I call to order today’s Defence Committee session on the UK’s contribution to European security as part of our ongoing inquiry. It gives me great pleasure to welcome again Dr Robert Johnson. Thank you, Dr Johnson, for coming to give evidence. Dr Johnson is the former director of the Secretary of State’s Office of Net Assessment and Challenge, and director of the Strategy, Statecraft and Technology Centre at Pembroke College, University of Oxford. We are very much looking forward to getting your evidence on record today, Dr Johnson.

Dr Johnson, welcome. Can I start by asking you about the ability of the UK to meet its commitments to NATO? If I can put a bit of background to this, some of us have been on the Committee for a fairly long time. When we have questioned the ability of the UK to put a division out, for instance, and talk about what it can deliver to NATO, we have often been told, “Yes, we can do X, Y and Z, but don’t forget that we are part of NATO and, therefore, it will always cover the bits that we do not have”. I am paraphrasing, but that is roughly what we are told time and again. Against that backdrop, what about the gaps in our ability? We also know that NATO has its own capability gaps. Maybe you could talk to us about that first.

Thank you very much indeed for the invitation and the opportunity to speak with you. Thank you also for serving on this very important Committee. There is always a risk that a specialist comes along with a special interest. Sometimes, a bit of special pleading comes out as well. I will be as forthright and accurate as I can in my answer. You are absolutely right to say that, across Europe at the moment, there is the same problem. It is almost as if everyone is looking at everyone else, expecting them to come along and provide the support. I was recently at a conference organised in the Netherlands, with representatives of the UK, France, Germany, the United States, the Netherlands itself, and one or two other nations, such as Poland. It was very evident that there was a great deal of anxiety about the UK not providing the military, naval and air leadership that all of them felt the UK, as a permanent member of the Security Council and a nuclear-armed power, should provide. I will not name names, but one of the Americans there was quite categorical that the UK is not a tier 1 military power in the way that its armed forces are currently configured. They were all looking at each other, concerned that they do not have the critical enablers in places such as space, electronic warfare or intelligence, surveillance and reconnaissance. All had worked on the assumption, as we have in the UK, that, if anything really serious happened, the rest of NATO would come along and provide those supports and facilities. I know that members of the Committee will know the statistics, but it is interesting that, if one looks purely at, for example, the Russian navy’s fleets of frigates, destroyers, corvettes and submarines, it has 419 vessels. The UK has 12, plus two aircraft carriers. When it comes to submarine fleets, the Russian fleet is 64 submarines strong, and the UK has six, with four nuclear-armed submarines. Our forces are very small by comparison, and the assumption has always been that mass will be available through NATO, but NATO in Europe is in pretty much the same position. If you add up all of the European NATO capability, in destroyers and frigates, for example, it has 115. I would remind you that the Russian figure is 419, so almost four times the size. In submarine fleets, NATO together exceeds the size of the Russian fleet. Why do I mention fleets in particular? The imminent threat to the United Kingdom comes from the air and the sea, and less so from land. The argument about NATO providing that mass has often been with reference to the land environment, not at sea. In particular, the Arctic and north Atlantic is an area of responsibility that Britain cannot ask anyone else to really step up to. It is our responsibility. I hope that that answers the initial part of your question.

One of the questions that we have long asked on this Committee, which follows on from that point, is one of resilience and the ability to take losses. Those figures that you just described show that that is not going to happen.

That is correct. Of course, for me, the baseline is always something like the Falklands conflict.

If we take, for instance, our fighter aircraft, the ability to take losses there is pretty difficult, is it not?

You are right. We are moving towards an era of more uncrewed systems, so the argument is that, while we can afford to lose the metal, what we do not want to lose are the personnel. That is crucial. If the baseline was the Falklands conflict, which was the last time we had a serious air, sea and amphibious engagement with a medium-sized power, that was very serious. Proportionately, if you superimpose those losses on the United Kingdom, the immediate problem, apart from the tragedy of loss, is, “How do you regenerate the force? How do you replace what you have just lost?” In the case of the Falklands conflict, where we had a lack of sealift capability, we commandeered civilian vessels. Indeed, we were able to utilise other NATO partners’ intelligence, surveillance, reconnaissance, and space assets. Norway, for example, provided crucial space intelligence photography, believe it or not, as did the United States. Regeneration is part of your resilience capabilities, not just what you have on day one. My key message there is that the UK is falling far short of its claimed leadership position. If it wants to defend its NATO partners in Europe and, indeed, in Canada and the United States, it simply does not have the mass, let alone the munitions, at the moment to do the job.

The Labour Government have been very clear that it is NATO first. In terms of the SDR, against the background of NATO first, what are the top three things that it should address in terms of capability? You can give us four or whatever. Just give us your top list.

Given that the priority threat for the United Kingdom and the special thing that the UK can provide to its European partners is in the air and maritime environment, it seems to me that that should be first on our list of what we would provide in terms of military capability. If we go back to 1990, the Royal Navy could muster 50 surface combatant warships. Today, it is 12, plus two aircraft carriers. We are a long way short of that priority area. The UK has a very good anti-submarine warfare capability, but, given the number of vessels that it can put to sea at the moment in any one working week, and the sheer scale of the north Atlantic, one is left wondering quite whether that is adequate. We have restored our maritime patrol aircraft for that surveillance capability, but, again, I would simply question whether we really have enough of those. What about electronic warfare equipment for sea, air and, indeed, land? The density that we possess is well short of what we military analysts would say is the absolute minimum requirement. Those would be my first ones. We will talk about this later, but the second area would be our national resilience, in terms of our ability to withstand, first, a sub-threshold series of crises; secondly, a minor conflict involving a European ally; or, thirdly, a full article 5. In all three areas at the moment, we would struggle. We could manage the first one—the sub-threshold threats and the crisis—but, for any of the others, we do not have the capabilities that we require, so we need to start thinking about our national resilience. That is my second area of priority.

We will come on to national resilience afterwards.

If the UK had to fight tonight against a peer adversary, what would go out the door and how long would it last?

I am going to talk in slightly oblique terms as opposed to mentioning anything remotely sensitive, if that is okay, because we are on the record. An idea that we have had in NATO for a long time is the so-called four 30s concept, so 30 days to get 30 squadrons, battalions or warships into the area that is under threat. The reality is that the UK has a very small rapid reaction capability. We could probably put 2,000 land forces into a theatre of operations quite quickly, thanks to the 16th Air Assault Brigade and the Royal Marine Commandos. To mobilise the next echelon will take a bit more time. The NATO standard is 30 days, but that seems quite slow if you think about it. We have a standing force, so one does wonder why it is 30 days. The way in which the Ministry of Defence deals with that is to have different echelons on different notice to move, but that requires the Government to at least raise the state of alert. In terms of the Royal Navy, again, it is all in open source, so I am not saying anything that is unknown, but we currently have a significant number—the majority, in fact—of our destroyer and frigate fleet in either routine maintenance or deep refit.

How many ships—three?

If you were to put a gun against my head, I would say that we can get two destroyers to sea. One is already at sea, of course. In terms of our anti-submarine warfare capability today, with Type 23s and that ageing fleet, it is three or four of those. It is very small. In terms of our air capability, we have a rapid reaction capability here in the UK in two air stations, which is amazing. We could also call on a third if required. The number of the aircraft that we could put in the sky is relatively significant.

Would that be 30?

We could manage 30. Again, I do not have the specific numbers in front of me.

We are just exploring this, so 2,000 troops, five ships and 30 aircraft. Is there any point in British history at which we ever had such a poor ability to field a fighting force?

