September 10, 2013 11:32 pm

Hammond rejects Brussels defence procurement plan

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Philip Hammond©Getty

Philip Hammond, defence secretary

The UK has vowed it will resist ceding any power to Brussels as the European Commission seeks to centralise Europe’s defence procurement.

Philip Hammond, UK defence secretary, on Tuesday said Germany also opposed the plan, all but dashing the chance that, at a time of austerity-struck defence budgets, there will be the impetus and political will for a more coherent, centralised military procurement and export policy.

In July, the European Commission, which has so far left most of the decisions on defence to its 28 members, presented a paper proposing measures to create more competition in a market dominated by big companies such as BAE Systems, pan-European EADS and Italy’s Finmeccanica.

Speaking to an audience of defence executives at DSEI, the big industry trade show in the UK, Mr Hammond said extending the commission’s hitherto minimal role on defence, was not in the best interest of the UK industry and would be resisted.

“There is a tendency for proposals to come out of Brussels which talk about increasing the competitiveness of European industry and what they really mean is imposing dirigisme on European industry,” he said, adding: “We cannot embrace a solution that feels like somebody in Brussels is directing some kind of latter-day command policy.”

Analysts said it was the most definitive statement of opposition they had heard and it caused great relief among industry executives who were unsettled by the previous government’s more amenable position.

“This is music to the British industry’s ears,” said Howard Wheeldon, an analyst, adding that Mr Hammond’s comments were “different [from past positions], it was meaningful, and it was said in a style that made you believe this was not just words.”

The Commission says it wants to cut procurement costs as member countries struggle to equip their armed forces and save jobs in an industry that employed 400,000 people directly and spurred the creation of a further 960,000 last year.

It argues that the fragmentation of the EU’s defence market undermines its global competitiveness by creating red tape, hampering innovation and causing duplication.

“EU countries have 16 types of frigate between them. If all countries had the same model, for frigates and other equipment, they could develop economies of scale,” it argues.

The majority of the industry is concentrated in the UK, France, Germany, Italy, Spain and Sweden and has suffered as tough fiscal conditions have forced countries to cut military spending, accelerating the fall in defence procurement and research.

To counter this, governments have sought to help their companies export more, with Britain last year securing an order from Oman for 12 Eurofighter Typhoon jet fighters.

BAE, EADS and Finmeccanica are the three prime contractors on Typhoon, though the programme supports many more smaller suppliers as well.

Though the Oman order helped boost the UK’s defence exports for 2012 to £8.8bn, the country is facing ever stiffer competition from the US, Russia and China: last year China bumped Britain out of the list of the world’s 5 biggest exporters, according to the Stockholm International Peace Research Institute, a think tank. This was the first time the UK had not been in the top five since 1950, when Sipri started to compile the data.

Meanwhile, all the US competitors of BAE, Europe’s biggest defence contractor, aim to increase their revenue from non-US sales after Washington cut defence spending.

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