Pay to Play: UK's Strategic Investment in EU Defence Spending

The UK government is willing to invest significantly in EU defence spending programmes valued at hundreds of billions of pounds to ensure UK companies can participate in crucial military projects. Defence Secretary John Healey emphasized the need for UK input on these programmes while also protecting UK intellectual property and export opportunities. This willingness comes in light of the EU Commission’s caution that the UK may face exclusion from defence procurement unless they are prepared to “pay to play”.

The backdrop for this strategy is the growing geopolitical tensions, particularly Russian hostilities and a less committed US security posture. The European Commission has ambitions to boost military budgets, aiming to gather up to €800bn (£680bn) to enhance European defences and assist Ukraine. In this context, BAE Systems, a prominent UK defence contractor, is ramping up operations and staffing, responding to the urgent demand for ammunition in support of Ukraine’s resistance efforts.

BAE’s facility in Washington Tyne and Wear has transitioned to a 24/7 production cycle to meet the significant demand for 155mm artillery shells. The plant’s operations will expand dramatically, projecting a 16-fold increase in production over the next five years, ensuring supply chain resilience and more local sourcing of materials. Steve Cardew, BAE’s munitions chief, highlighted that this shift is crucial for maintaining sovereignty in critical ammunition manufacturing.

Healey noted that the experiences and lessons from the conflict in Ukraine will inform and boost the UK economy, acknowledging that a nation’s military strength is intrinsically linked to its defence industry. Currently, the defence sector supports 400,000 jobs and is poised for growth as government plans aim to increase defence spending from 2.3% to 2.5% of GDP by 2027, re-allocating £6bn from foreign aid budgets.

However, expert perspectives indicate that immediate needs may skew towards upgrading infrastructure rather than acquiring new weapons systems initially. Matthew Saville, director at the Royal United Service Institute, pointed out that foundational aspects, such as training and recruitment, must be prioritized to address existing military deficiencies.

The changing dynamics of warfare, such as the rise of drones—with Ukraine leading Europe in production and BAE following closely—underscores the necessity for adaptability in military spending. As the largest defence contractor in Europe, BAE is positioned to gain from the European rearmament campaign, evidenced by a tripling of its share price since the onset of the Ukraine conflict.

Ultimately, while wars are costly and can escalate national debt, the UK government advocates that the strategic benefits of engaging in EU defence programmes justify the investment.