No, not than I can think of, and, as you know, I am an historian by training. We are on a par with where we were probably in the 1790s, when there was something approaching national panic.

Looking at those three domains, as well as space and cyber, we do okay in cyber; in space, we significantly underperform; and we have discussed the three physical domains. We have a strategic defence review coming out. Where would you put the balance of investment effort across those five domains?

I should declare, if anyone does not know, that I was a soldier once upon a time, but the priority has to be the imminence of threat. For me, the air and maritime threat is pretty urgent, because it affects our critical national infrastructure and seabed security, for example, as well as our airspace. A great deal of threat now comes from drones, which have a much longer range than they did even five years ago. We do not have a counter-drone or integrated air and missile defence capability that, in my mind, is sufficient. The next area would, indeed, be space, as you have mentioned. If there is going to be even a limited conflict in the next few years, it will almost certainly begin with space manoeuvre. Russia and China both possess manoeuvrable space vehicles with the ability to defeat satellites, not necessarily by destroying them with anti-satellite missile systems, which are known to produce lots of debris—I am conscious that I have a space expert behind me, who I look forward to hearing later—but it seems to me that space capability is very important. You are then going to think about the next layer down. How secure is our government continuity and public information in a moment when we would come under very severe pressure very quickly?

As a final question, you mentioned that we have not been in this situation since the 1790s, when there was something approaching national panic. Why do we not have national panic about this at the moment, and should we?

I am not sure that panic would be helpful, but a sober, deep analysis, as you are doing, of what happens under three different scenarios would be very helpful. When I was working briefly at the Ministry of Defence, part of my job was net assessment to examine where the UK has advantages and where, crucially, it has vulnerabilities. The scenarios that I looked at, and still do, include, first of all, a sub-threshold crisis, which is anything short of a war, so sabotage, assassination, a chemical attack or a radiological attack. They do not need to be on a very large scale, but at sufficient scale that it would cause serious harm to the public. We have a Civil Contingencies Act in two parts. Part 1 is about preparation. In answer to your question, I cannot quite understand, given what we are seeing around Europe at the moment, what has happened to the UK over the last few years, and the fact that Russia makes constant rhetorical reference to wishing to strike against or be in a political struggle with the UK, why we have not implemented part 1. It does not require panic. It requires the implementation of elements of the Civil Contingencies Act part 1. Part 2 then becomes a natural extension of that if there is a crisis, but it means that you are prepared and ready. At the moment, there is still a degree of complacency. Q184       Mr Bailey: Not to put words in your mouth, but you seemed to say that we should focus on maritime and air. You have spoken about the leading edges of those things, so frigates and aircraft. Can you talk about the enabling deficiencies? They are areas that we often gloss over. When we talk about strategic capabilities, so AAR, oilers and those types of enablement things, can you give us some idea of where we are in terms of shortfalls? They tend to be what we bring to the table.

As you know, the Ministry of Defence will tell you with great enthusiasm about how it is investing in solid support vessels for replenishment at sea. My only question about that is how few there are. There are only three Royal Fleet Auxiliary vessels left now, and they are looking a bit old and tired, although their crews are incredibly dedicated. I had the opportunity of going aboard one in Bahrain not too long ago, and I was just amazed at how small the crew is and how much smaller it is than a Royal Navy crew. This shows that we can do more with less if we build the technologies around the crew as opposed to thinking about the costs of things and what we might require there. You are quite right to mention tankers and air tanking. Across Europe, we are well below where we should be. I was just going to see whether I had the figure in front of me. If the United States follows through with its declared pivot to Asia, which we all now expect, we are going to be short of those. An F-35 fighter can stay in the air for two hours but will then need refuelling if it stays aloft. If you do not have enough of them, you are already impairing your ability to do things. I mentioned electronic warfare. It is absolutely the case that we do not have sufficient density. If you look at even some of the peripheral areas of the conflict in Ukraine, the density is far higher than what we have here. We have struggled with secure communications, particularly tactical secure communications, which we do not have. Our logistics capabilities are better on average than other European ones, which tend to be entirely unprotected. Ours are at least protected, but it is insufficient for what we require, which means that, in a crisis, we would have to requisition. My question would be, “Do we have the legislation in place for that?” Under the CCA part 2, we might do, but I am not entirely certain that we have anything approaching what you might call a war plan or a mobilisation scheme to use those. To give this slightly more colour, rather than the usual colourless lists of numbers, we have a young technical workforce in the UK, better than some other nations in Europe. Do we have a mobilisation scheme for reserved occupations or for ICT workers who can help us with that crucial area at the moment of drone development and the regeneration of uncrewed systems as a force, or, indeed, protecting our communications infrastructure? We have not even begun to address that.

In a short answer, it is the fact that, after 1990, we permitted, across Europe, Canada and the United States, our defence industries to pursue their own approaches. We no longer obey those standards. We have an absurd situation at the moment, where one of the UK Army field guns only takes its own ammunition; it does not take European standard ammunition. The Ukrainians pointed that out to us. In fact, if anything, the interoperability problem has been most exposed by the situation in Ukraine, and everyone has realised with horror just how far down the track we have gone. The question is, “To what extent is Europe addressing it?” The European Commission is quite interested in industry as opposed to providing fighting forces. That might be a start. Perhaps there is a European standard that the European Union can insist on, which would help everyone. On the other hand, we are probably more likely as a nation to operate alongside the United States at sea, in the air, and possibly even on land. Therefore, it makes sense for us to think in terms of a NATO standard led by the United States rather than trying to conform to some European approach. Ideally, of course, you want them all to align, but that requires direction of European businesses and industries to then conform to that standard. There have been some pretty unfortunate episodes. For example, France has not been entirely transparent about the capabilities of its Rafale aircraft, and that has been detrimental to the whole concept of interoperability. I have to say, as a rejoinder, that, at sea and in the air, NATO is far more interoperable than it is in the land environment. The land environment is really the problem, and the Ukraine war has exposed all of that. As has been mentioned several times, you can fly a French or an American aircraft from the deck of a UK aircraft carrier. The parts are interchangeable for the F-35, and lots of nations, even in northern Europe, have F35As and F35Bs, which is, again, very helpful. We are moving in the right direction, but are we going quickly enough? I do not think so. If it was a fight tonight situation, as you have mentioned, we are nowhere near that and we would struggle. It has taken us three years to even ramp up the idea of production of 155 mm artillery ammunition. Three years? To give you an idea of why this really matters, last year Ukraine produced 2 million drones. In a month, it uses 77,000, but produces 220,000. I asked around UK industry how long it would take us to produce 220,000 drones. The answer was four and a half years. That seems to me utterly unforgivable. We are also all producing different types of drones. This is an obvious one, really, but it needs to be addressed now as a matter of urgency if we are going to get through the next couple of years.

It would be to make sure that it insists on a STANAG, so a NATO standard, that is useful across the whole of the NATO alliance. If Britain leads the way and says, “We will not procure unless it meets that standard”, we are leading by example.

With regard to lessons from Ukraine with reference to interoperability, it has been a stark lesson for all of us in terms of munitions consumption. It was estimated that Ukraine was using vast stocks of munitions each week, although it was firing only a fifth of what Russia possessed, so there are huge issues. Like you said, the Ukrainians have managed to get different pieces of kit and equipment from different sources, and made it work. If we were faced with a similar issue, do we have the interoperability within NATO that means we are able to rise to that particular challenge? What should we be doing to improve things on account of that?

