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DSEI: How the UK’s arms trade funnels public cash into private pockets [1]

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Date: 2023-09

The Defence and Security Equipment International (DSEI) hosted in London this week has arrived at a moment to savour for arms companies. The bi-annual exhibition where representatives of arms firms congregate alongside their customers is taking place with global military spending at a record high – in part the result of rearmament following Russia’s invasion of Ukraine and geopolitical competition in the Pacific.

Lurking under the surface of festivities at London’s ExCeL centre is a British arms procurement system described as “broken” by two parliamentary inquiries this year. The financial accounts of the multinationals that supply the Ministry of Defence (MoD) reveal an industry propped up by state subsidy – to the benefit of international shareholders – and structural flaws in the UK’s most active area of industrial strategy.

Even beyond the fundamental entwinement of the industry with civilian deaths as a result of UK foreign policy, or the leading role of the UK’s arms export customers in global conflicts, the supposed economic benefits often used to justify arms production actually flow to private shareholders. Over the past decade, the MoD’s leading suppliers have paid their shareholders billions despite high-profile failures in defence programmes.

Aircraft contracts negotiated upwards in price; newly-built frigates sawn open to install delayed gearboxes; flagship tanks that injure testing personnel – the litany of expensive errors in MoD contracts is near comical. With the department set to spend a further £242bn on procurement over the next decade, greater examination of both defence contracts and the balance sheets of contractors is a necessity and can offer a starting point to develop an alternative industrial strategy.

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The London arms fair captures the core dynamic of the defence sector in broad strokes: the exhibition is sponsored by the MoD and UK Defence and Security Exports (a government division that markets arms to export customers) and is attended by the representatives of private firms. Arms companies rely on heavy subsidy from state customers – in part through direct support for research and development included in defence contracts. The largest UK-headquartered arms firm, BAE Systems, spent £2bn on research and development in 2022 – only 14% of which was paid for by the company itself. States therefore “de-risk” the early stages of arms projects while ultimately facing another layer of risk if their product is not delivered.

The list of the MoD’s top ten suppliers illustrates their hugely varied reliance on UK business: from firms like QinetiQ, which has derived nearly 60% of its global revenue from UK contracts over the past decade; to BAE, which has subsidiaries in Saudi Arabia, the US and Australia but has still received a minimum of £3bn each year in MoD contracts since 2012; and US giants like Boeing, at which MoD revenue is barely visible on the balance sheet.

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[1] Url: https://www.opendemocracy.net/en/dsei-arms-fair-london-excel-common-wealth-weapons-bae-boeing-qinetiq/

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