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Economic news – Embassy 55

Cyber is future for defence industry

Spending cuts have created a challenging economic environment for the defence industry but new cyber applications will be a key growth point, economic attachés learned at an AERL briefing with Britain’s largest defence contractor.

BAE’s head of Government Relations Bob Keen told AERL members that BAE was investing in ‘applied intelligence’ as its government partners demanded resilient systems to withstand a cyber attack.

Keen pointed out that cyber security was becoming increasingly important in the commercial sector as businesses sought to protect their data assets against cyber attacks, as the recent hacking into Sony’s IT system demonstrated.

Another area of rapid development was that of unmanned systems (drones), he said.

However convincing the UK government to commit to defence programmes and winning large defence contracts in traditional markets was equally important to sustain skills and capabilities in design and development.

The current UK government – “from Prime Minister down” had been “outstanding” in its commercial diplomacy and its support of the defence industry’s export efforts, he said.

Because of the government to government nature of defence contracts, Keen  said the network of UKTI officers at UK embassies abroad had been “very important” in helping BAE to diversify into other markets where traditional markets reined in their spending.

 The reason for the government’s support of the industry speaks for itself: BAE contributes £3.5bn to the UK economy, employing 33,000 staff, 70 per cent of which are skilled.

But having a close relationship with governments brings with it an element of political risk, added Keen. Governments change and funding priorities change, creating an uncertain environment especially when considering costly long-term investment.

There is a greater level of scrutiny in the activities of large defence companies with foreign governments and the government can also slap on export bans if there is a serious breakdown in diplomatic relations or a threat to national security.

Political events such as vote for independence in the Scottish referendum could have had a profound impact on BAE’s operations in Glasgow, prompting BAE to “wade in” on the debate. Similarly, on the question of an in-out referendum on Britain’s membership of the EU membership BAE’s position is in favour of Britain remaining in the EU.

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Bob Keen of BAE

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