That is a great question. One thing that we have always prided ourselves on in the UK is that our armed forces are very versatile. We have been very good at crisis management. We have a great track record of crisis management and improvisation as a result, but we could surely do better if we prepared rather than leaving it to the last minute and then improvising at the moment of crisis. That seems to be a far better idea. At Oxford, I carry with me Maurice Hankey’s little handbook, which he produced before the First World War, but then rewrote after the Second World War, because he was struck by how much his experience of writing preparatory material, getting ready in 1912, assisted the UK in 1914. Having those measures implemented in 1938 meant that we were just about ready for the crisis when it broke over us in 1940. We almost left it too late even then. The answer is about preparation, but there are also lots of lessons that have come out of the conflict in Ukraine, and it is as if they have remained as lessons and not been implemented. A senior civil servant in defence, who I will not name, said to me a year and a half ago, when he was told that there was a requirement to be quite radical with the next defence review, which was the command paper refresh of 2023, “It would be quite radical, wouldn’t it, to actually implement a defence review for a change?” It is ironic, but he was getting at something that we tend to do in this country. We have used very good words, but our European colleagues are now looking at us and wondering how much more rhetoric they can take without delivery.

That is agreed. We were hoping that the strategic defence review will be implemented. With regard to senior civil servants, as you have mentioned, there has been a lot of talk. For example, at the recent Public Accounts Committee, the MoD Permanent Under-Secretary noted that we need to learn the lessons and that there is now “a renewed emphasis on the importance of standardisation of interoperability”. Andy Start, the acting national armaments director, has talked about the need to “sustain the product in the fight if your supply lines are disrupted”. Do we have what it takes in terms of resilience in the production line? With regard to drones and everything else, can we possess that resilience in the production line?

Yes, we can. I would dearly love to see the UK have a rejuvenation of its manufacturing base. There is a correlation between the UK’s wealth and success with manufacturing in the midlands, the north of England, and Scotland. I cannot understand why we took the short, easy route of saying, “We will offshore it”. Now, through globalisation, almost everything that we consume in this country seems to be manufactured in China. China had a strategic objective called Made in China 2025. That is this year, and it has been achieved. I am sure that every taxpayer at home laments the fact that, if you try to buy British products, they will have the UK flag on them but will come with “made in China” written on the bottom. If we were to do that, we would build resilience. We would also be training our technical workforce for the future. We know that defence investment is like infrastructure investment. You do not get an immediate return on investment. By the way, as a theoretician, I do not believe the fallacy of the so-called “guns or butter” thesis; it has been proven wrong time and again. If you invest in defence, just as in infrastructure, you do not get an immediate return, but you get a return much further down the track. The gross value added that you get out of defence investment depends on how you calculate the figure, but it is significant. It is in the billions of pounds. You are generating jobs and regenerating parts of the UK. All those people are being employed. Since you ask, the missing link in the whole thing is that we are still too reliant on the big prime industries, because they are the only ones that can make submarines, tanks and so on, not that we have made tanks since 2004. We really need to embrace what Ukraine has done, which is to take on small and medium-sized enterprises much more quickly. The procurement cycle in this country is notoriously sclerotic and slow, and we now have a policy in place that says that any spend over £50,000 has to be signed off by a three-star and possibly by a Minister, which has added to the slowness of the whole system. Many small companies say to me that they have great ideas that they could implement tomorrow. They can produce tens of thousands of drones, but they just cannot get through the MoD system.

You have made some very strong points and you will have a lot of nodding heads from around the table.

Dr Johnson, you have neatly summed up in the last half an hour many of our findings from the past 10 months. Your passion and your frustration about how slow we have been to modernise is palpable and shared by this Committee. You were a director at the MoD from 2022 until the election was called in May 2024, so last year. Your job there was director of the Secretary of State’s Office of Net Assessment and Challenge, so part of your role, I assume, was challenging the Secretary of State. A lot of what we have spoken about refers to those exact same years when your job was challenging the Secretary of State, so this is my question to you. Was he just not listening?

Did I fail? That is what you are asking. There was one of me, and I had a very dedicated small team behind me. It was not for want of trying; that is probably the right phrase. You will know what happens, even here, to the findings of Committees. Back-Bench MPs will stand in the Commons, and Members of the Lords will stand in the Lords, and beg, plead and make their case, but government, as always, is about choice and the Government make decisions based on a balance of investments and budgetary demands. I do not want this to sound like special pleading on behalf of defence because I happen to have been in it, but, when defence makes its case, it sometimes has the rug pulled from under it in terms of the arguments with the Treasury or with No. 10. They will turn around and say, “You are not very efficient, though, are you? You could be better. Why is it, for example, that Finland has a smaller defence budget than you, but more soldiers? Why does it have more F-35 fighters than you?” Of course, the argument back would be, “Because Finland is not a nuclear power. Have you seen how expensive a nuclear weapons system is?” It also needs a very dedicated crew to maintain it. It is all about balance and choice. I would argue that, since 1990, successive Governments have made choices on what they are going to invest in, and defence has often been the loser because it was wrongly perceived as not a vote winner. If you asked the public over the VE Day celebrations whether they thought defence matters, everyone I spoke to would have said that it does. The public are very conscious at the moment about the threat posed by Russia and, indeed, frankly, by China, so I do not buy that argument. The difficulty has been the interface between Treasury, No. 10 and Secretaries of State. There are choices to be made about where you make those investments and where you spend that money. Defence could be more efficient. We probably need a DOGE, although probably less ham-fisted and slightly kinder in the approaches that it takes. It probably needs to be made more efficient. We need to work out, for example, whether what we are using here in defence today is making the nation fit to deal with a national crisis. Is it an operator problem or a regulation problem? At the moment, we have the balance wrong. We have far too many regulations and regulators in defence, and not enough operators. I will give you one final example. Again, a senior civil servant, who I will not name but who works in procurement and contracting, said to me that he had found two people at the frontline working on delivery of a product, but, in the system behind them, there were 33 people, including two three-stars. Everyone in the room burst out laughing. He said, “I don’t know why you are laughing. One of those frontline workers has just gone on maternity leave. You have just doubled your inefficiency”. It seems to me that we need to take a much more ruthless look at how we are operating to make ourselves more efficient. Then there is an argument for going back to the Treasury and saying, “We should get this right”. Internally, my senior civil servant colleagues would testify that I was a fierce critical friend.

I do not disagree with anything that you said there. The Secretary of State is on record at this Committee in saying that MoD is not fit for purpose. You can be as efficient as you want, and I am sure that, as you say, there are many ways in which we could save money and spend it better, but there is still the key issue of what we should be spending on defence. I have made clear my position that 2.5% is not enough, and we should be hitting 3% before the next election and going beyond that. The Committee would be interested in your view of what we should be spending on defence to deliver some of the capability gaps, which cannot all be delivered by efficiency gains.

I completed a paper in the last couple of months on defence spending, where it goes, what it should go on, what value added it brings, and so on. It also looked at the costs to the nation of armed conflict. The more that you can invest to avoid a conflict, the better it is in the long term for your nation. The figure is £59 billion or so at the moment, and is alleged to be 2.3% of GDP, which fluctuates because it is supposed to grow. There is the Baumol effect, which means that, if you do not keep up your public spending, it will gradually sink and fall behind. We are well behind where we should be. The figure that I think we should spend this year is 3.2% of GDP; we should get on with that now. The 2.3% that we spend, even if it went to 2.5%, is just not sufficient to maintain the current conventional forces. Perhaps members of the MoD will not tell you this, but the shortfall is somewhere between £10 billion and £16 billion. We need to be spending 3%. We need to get to spending £68 billion to £71 billion a year on defence. We need to sustain that for two years just to get us back to where we should be, and then we can think about the continuation of modernisation. What we need is expansion of the force. My priority would be the air, maritime and enablers environment. By the way, I have been criticised in the past for running down the British Army and not playing the game as far as it is concerned. Let me just say that, as a former soldier, of course I care a great deal about the British Army. Five combat brigades is far too small as a capability. We should be aiming for a total of four British Army divisions, and I mean square divisions. Two of them should be armoured and regular, with probably two made up of reservists. That would be a serious deterrent to any opponent, but I am afraid that five brigades is not a deterrent.

