive armour or protective outer shells to keep vehicles operational and their crews safe. It becomes an active-reactive escalation race. As we have pointed out before, the average lead-time on developing a new military system in the UK is 6 years; technology in this arena, and the necessary mitigants, are changing in less than six months. It only adds to the immense challenge facing the new NAD.

A political path still strewn with cowpats

As a depressing post-script, the 13 October MoD press release announcing Pearce’s appointment contained the following paragraph: “The appointment comes at a crucial time, following the Prime Minister’s commitment to the biggest sustained increase in defence spending since the end of the Cold War, with spending rising to 2.6% of GDP by 2027 and an ambition to reach 3% in the next parliament (our italics)”. This is quite misleading: in fact we are required and have committed to achieve 3.5% by 2035, it is not an ambition to reach 3% in the next parliament which concludes in 2034. Further, we have committed a further 1.5% of GDP (i.e. 5% in total) by 2035 that supports cyber and defence-related infrastructure for enhanced national security. A careless cut & paste from an old, pre-June 2025 NATO summit press release? Or does it reflect the government’s intention to backslide from its commitments? As we reported recently, only six months into the fiscal year and already the 2025/6 defence budget is £2 billion over-spent and the order has gone out from the MoD to the service chiefs to find cost savings. And this is before the MoD must meet new costs relating to the strategically and financially illiterate Chagos deal with Mauritius and the resettlement and compensation sums running potentially to billions of pounds for Afghans caught up in the large MoD data breach. The political omens are not good.

Crack on, Mr Pearce! No time to waste!

Vision, pace, urgency, a willingness to throw away the rule book to which add a touch of bloody-mindedness: these are the character requirements for NAD and his team. His biggest challenge is overcoming entrenched, institutionalised, suffocating inertia. The stakes could not be higher; the risk is literally existential. We are not going to wish Mr Pearce good luck in his new role because that implies a reliance on chance; we are willing him Good Leadership and Godspeed.

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