Read: Why defence companies can deliver social value alongside security
Since the invasion of Ukraine over a year ago, there has been an increased focus on defence capabilities and defence spending. That conflict, and continuing aggression and displays of military might from Russia and China, have prompted a rethink of our defence sector - how effective is it in maintaining our national and international safety and security and what part can it play in shaping a technologically competitive future?
Despite the tight fiscal climate - and the economic challenges relating to any public spending decisions - a commitment in June 2022 by the then Prime Minister, Boris Johnson, to raise defence spending to 2.5 per cent of its GDP by the end of the decade stands out. In 2021, the UK spent 2.2 per cent of its GDP on defence. It’s decreased markedly since 1956 when it was just under 8 per cent, and even 1980 when it was 4.1 per cent. This month, the Prime Minister confirmed that the UK would increase defence spending by £5bn over the next two years and launched a review to ensure that the UK can respond to aggression effectively while also protecting our economy and competing at the cutting edge of technology. The ramping up of defence spending, alongside a bolder rhetoric on facing up to existing and would-be aggressors, highlights a step change in attitude.
This time last year, I wrote about how the war in Ukraine would prompt a fundamental rethink on what it meant to be a responsible business. The conflict created a moral urgency to do the right thing and many moved quickly to give up Russian partnerships and investments. Those who weren’t so quick risked the wrath of their customers and investors and, in the end, their reputations. The best CEOs also considered how they could be part of a broader moral order that would do business only with those who abided by the rule of law with a respect for international stability.
The acceptance that the defence sector has a valuable role to play in social value has been reflected in the business world where previously many investors and financial institutions had shunned the defence sector to avoid controversy about involvement in the arms trade. That is changing as business leaders recognise that ESG and the social impact that their organisations deliver can also extend to defence companies and the security, technological advances and high skill jobs that they can bring. Leading Purpose Coalition member Leonardo is a striking example of this, as our analysis of the company’s impact shows.
In addition to the headline announcement that defence spending will rise as a proportion of GDP, the Prime Minister, alongside the leaders of the US and Australia, also announced that the first generation of AUKUS nuclear submarines will be built in the UK and Australia. Based on the UK’s world-leading design, they will be the largest, most advanced and most powerful attack submarines ever operated by the Royal Navy. The agreement cements a decades-long partnership in our nations that could be of similar significance to the 1958 nuclear cooperation treaty between the UK and USA. Construction will see huge investment in high tech jobs in every corner of the UK, beyond the already considerable investment in the Dreadnought and Astute submarine programmes.
This has major potential to tackle regional inequality and drive levelling up. The Purpose Business Coalition is proud to be working with Rolls-Royce Submarines who will be providing high level technology and expertise for the AUKUS project, bringing thousands more well-paid jobs to Derby where the engineering firm is based. As a former MP for Barrow, the site of the shipyard where submarine construction comes together in the UK, I know just how much of a difference that this can make to the communities there that have often felt left behind as traditional industries have closed.
Rolls-Royce, and engineering and IT consultancies like Alten, another Purpose Coalition member, will be focused on attracting and retaining talent from the communities they serve to fill the thousands of vacancies that this major expansion will demand. Providing the right training in skills that are transferable will support thousands of opportunities for people in their businesses and their supply chains, and bring a wider economic prosperity to the areas in which they are located. Stepping up will be a major industrial challenge, but it’s a great problem for UK Plc to have, and the pay-off will be people who are equipped with the right digital and green skills needed for a competitive, twenty-first century workforce.
The uncertainty of current geopolitics means that we are living in a more dangerous world but the pandemic and cost of living crisis have both shown how the most purposeful and resourceful organisations can take the challenges they face and turn them into opportunities. I am looking forward to working with the defence companies in the Purpose Coalition at this crucial time to help shape the way they can make a positive impact on their colleagues, their customers and their communities while playing a vital role in keeping us safe.