Dr Johnson, what you have said is very interesting. Can I just test it quickly in relation to one thing? You have talked about SMEs. Of course, the problem with a lot of what we are seeing in procurement is that it seems to be impossible, in terms of not just the big procurements but rapid iteration. In areas such as drones, rapid iteration, even more so than scale, is what is required. The numbers do not have to be very large. You might be talking about 50 million to 100 million quid to give the right kind of demand signal. There is an enormous number of companies, domestic and outside, that could react to that. What is the solution and how do we get there?

That is an excellent question and a great point. You are absolutely right. There is a famous line in the Bible: those who survive on the battlefield are the quick and the dead. If you are quick to adapt, you will survive. When UK armed forces go into a conflict, they go in with one thing. By the end of the conflict, they look very different, as Ukraine found out. We are very lucky in the UK. On the whole, we have a very educated technical workforce. We have the capacity to do it. We have this brilliant spirit of invention and innovation in the UK, but I am not convinced that we invest in it in the right way. I am seeing various ideas floating around Europe at the moment about a European rearmament bank, which is fascinating. There are all sorts of initiatives in Europe around innovation, such as DIANA, which is not actually delivering a lot at the moment. We have talked about the equivalent in the UK, the defence innovation fund and so on. Somehow, there is a vortex effect that takes it towards the primes, because they are the ones with the personnel in large numbers to do things. That said, on the edge of some of the primes, we also have a very good innovation culture. Without naming particular names, it is really fascinating to go and visit them and to see some of the amazing things that they have done, and how they have brought some small SMEs into the umbrella of their own company, because they can see the talent. It is a question of creating the right system, the right envelope and the right governance structure to allow that natural environment to flourish. That is all about incentives. At the moment, I just feel that we do not incentivise it. I can give you an example of a small company on the Oxfordshire-Wiltshire border that makes drones. It also makes high-end motorcycles, and paragliders that you can direct in different ways. It is an extraordinary company. It told me that it found, by accident, the requirement for a Royal Navy dual-rotor drone underneath curtains for an RAF officers’ mess in this long list of procurement requirements. It is a small company that does not have time to go through all these systems to find how to get there, with the endless paperwork and endless delays to contracting. Two small companies that tried to work with me on AI development, which said that they could exploit that and I could reduce the size of my team, went to the wall, unfortunately, because the procurement system kept going back to the beginning and defaulting to the start point. We are not incentivising. We are not governing it properly. We have a system that does not work in that way. I know that the Committee has addressed this problem before. The report that was produced in this Committee is excellent. I would suggest that we now need to see the delivery of that, rather than more rhetoric and another report. The SDR must surely address those issues.

Dr Johnson, it is interesting that you just mentioned the idea of a rearmament bank. This Committee is interested in that, and I have been looking particularly at the opportunity for a multilateral bank. I just wondered whether you could talk about what the opportunities are to work with our allies and to co-operate to get the capabilities we need.

In concept, it sounds great. The idea of a commonwealth—here we are in Parliament—is a wonderful idea. It is great. The devil is always in the detail. How do you orchestrate and implement it? If, let us say, a French defence company was in receipt of some European rearmament bank funding and got a commercial advantage as a result, how do we think other companies, particularly in the UK, would feel about that? In other words, the difficulty is distribution, fairness and prioritisation. Again, it comes down to incentives. It is down to Government, and particularly defence, to make themselves very clear about what they require. They could also do a lot of good by developing long-term relationships with certain companies. Within those relationships, they have to demand and incentivise a faster cycle of development. There are classic examples. A friend of mine who works in Deloitte told me about an amazing example of a particular aircraft in the United States that always seems to spend its time in maintenance and very little time in the air. The US Government changed the incentive structure and said, “The longer it is in maintenance, the more money you, as a company, will lose. The more flying hours it does, the more we will pay you”. Suddenly, those aircraft were in the sky almost all the time. What a surprise. It seems to me that that is the route to take with your banking idea. You have to get the incentives right and not allow special privileges and favours. Some countries will feel that others are getting all the benefits, so that is very difficult to orchestrate. As we know from combined projects,, German labour unions can hold up the development of certain fuselages because it does not suit them. The Spanish will take longer over an aircraft wing, again because they want the business. Doing combined projects is always very difficult and requires very strong governance structures.

Thank you very much. Let us move on to a completely different aspect, namely article 3 of the NATO treaty. Q193       Mr Bailey: We will give you a moment to replenish your water, Dr Johnson, and take the opportunity to familiarise those unfamiliar with article 3. Article 3 talks about “means of continuous and effective self-help and mutual aid”, and the ability to “maintain and develop their individual and collective capacity to resist armed attack”. This is not just about the military. This is about the entire nation being robust and resilient enough to resist attacks of various types. You have made the case that the UK’s defence spending is insufficient to ensure deterrence or to fight a peer adversary to a standstill, and that the strategic culture must shift towards readiness. You have pointed to our paper, which highlighted that readiness is a significant challenge. In your view, is the UK currently doing enough to meet its article 3 obligations to maintain and develop the capacity to resist armed attack?

It is working towards the objective. Shall we say that? I am being diplomatic, for a reason. I mentioned earlier today that we have the Civil Contingencies Act parts 1 and 2, which is good. We have an ability to react rapidly and successfully to a crisis. We learned a great deal from the 7/7 attacks, for example. We learned a great deal also from covid, but we did not necessarily institutionalise, if that is the right word, a lot of the findings of that particular crisis. Q194       Mr Bailey: That is a very good example. The covid example is national resilience writ large. There are a number of things that you might elaborate on. The first is about government structures, because national resilience is not just about defence. You made comments earlier about the amount of defence spending that we would have to grow to in order to meet our article 3 commitments. Where should that be placed in Government? Using covid as a lesson, do our government structures, such as the Cabinet Office or other Government Departments, feel, understand or share their commitment to meet our NATO article 3 responsibilities?

I cannot speak for members of the Cabinet Office, because I have never worked in it, but I did interact with people there quite a lot. There was a moment when, in the Ministry of Defence, we ran a wargame, so a simulation of an armed attack on the United Kingdom to find out what would happen. We brought in all the government agencies and local government officials to help us. There was also quite a strong representation from the MoD. I have to say that the Cabinet Office was less than enthusiastic about defence running the exercise, because it felt that this was probably its own area. At the end of the process, they told us that, by November of 2024, they would have a plan. I did notice that there is a website page dedicated to what the public should do in the event of an emergency. The problem there is that, in the event of an emergency, the first thing that you are probably going to lose is your electricity and, therefore, I suspect, your ability to read a website. There have been some good things done in terms of the phone alert system, which we tested only relatively recently. That is great. We have some things that we are doing and the Cabinet Office has an interest in that. As I say, we have a Civil Contingencies Act, which is also progress. However, I am not entirely convinced that we know who is in charge of what and how to co-ordinate the various problems that we would face if we had a particular type of threat. For example, if it is a distributed denial of service attack, so a cyber-attack, we know that GCHQ in Cheltenham is probably going to lead on it. If it is an assassination of a leading public figure, that will be a police matter and the Home Office will lead on it. What if it is more serious and large scale than that, rather than, say, a terrorist attack in one place? What then? I would like to see a dedicated homeland security team headed up by a Minister. That would be important. Everyone in Government always says, “You can have a certain number of Cabinet Ministers. What about the budget?” You just need to have some sort of secretariat whose responsibility it is to know what to do, when. All these things need to be exercised and rehearsed. We were not rehearsed for covid. We are rehearsed for large-scale terrorist attacks. We have been used to them for over 30 or more years, so we know what to do on that occasion. Q195       Mr Bailey: Do you see adequate evidence that we are resourced for them? Both of those examples require an amount of additional capacity within the system. To go back to the question I was asking, has the NHS, for example, resourced for article 3?

