Moderate

Defence

Despite renewed funding support from HM Government defence investment priorities are changing significantly and cost pressures remain.

Sector trends & challenges

  • Existing programmes

    Sizable funding deficits remain across the Defence Equipment plan, which will require focus on cost overruns and value maximisation, exacerbated by the continued impact of COVID-19 and other external pressures on supply chains and production.

  • New threats and capabilities

    Cyber defence and intelligence are the increasing defence spending priorities, which will result in the focus on new technologies over conventional capabilities. Procurement with some traditional manufacturers may be curtailed or disrupted.

  • Management of change and transformation

    There is a push to ensure efficiency and effectiveness across the public sector. Defence is engaged in several transformation initiatives, particularly in relation to the Support and Sustainability agendas, with implications for operating models and the wider supply chain.

Sector rating profile

Justice, Security & Defence

The commitment by the UK Government to increase defence spending by £24.1 billion over the next four years has been broadly welcomed by the defence sector, following over a decade of budget reductions.

What remains somewhat unclear is how the proposed additional commitment will be used. Cyber defence and intelligence are now critical elements of defence activity, and it appears that much of the proposed new spending will be aligned to tackling this growing threat. There have also been announcements of an agency dedicated to Artificial Intelligence as well as the creation of a new Space Command, with interoperability across Defence and allies and partners a key theme in the face of adversaries operating in the ‘grey-zone’ between peace and conflict.

Although some spending is explicitly earmarked to replace or modernise conventional military capability (including the Future Combat Air System), the focus on emerging threats may limit the impact of new spending on traditional defence contractors.

It is unlikely funding shortfalls in the forward equipment plan will be easily addressed however – leading to a continuing focus on value for money and efficiency. The supply chain must therefore continue to identify savings and efficiencies in order to remain competitive and demonstrate taxpayer value. Recent supply chain disruption and pressure on costs for defence contracts, many of whom also operate in the civil aerospace market, is likely to see cost escalation and delays to major programmes.

Find Your Expert

Craig Masters is Interpath Sector Lead for Public Sector, which includes Justice, Security and Defence as one of four core segments. Dan Berrill leads our approach to the Justice, Security & Defence sector nationally. For a full list of our senior people with experience in this sector use the button below.

Our senior team