The UK government has today published its long-awaited Defence Investment Plan (DIP) after months of delays and wrangling between the Ministry of Defence (MoD) and the Treasury.
We bring you initial response from our director general Marco Forgione and our defence director Daniela Turiccki.
Also today in trade, there’s the news that the EU is setting an autumn deadline to reduce its trade deficit with China.
Defence Investment Plan published
The government has published the much-anticipated DIP following months of negotiations between the MoD and Treasury.
Prime minister Sir Keir Starmer, defence secretary Dan Jarvis and chancellor Rachel Reeves announced the plan during speeches at the premises of defence company Malloy Aeronautics in Berkshire this morning.
The plan was signed off by Starmer’s expected successor as prime minister Andy Burnham, according to the FT.
The DIP increases defence spending by around £15bn. This figure has increased by £1bn since John Healey resigned as defence secretary earlier this month in a row over funding. He had been pushing for an investment package worth around £18bn.
The plan includes £5bn in investment in drones, thought to be inspired by Ukraine’s cutting-edge use of the technology in its war with Russia. There are also commitments towards developing a ‘hybrid’ Navy by building self-controlled vessels and warships, and new autonomous fighter jets in the RAF. Increased spending on the country’s nuclear deterrent has also been confirmed.
The package will deliver a “real-terms” increase in defence spending of 27% by 2029 – that’s in contrast to the yearly spend of the previous Conservative government, according to Starmer.
He also said the plan will put the country on course to spend 4.2% of GDP on defence by 2035 as part of the country’s Nato commitments.
£50bn defence export facility a ‘once-in-a-generation boost’
Starmer said the plans are “fully costed” and that there were “no easy answers” in the “trade-offs” necessary to ensure the plans didn’t raise interest rates or reduce spending on other key government services. “Defence bonds are just borrowing by another name,” he added.
He said the plans will make the army “ten times more lethal”, including with cutting-edge drones, armoured vehicles and long-range missiles. The plans will also “back British” with a defence dividend “bringing SMEs and start-ups” into the defence supply chain and creating more jobs for British workers.
He also said that there will be a new £50bn British defence export facility to support British companies to “compete” internationally, which he described as the “largest expansion of UK export finance support in its 100-year history and a once-in-a-generation boost to the British defence industry”.
He added that he wanted to “build a more European Nato” in a bid to “strengthen the transatlantic relationship” with the US.
“From here on, every pound raised from taxpayers will work harder for them – and that approach will apply fully to the Defence Investment Plan,” said Burnham in his first policy speech since announcing his bid to become prime minister yesterday.
The plan continues to attract scrutiny, however, with Tony Radakin, the previous head of the armed forces, warning that the UK will “fall short” of spending enough to deter Russian aggression, the Guardian reports.
Kemi Badenoch, the leader of the opposition, said the plans were insufficient and “barely half what the Armed Forces say is needed”.
‘Significant international trade opportunities’
Marco Forgione, director general at the Chartered Institute of Export & International Trade welcomed the plan:
“The Defence Investment Plan rightly recognises that national security and economic security are inseparable. The new £50bn export facility is especially welcome and must help more UK defence businesses, including SMEs, turn innovation into international growth.
“Delivered well, this investment can strengthen our industrial base, create high-skilled jobs across every region and ensure British firms are ready to scale, export and compete in the defence technologies of the future.
“The Chartered Institute looks forward to supporting this delivery by helping businesses get the regulatory knowledge and skills needed to thrive in this sector.”
Daniela Turiccki, the Chartered Institute’s director of defence and export controls, also welcomed the DIP’s £50bn export financing facility and its support for MSMEs to enter the defence supply chain.
“While debate will continue over the extent of the funding announced in the DIP, there are significant international trade opportunities for British businesses of all sizes in the defence sector that this investment will support.
“We look forward to working with businesses to help them enter into or increase their contribution to the UK’s defence supply chain, while supporting them to ensure compliance with important export control and sanctions regulations that apply in the sector.”
We will publish further analysis from Turiccki and Forgione in the coming days.
Latest sanctions breach settlement announced
The DIP publication comes as the government’s Export Control Joint Unit (ECJU) issued a new Notice to Exporters naming a firm that has agreed to pay a compound settlement for having breached Russia sanctions.
Petrofac Facilities Management Limited have paid HMRC £569,157.07 for offences under The Russia (Sanctions) (EU Exit) Regulations 2019, also known as ‘the Russia Regulations’.
“The first offence was for making the sanctioned goods available to a person connected to Russia,” the notice said. “The second offence was for making available sanctioned goods for use in Russia. PFML also breached Regulation 46Z(1)(b) by providing technical assistance in respect of the goods they made available.”
The breach was “inadvertent or due to weaknesses in internal controls” and the fine was agreed after the company “voluntarily told HMRC” about the breaches.
Turiccki said that the settlement is a reminder that businesses must ensure they have appropriate compliance processes in place.
“Businesses that don’t take extra care to ensure they have robust compliance processes in place risk inadvertently breaching sanctions and export control regulations. This can result in significant fines and being named publicly by the ECJU, which can have an impact on a business’ reputation.”
To ensure compliance, Turiccki advised businesses get expert support through services such as the Chartered Institute’s Export Controls Advisory Practice.
October deadline for EU to reduce China deficit
EU trade commissioner Maroš Šefčovič has said the bloc wants to see “tangible results” by October in its efforts to reduce its trade deficit with China.
Šefčovič met with his Chinese counterpart, Wang Wentao, yesterday, and the pair released a joint statement launching the EU-China Trade and Investment Consultations (TIC) which will address market access issues.
“The main objective of the TIC is to strengthen dialogue at ministerial level on trade and investment policies with the view to stabilise and make our bilateral relationship more balanced,” the statement said.
Šefčovič is quoted by the FT as saying he had described to China “how important” it is for EU states that European industry is protected. He will visit Beijing in October to ensure progress is made.
China, for its part, has accused the EU of protectionism, particularly its Industrial Accelerator Act.
Šefčovič and Wang met as Volkswagen announced plans to cut 100,000 jobs and shut down four German plants, amid rising competition from China and the US in automotive – a traditionally strong sector for Germany.
Also in the trade news
- The government published details about how businesses can benefit from the Growth Guarantee Scheme
- HMRC also published new guidance about how businesses can apply to import multiple low value parcels on a single declaration using the ‘Bulk Import Reduced Data Set’ (BIRDS) service
- The pound strengthened yesterday following Andy Burnham’s first keynote policy speech since announcing his leadership bid, according to TorFX
Yesterday in trade
- Burnham’s speech focused on raising living standards and driving growth across every nation and region of the UK
- Traders were reminded of two significant upcoming changes – the UK’s new tariff regime and updates to the EU de minimis scheme
You can read yesterday’s trade news here.