No. Q196       Mr Bailey: Is there adequate evidence that any of the Departments have resourced any of their services to meet article 3?

Not resourced, no. There is information. For example, Thames Valley Police has a plan for what to do in the event of a chemical attack, which is incredible, because a lot of other forces around the country do not have that. It seems to me that we have not resourced these things. I go back to my earlier point. It is always a balance. A special interest such as me might say, “Of course, what you need is a proper civil defence force”. I do think we need a force of white helmets, because, if there was a really big national crisis, it is not so much that it is going to be military aid to the civil authority, which we have got used to. It is going to be the other way round. It will be civil aid to the military authority. Every time there is a national crisis, normally about half a million people come forward, brilliant, dedicated members of the public, to say, “How can I help?”

We are going to move on to societal resilience. I just want to make sure that we do not veer into the next question. I am also mindful of the fact that time is defeating us, but thank you very much for that.

Good morning, Dr Johnson. Just staying on the theme of homeland and national defence plans, is there one in existence at the moment? Do we have a national homeland defence plan?

Not that I know of, no.

We have been told that there is one being drawn up, but there are reports that it might never be released and the public might never see it. I do not even know whether this Committee would ever see it. Are you aware of any ongoing work or a timeline?

The last time I was told that work was under way was the summer of 2024, as I left my secondment to the MoD. I have not had any information about it since, so I cannot comment on that.

In terms of societal resilience, do we have enough in the UK? This Committee visits lots of countries. We have been to Finland and other places, and they seem to have a completely different mindset, because of the geography of where they are. You read reports that some young Brits would not be prepared to take up arms to fight for their country. The last report said 11%. How do you shift that dial in our society and in the mindset? You said that, on VE Day, people were saying that they see the value of defence, but that was probably in the moment. If you ask somebody, “Would you rather that that was spent on defence or the NHS?” they would probably say the NHS. How do we shift that dial with people?

It is down to our public information and education. It seems to me that we could do a lot of very good things to help schoolchildren and students in this country better understand security for them in the round. We already tell them about cyber-bullying and cyber-security, but why not about their own national community, and how to help it and what they can do with that? We have such a wonderful voluntary tradition in the UK that it seems almost criminal to neglect in that way. I am not advocating a security state and all of that. God forbid that we should ever go that far, but you can raise consciousness. You could make a reservist force bigger and move not towards a full nation at arms, because we do not need that, and we will always want dedicated professionals, but we could do with a much stronger reservist cadre. In proportion to the size of the nation, we have one of the smallest reservist cadres of people across Europe, which does seem very odd to me. Because we are an island, perhaps we have become complacent in that way.

Just touching on what my colleague Calvin said, who should be responsible for this in Government?

You need to have it as a centralised mechanism. Some years ago, Lord Sedwill provided an exemplary example of how you might think about fusion or integration of the different arms of Government to do with security threats of all species. Since then, we have rather let that go and neglected it, and we need to rejuvenate that through a central figure, with a Cabinet Office team that can really help. As I said, I have not been a member of the Cabinet Office team, so I do not know specifically what their thinking is at the moment. Perhaps they have lessons that they have learned from Ukraine that could really help. I would ask them that question. All I can say is that we need a system for it. We need to have governance for it. Business continuity is priority number one. We then need a public information system and, to answer your question about how resilient we are, a critical national infrastructure repair plan. We cannot just leave it to the private sector, because it will very quickly run out of what it needs. When you think about imports into the UK, our entire water supply depends on the import of chemicals. If that was interdicted in some way, we could not survive as a nation. It is not just foodstuffs and raw materials; it is everything that we bring in by sea.

If we have a national defence plan that is not getting published and no one sees it, what is the point? How can people get behind it?

I agree with you 100%. We need a public-facing one, and then probably a more classified one for the things that are really sensitive, such as core communications. That is fine, but a better outward-facing one would be advisable.

You touched briefly on covid. That escalated people’s thoughts on just how unprepared we are. We saw the lack of supplies in the NHS. Particularly in Cumbrian rural areas, which is my patch, that rurality and the difficulty within the community was raised during that in particular. Everybody automatically assumes that Government or local authority would pick it up. There was nobody there doing anything in those first weeks, and it was the local community groups and, as you referred to, our third sector that got together to do all of that. Where is the connection? Where do you see that being fixed? Even now, we are many years down the line, and nobody has picked up on that to deliver something, should that happen. We talk about defence, but this is about society and how it reacts. It is not the military dealing with that, but just the natural things in society, such as looking after the most vulnerable, and those connections that we do not seem to have made.

It is an excellent point, and I totally agree with you. It is all very well having a central Government apparatus, but you have to have local government involved. From there, you spread out to local communities. Looking at parish, borough and city councils, it seems to me that we have a ready-made system. We just need to equip them with the information that they need, and then a degree of resourcing. How often do we hear local authorities complain that they do not have the resources even for the services that they currently have? There is always a trade-off, and choices are going to be made. The way that we have dealt with first aid, for example, in the UK is that we have wonderful voluntary services such as the Red Cross and St John Ambulance. Why not do the same thing for a wider resilience programme in the UK? It gives people confidence, and then you do not have the panic. You have this sense of national purpose and collective responsibility, and a degree of wanting to volunteer to do more.

You said something earlier about a wargame and a simulated attack on the United Kingdom. What was the outcome? Did they win?

Believe it or not, the outcome is classified.

Well, blow me down.

I cannot talk about that outcome. However, there is a podcast that will be released next month, which will tell you about a non-military one that we did, and I think that you will enjoy it.

Dr Johnson, thank you very much for giving evidence today.   Witnesses: Dr Alastair McGibbon and Ken Turley.

I call to order today’s Defence Committee evidence session on the UK’s contribution to European security. We now have our second panel for today. It gives me great pleasure to welcome Dr Alastair McGibbon, Head of Semiconductors at Space Forge Ltd. I am also very pleased that we have with us Mr Ken Turley, the former CEO of RUK Advanced Systems Ltd. Thank you very much, gentlemen. Our second panel is going to be around SMEs.

Thanks for the question and for the opportunity to speak before the Committee. Currently, the reality is that SMEs are not adding to the resilience of the UK. You mentioned the indirect and direct spend. The indirect spend with SMEs is in the 20 per cents through prime contractors. The direct spend is less than 4%, most of which is in the special forces sector. If you ask the question of how SMEs are helping resilience with a 4% direct spend, it is not a good answer. I genuinely believe that the contract values that SMEs see are low, and the longevity causes that problem that they just cannot invest. Therefore, my short answer is that it is not good news. Could it be better if we were to go to war? The previous panel brought up some really valid points. When we have gone to war, it is the SME community that stands up. Once it has hit the fan, your SME community will stand up and deliver. As mentioned before, we go into war with a particular posture and a particular way of fighting a war, which is typically totally nonsensical and non-purposeful for the war that we are going into, and we come out of that war with a different way. To repeat myself, I do not think that we are helping with the resilience in the short term, but, in the hour of need, your SME businesses are where the help will come from.

