DSEi Seminar preview

Guy Anderson Guy Anderson, editor at Jane's Defence Industry, will assess the future of the European defence industrial base and its place in the global market. Anderson's seminar – 'Ever closer union? The future of the European defence industry' – will focus on expected changes to the industrial landscape and gauge whether European industry could one day, rival the US. Anderson considers the UK defence industry to be a global success story, but sights key differences between the UK and the US, the first being sheer scale. "Another issue is openness," he says. "The UK market is one of the most open in the world, in terms of foreign procurement and the willingness to accept foreign investment." Expectation, particularly in the US, has also changed. There has been a fundamental shift in spending priorities with the emphasis now on intelligence, surveillance and reconnaissance fields. "This has led to the boundaries between core defence and security markets becoming blurred," says Anderson. "It is clear that defence companies are increasingly looking to break into adjacent markets such as government IT programmes and homeland security." Anderson has also witnessed a number of automotive engineering firms taking a giant leap into the defence arena - particularly firms with experience in the production of precision engineered parts for the top end of the auto sector. While some analysts predict that the recession could be over by the end of this year, recovery is expected to be slow. In an uncertain economy, Anderson is reassured that the electronics industry is asking 'when?' and not 'if?'. "Overall, we expect the defence sector to emerge with less defined edges," he concludes. "We are already seeing the industry looking to take its current skills and capabilities into adjacent markets, such as civil government security and large scale IT projects." Digby Barker Digby Barker, director for public sector procurement, at consultancy specialist Sollerta, will discuss how SMEs can improve their chances of success in the current economic climate. Barker believes that opportunities for smaller companies to sell to the public sector are improving, with many governments seeking to address barriers, real and perceived, for SME access to public contracts. Barker says: "The main perceived barrier is the idea that the public sector only buys from large, well known companies. The Ministry of Defence, for example, spends nearly £1billion directly with SMEs. "An example of a real barrier on the SME side would be lack of prepositioning ahead of selling opportunities, while on the buyer's side it would be the failure to appreciate commercial realities, particularly regarding supply chain issues." One key development is the implementation of the Glover Report which Barker believes will improve matters significantly. The report suggests that improving SME participation in public procurement is best achieved by allowing SMEs to compete for contracts. This means opportunities should be transparent and the process made as simple as possible. However, Barker notes a key development not covered in the report's recommendations to the Glover committee. Namely, that contact details of any company expressing interest in procurement should be made available in real time and preferably online. Barker explains: "This would greatly increase the opportunity for potential subcontractors - and therefore SMEs - to contact potential prime contractors early in the tendering process, for their capabilities to be properly assessed by the primes and integrated into their response and tender." The cost of tendering is also likely to be relatively greater for an SME, but this can be improved if the tendering process is conducted efficiently and in line with regulations and best practices. Under the SecureSME programme, EU funds have been made available to facilitate the participation of SMEs in meeting EC security programme requirements by coaching them in the preparation of proposals. The primary areas of interest of the SecureSME project is searching for innovative products and processes; investigating the feasibility of joint use of research by two or more SMEs; testing and evaluation of infrastructures in the security field; and SME integration systems. According to Barker, the defence and security sector will emerge from the economic downturn leaner and meaner. He noted: "The major players' current emphasis on procurement of reconnaissance, surveillance and intelligence gathering capabilities at the expense of platforms, means the larger defence companies will seek to follow the associated budget reallocations by acquiring SMEs with expertise in these areas." Stephen Radley Chief economist at the EEF – the engineering and manufacturing support organisation - Stephen Radley, will be evaluating the economic crisis and the effect it is having on the defence and manufacturing industry. Responsible for all of EEF's work on the economy and industrial policy, Radley's role encompasses macro-economic issues such as the state of manufacturing, interest rates, taxation and productivity, as well as the sources of competitiveness, such as investment, skills, trade and innovation. He notes: "Generally, the issues of skills shortages in manufacturing that we've encountered in previous recessions are a result of companies under immense pressure to reduce costs. In doing so, skilled people are lost and they often find it a struggle to get back into the industry. It's a double edged sword as, once the upturn finally comes, these companies no longer have the skills to support them or push orders forward." Radley says that for many organisations, cutting back on recruiting apprentices and training is an understandable short term solution. But, the longer term impact is that it sends a negative message. Nevertheless, Radley believes there are still positives. "Firstly, a lot more companies have had success in striking deals with their workforce – whether it is in the form of pay cuts or flexible hours. While it is questionable as to whether these measures can be sustained, at least these channels ensure that companies retain skills. Secondly, public funding also helps. Training schemes, such as the Train to Gain scheme, support adult apprenticeships as well as the traditional younger recruits." The key issue is that markets need to recover. "We've endured a severe downturn," he says, "but there are signs that things are beginning to stabilise. However, it's frustrating that banks are taking extremely short notice on lending or credit insurance, without looking at the individual circumstances of companies. Longer term, unless there is a change in attitude, there is going to be enormous pressure to start taking action on high levels of borrowing. The message is clear. Don't cut spending until the recovery is here, otherwise it will merely push the country back into another recession." So where will the UK's economic growth come from? Radley asserts: "It's hard to see a bounce back in consumer spending and it's unlikely that business investment alone will lead us out of recession. Exports could help, on the back of a weaker Pound and we'll reap the benefits if China and US recover faster." Radley believes that Government should be working closer with manufacturers. "I want to see manufacturers playing a bigger part in helping the Government use its spend more resourcefully. It's a catch 22 situation, as whoever is in power during a recession is under pressure to save public spending."