I can talk specifically about what we do. We are looking at in-space manufacturing, but are, effectively, a semiconductor company. We fill gaps in the semiconductor supply chain that currently exist in the UK. There are a lot of SMEs around that can provide significant innovation, which you cannot necessarily get in existing prime-led supply chains. If you are looking at resilience, covid showed up just how many capability gaps there were in the UK, particularly in the semiconductor sector. That came up earlier. We are one of these companies that are looking to plug those gaps, but we would say that it is aspirational. It is certainly difficult for an SME to readily engage into the UK supply chain, in some cases because we are innovative, because there can sometimes be an inertia in existing supply chains. We absolutely have the potential to contribute.

From our perspective, we certainly welcome the SME hub.

We will come on to the SME hub later. I just want to hold that particular thought, because one of my other colleagues will be coming on to that.

There are clear technology gaps that SMEs can fill. If the defence industrial strategy is clear in recognising that there are gaps that SMEs can fill, how can that be done? It has to be much easier for SMEs to engage than it currently is. Certainly, things are going in the right direction. We have lots of good conversations with the defence community, but that does not necessarily turn itself into tangible results. You need ways to convert that into action relatively quickly, because we have certainly had issues around the speed of engagement in the MoD programmes in relation to other types of investment that we can get. Something that oils the wheels to make it much easier for SMEs to engage should be built into the strategy.

I would like to hope that we have confirmed the question that we are trying to answer. As I mentioned earlier in terms of going into conflict, we came out of the Falklands and learned to fight differently. We went to Iraq and Afghanistan and learned to fight differently. Now we think that the answer is 155 mm shells. Is that going to be the next war in Europe? We do not know. To your earlier questions around where we are going to be spending money and how we should spend it, I am hoping that we have asked that question at the start of the process. I am sure you have, but it is not in the public domain at the moment.

We are having this conversation in the context of the upcoming SDR and defence industrial strategy. Even today, the Secretary of State is at the London Stock Exchange, announcing, we assume, something to do with access to the marketplace, etc. All of us on this Committee will have conversations with SMEs and folks such as you about the barriers to progression in the UK defence market. If you were to put yourselves in the MoD’s shoes for a second, and you were in that building now, what barriers does it face when it comes across an SME whose product it knows would have good effects in the UK armed forces? What stops the MoD from being able to give that SME a long-term contract and to adopt that technology and capability into the UK armed forces?

In a nutshell, it is commercial regulation. I will give you an example. As you would expect, I attend many briefings about what is going on in the defence world, especially around specific programmes. They all follow a pretty similar format. The general will stand up and say how enthused he is, how he has money, and how things are going to happen. The two-star, down to the one-star, will then stand up and say, “We are really after getting after it. We want to engage with SMEs differently. We are really into it”. The SO1 stands up. He is going to do the work. They are all completely knitted together. They understand exactly what they need to do and what equipment they need. Then the commercial guy gets up and the energy sinks out of the room, and the four or five companies that are there realise the commercial guy is going to say, “I can’t engage with SMEs in this programme, because the typical programme will have 90 or 100 line items. We want to engage with one or two organisations”.

By “commercial guy”, do you mean a commercial civil servant officer?

That is correct.

I would agree with that. The process is difficult because of all those different commercial arrangements. I can give you an example. We were successful in some MoD funding a couple of years ago. It was about £200k or £300k. It took two years and eight stages to get to that point. In the meantime, we were talking to the NATO Investment Fund for direct, dilutive investment, and we got 20 times that amount of investment in half the time. There are all these barriers, with stage after stage of due diligence. Equally, you can do due diligence at the level of millions very thoroughly, so there should be ways to make that a much more streamlined and simpler process. If you know that you need the technology, there have to be better ways of engaging.

You mentioned the NATO Investment Fund. NATO has had a number of schemes to try to encourage tech innovation and particularly take-up within NATO forces. The NATO Innovation Fund and NATO DIANA both came from the NATO Innovation Cell, the former head of which has campaigned for years now for the kind of European mutual development bank that we spoke about before. Within the UK, we have the British Business Bank, a subsidiary of which is NSSIF, which already does some investment and fundraises for defence intelligence architecture companies. Do you think a bigger problem for SMEs is access to finance or adoption in the MoD of the product? What is the bigger challenge? You cannot say both, by the way. You have to choose one.

In our experience, we have been successful with both the NATO Investment Fund and NSSIF. We are one of the few companies that have been able to get investment from both. We have not engaged as easily with the MoD.

Interestingly, we had a conversation just before coming in. My experience with NATO is completely the opposite to Alastair’s. For 12 years, I have been batting on the door to try to find some money to help investment, and I have just never managed to find a way. There is a security problem that is replicated in the UK. I will come to that later when that question is raised. The MoD understands what equipment it wants to fight the war that it is going to fight. It is restricted from buying that equipment. It is actively restricted from solutioneering and saying, “I have seen this kit in America. That, or a variant of it, is what we should have here”. That is what the war fighter wants to do, and I will come back to my commercial civil servant guy who says, “You cannot get involved now. Tell us what you want. We will design it and then deliver it”. That is a far bigger problem than finance in the UK.

It is really interesting that both of you have highlighted that it is within the MoD rather than access to finance. In the last few months, there have been quite a few initiatives announced or hinted at from the Government. Of course, there are going to be loads more, as I alluded to earlier, and there will probably be stuff today. What excites you most about what is changing in the last few months? What is going to have a good effect and achieve change within the MoD, so that it is able to adopt, use, and give contracts to, the right companies?

I cannot comment on specific things that I have seen, but there is definitely a recognition of the need for sovereign capability, which is good. There are more schemes coming out, potentially, for non-dilutive income, which is important to us. It is great getting income from the NATO Investment Fund and NSSIF, but, every time you get dilutive income, you are selling a bit of the farm, so you need to be able to balance that with non-dilutive investment that helps you engage in the supply chain and start to fill in the gaps of sovereign capability. We need more focused ways for SMEs to engage with that, and more access to schemes that help us engage in the UK supply chain, as well as in European supply chains. If we have a gap in resilience that we can fill, the important thing is developing those industrial supply chains so we can pull that through to an end user.

As a country, we are starting to look investable in defence. Last year, we were one of the most uninvestable countries in defence, and I speak as somebody who trips around the City regularly. The most exciting thing is that somebody is going to spend some money, which would be a great thing in our UK defence world, because they have not spent anything of any significant value for many years, other than keeping this fallacy of old equipment because we need to fight tonight. New investment and spending money is going to be self-fulfilling, and that is the most exciting part of what is coming up, as well as the SME direction. Q212       Mr Bailey: Alastair, you have described how the fragmented landscape, particularly the funding landscape, incentivises the creation of micro-companies and really inhibits our ability to scale up companies and to fill the market. First, could you expand on how these structures are limiting you, so that we hear that from you rather than from me? Secondly, the net outcome of the system that we have created is that companies unable to move beyond these very limited grants run out of a consistent funding stream and sell IP abroad. Would you both comment on my assertion that the UK looks increasingly like an IP farm in strategic technologies? What are the long-term risks of this model, particularly for the defence industrial strategy?

In the UK, we are primarily part of the space and semiconductor industries. There are very few UK companies of scale in those critical technologies. In a lot of cases, they set out to be able to be bought over. As a company, we want to scale, but there are significant difficulties in being able to do that. We are an SME of scale. It is a global marketplace that we are developing. You are looking at tens to hundreds of millions in the short term for us to be able to get to the level of scale that we need to get to. There are initial low-technology readiness-level schemes to get companies to start on that. There are plenty of those, and it is good to get to that point, but, when you get to the point where you need to start to develop and build a manufacturing capability, that becomes much more difficult. There are routes. We are working with the University of Swansea, which has a world-class semiconductor manufacturing facility, or Fab, which we can use to start to incubate. Beyond that, we are going to have to then move into a site to get to a larger scale, which requires levels of non-dilutive investment that do not exist at the moment. I keep talking about dilutive and non-dilutive. If we get dilutive investment to do it, the vast majority of our investment is non-UK, which then increases the pressure to move somewhere else. We have significant US funding, for example.

I would agree with your assertion that we are generating an IP bank. We do not like solutions. We do not like equipment. We like White Papers that we can regurgitate three or four years later. I do not know whether this point is going to be raised later, but, in finding financing and funding, the SME classification is challenging. I have spent 12 years in defence. I have worked in a start‑up as employee No. 1. I have worked in a 50 to 70‑man company that I scaled and sold. I have worked in an SME with 200-plus employees, of whom 32 were in the mid-tier company. They all have different challenges and operating models, and yet, for SME funding, we have one solution.

I was really struck by your comments on what you called the commercial guy and these conversations that you have with them. I just wonder whether we are recruiting the right kind of person to be the commercial guy. We are bringing in a national armaments director who is the commercial guy or girl in the system. What sort of person should that be? For example, should they be from a civil service or military background, or perhaps somebody who has done commerce as their day job? I would use as an example what the Americans did in the Second World War. They created a system of market inducement to allow huge numbers of firms to retool and deliver gas masks, or whatever it was, when previously they had been delivering vacuum cleaners. Are we recruiting the right people for these critical roles in the system?

The majority of people come, of course, with the best intention in the world, but they have their rules to follow. This is what is brought up. In the briefings that I attend, they do not just stand up and give us all negativity. They are just bringing the reality of the process that they have to go through. There has to be fair competition. They cannot have solutioneering from the customer. They have to go out to an open customer. On the whole idea of rearmament, you are exactly right. We need to have a different approach. We play commercial like we are at peace.

Would you argue that we need to change the fair procurement rules in order to rearm?

Yes, absolutely.

The majority of UK defence funding for SMEs comes through prime contractors. How symbiotic are these relationships and could they be improved?

I wrote this down on the train coming down, because I thought that there would be a question about how we engage with primes. As you have probably guessed, I am going to tell you. Excuse me for reading this, because I will get it wrong. Primes roam the globe like dinosaurs of the Jurassic period. They are a necessity for the current defence ecosystem, and we just hope that they are not coming to their extinction period. I can tell you that the vast majority of SMEs that I talk to have a horror story—and people from this Committee who visit SMEs will have listened to them—of an engagement with a prime. It is not always like that, but it really could be better. It comes down to collaboration. While I was at RUK, in order to trade well with the MoD, I did a series of ISOs from 9001 to 14, 15 and 27, and so it went on. Then I decided that 44001, the ISO for collaboration, would be really useful, and maybe we could set a framework that could be utilised by the MoD for how SMEs interact with mid-tier prime contractors and the whole ecosystem of delivery on a project. After approaching the fourth prime to support this, and the second frontline command, which all refused because of competition fear, I gave up. Would it not be great if we could collaborate and the primes could be used for what they were potentially intended, to bring together that resilience? To the first question, where SMEs struggle to have an effect, they should be amplifying that SME through collaboration, not through the threat of loss of IP or down-rolling regulation and STANAGs because they have got rid of their risk. Primes are here as a commercial business. They have an interest with the war fighter, but their main focus is their shareholders and their stakeholders, as is an SME’s, when all is said and done. I will not mention the horror stories, but it could be improved. It is a place where Government could really help, particularly in the direct and indirect spend, which currently is not scrutinised as well as it could be. I will not give you a gut feeling, but I would suggest that what is spent with SMEs through primes is significantly less than what is being published. Would it not be great to do a higher direct spend with SMEs if your frontline commands were given that opportunity to engage and buy the equipment that they needed and wanted to fight the war that they want to fight?

We are engaging with a couple of primes, and that is going well. In general, there is an inability to be flexible within the primes. If you are a fast-moving SME, you need to be able to work quite quickly and slot into the supply chain. If a prime is in charge of a supply chain, there is not necessarily a huge amount of movement or innovation within that. It is down to risk, as we were talking about. If you have a novel offering, it is very difficult to break into that supply chain if the prime owns it. In other parts of innovation and development in the UK, there is a more open supply chain and collaboration, where the supply chain itself chooses the best solution. If you start with a prime that is responsible for that, that could be good from a defence procurement standpoint, but, from an innovation standpoint, it can be harder to get new ideas in quickly. That is potentially something to think about. Saying that, some primes that we work with definitely want to innovate, but how do you create those right mechanisms for what is high risk when you bring an SME in with a new idea? You do not have a guaranteed solution, because there is a lot to be done to get a particular product proven and working right through the supply chain, so that it then becomes effective at the end-user level. That needs attention and leeway to understand what those challenges are.

The primes are given targets for what they should do with SMEs. I do not think that any of us believe that the way the targets work at the moment is fit for purpose. How would you like those targets to work in terms of the MoD mandating primes? How should that work going forward?

Checking is always a great thing, is it not? They are not scrutinised particularly well. I think better scrutiny could definitely be part of where they are at. The primes have a big commercial team. I sat on an organisation called JOSCAR, which is a buying group. We were one of the first SMEs invited to be in this buying group of 24 primes at the time, and I was quite taken aback. I wanted to use JOSCAR to find suppliers. I was going to transfer technology to the UK and I needed to be able to make things here. JOSCAR was perfect for that. It had a big database of 5,500 suppliers. I went to the first meeting, and the prime contractors do not use JOSCAR for sourcing suppliers. They use it for providing the SME spend in their projects, so they are using it as an audit tool rather than what it was designed for. In answer to the question, more scrutiny is required, and maybe that is an element of the SME hub that could be brought together and where that scrutiny could be found. At the moment, I do not believe the numbers.

Cash is key, so we have been thinking a lot about how we get finance to our defence sector. Obviously, the one thing the primes can do is on their payment terms, and some of the work I have been doing with my colleague Luke Charters is looking at what we can do to encourage the industry to work better. We found some SMEs that are being given 120-day payment terms. Could you talk about your experience of how the payment process works and what you think it should look like going forward? Dr McGibbon: I cannot talk in much detail, but certainly a lot of it is in arrears. Cash flow is very important for an SME. At our scale, you need to be able to have efficient payments and certainty. It needs to be reasonably clear over a period of time how you are going to receive those payments and how that fits into the way you work. It needs more attention. It needs to be built into how an SME engages with the prime, not just in the payments but also in terms of IP, because sometimes it is unclear. You are never quite sure what is going to happen to the IP that is being developed within the project, particularly if you are developing a technology that is just one part of a final solution. How does that work? How do you benefit from that in the long term? There should be better guidance and access for SMEs as they engage with primes, as well as the SME hub. Touching on the previous point, SMEs do not know what they do not know in terms of the primes to work with and who is in them. If an SME is identified as being important to the supply chain, some form of guidance on how to engage with the key primes would also be important, because you can spend a lot of time going down blind alleyways in terms of how you are actually engaging with people.

That is exactly what ISO 44001 does. It gives you a framework of how you will all co‑operate. Then you agree the payment terms and you agree what is important to you. Obviously, a prime contractor has a totally different focus from the SME and the supply chain, but the ISO allows you to agree the terms and the important big handfuls you need to deliver the programme with. It would be great not to have stories of 120-day payments. From my own experience, it is never 30 and you always have to chase it. The reason is that it is typically a small amount of money, it just goes into a box, and there is some young clerk who is not really focused. You always have to chase money.

We are seeing a change in thought process from some forward-leaning primes. They are now starting to invest in buying 20% of a company rather than 100%, because the primes recognise they cannot deal with a 10-man team. If they stand up a project team, it has 30 to 40 people in it to start with. You have some primes that are looking, and the typical model is to say, “We will pay your operating costs for two years”. Then they are not becoming subsumed into the dinosaur but allowing that to move forward, which is a very positive thing. It would be good if the Committee can add to that.

We have heard a lot about SMEs and the challenges that they face in gaining access to MoD and different contracts. We have, in my patch, the nuclear deterrent and, inexplicably, we have small SMEs in the same patch that are not in that supply chain. Is this something that you hear often? How do we deal with that challenge? Dr McGibbon: Yes, we live that. It is very difficult to quickly and efficiently get involved in supply chains. I do not know whether this question covers the SME hub. We have had lots of good conversations with the MoD, but those do not go far into engagement with primes and specific projects. We have likened it to having multiple doors of access, and it does feel like that. As we have discussed internally in our company, sometimes it is like trying to push one door, but, if that door has 200 doorbells, that is not much use either. Is there a way to have a more efficient single point of contact and something that understands the challenges of SMEs? Quite often in these programmes, you have to shoehorn what you are doing into a particular call requirement for a piece of technology, or the way the business works or how it works in the supply chain. There could be more tailoring of programmes to the capability that they want from SMEs. We are talking to a couple of other European countries about potentially having a European office, and in general we are seeing a greater ability to tailor solutions. If they want us to be there, they will tailor a solution for us to take part. You see less of that in the UK; it is more about trying to fit into specific areas.

Given that the space sector is not solely defence, what challenges are you facing in engaging with multiple Government Departments? Dr McGibbon: We cover space and semiconductors. We cover DSIT, DBT, defence and the space sector. There are advantages to being dual use, but the disadvantage is that you can be pointed in different directions about where to actually go. There is always somebody else who may have the solution, so it is very difficult to find a home that will also recognise that you can access other areas. We are getting there. We are having good conversations. There is now significant semiconductor capability within DSIT, and it is recognising us as being not just a space company, but a semiconductor company. It takes a lot of effort to work across multiple people in multiple Departments to get to that point.

Your question was really around the supply chain problem. What I have seen in the commercial world more than defence, and deterrent is even slower and more regulated, is that they want to get a supply chain. They go out and look at the big list of potential suppliers. They funnel them down and they find three to five companies that they are going to work with, and that is it. “See you in 20 years’ time”. What they should be doing is refunnelling that and driving a supply chain in the way it should be driven, by ensuring efficiencies, the right capabilities, standards and costs. They tend to like rigidity and safety. “We have found our four suppliers. We have done all the checks. We know how much money we are going to get in. This is how much we are going to pay out. That 20-year contract is perfect, so why on earth would we want to talk to another supplier?” This is a failing in the supply chain.

How would you change that if you had a magic wand?

I would insist that the supply chain was reviewed more frequently, not annually, but maybe every three to five years. You should be looking at the supply chain and looking for efficiencies. This also keeps suppliers on their toes.

Time is fast moving, but we have a few questions. Could you be as brief, concise and to the point in your responses as possible?

Is it harder to work with the primes or with the MoD? Dr McGibbon, is there any other Government Department that you work with that is better at this than the MoD? Dr McGibbon: Oh dear, the answer to this is going to get me in trouble.

Be very careful.

We know what the answer is anyway. Dr McGibbon: We do work with a lot of primes. Once we get in with the primes, we can work well with them. The issue with the MoD is that there are lots of conversations. It is harder to work with the MoD than some of the other Departments in my opinion. The main business of DSIT, for example, is working with companies and supply chains, and it tends to be clearer how you work with the mechanisms that it has to encourage innovation. MoD is obviously different and it is not necessarily about innovation, but in order to be robust and resilient it needs to understand the challenges of getting innovative solutions into products.

We are increasingly getting a sense on this Committee that the MoD, as an organisation, has a culture that is very resistant to change and is very big and unwieldy. Dr McGibbon: Yes, you might say that.

I echo that. I think it can be fixed, but I do echo it.

I will try to keep this clear and focused, but this is particularly to jump on what Michelle had got to with your ability to access funding. I just wanted a bit more on the challenges of presenting a product in the space sector within the UK and understanding where the sustainment of that money comes from, because, with a disaggregated and fractured government process, I cannot see where the sustained funding comes from within government. Dr McGibbon: My main sector is semiconductors, but we spend a lot of time within the space sector. There is definitely a willingness in the UK space sector to start to be able to grow and sustain companies like ours. We have good relationships with the UK Space Agency, for example, which recognises the potential contribution that we would make to UK sovereign capability and resilience. The issue in many cases is how to get the funding that helps us do that. In some cases, this may be at odds with ESA and other European-level funding. Having something that is UK-focused helps us, and we are starting to see that in conversations with the UK Space Agency. Now that we have been around for a while, people understand what we are doing, and it is very new and very different. There are starting to be mechanisms and potential funding in place to support that, but we definitely need that. We are looking at ideally several million to tens of millions of pounds of co-investment from Government in the technologies that we are looking at. It takes a while to get those mechanisms in place.

Dr McGibbon, I interrupted earlier when you were talking about the SME hub, but this is a perfect opportunity to discuss that and more, which will be taken through by Mr Jesse Norman.

Just as a general characterisation, when we are in peacetime, procedures are slow, impersonal and highly rule-based. When the guano hits the fan, and you have to make decisions and get on with it, stuff very quickly becomes quick, personal and discretionary. Before I turn to the issue of SMEs, what lessons can we learn from that broad characterisation about what we could be doing faster, better and more effectively now?

That was covered in the previous session. There is a reticence from the MoD to change, and that is clear across the piece, but we know the solution. We have done it on a number of occasions. We have been to Afghanistan. We knew how to procure things. We have been buying things for Ukraine for years. We know how to procure when people are given the latitude and the grown-up view of, “Yes, that is what we want. Please go and buy it”. The problem in rearmament is cultural as well. There are decisions to make. There is only so much money. The country is not up for this at all. As far as the country and the general public are concerned, we are at peace, Ukraine is a long way away, and the fact that we have no anti-missile defence anywhere in the UK is an irrelevance to the bloke down the pub. I think we know how to do it, but I do not think that there is a willingness to do it.

Focusing on the point you just made, can you give me an example, among the slew of recent MoD announcements that might be affecting the SME sector, of one that filled you with joy because it gave you a sense that it was heading in the right direction, and one that filled you with dread because it reinforced all the worst prejudices we all have about how slow it is?

Initially, the SME hub filled me with absolute joy. My in-tray was full. “Why weren’t you in No. 10?” “Because I wasn’t invited”. Then I start to look into it, and it is a very thin veneer. Then I start to think, “Is it going to be another talking shop?” That is my concern at the moment, but it was a great piece of news. It was exceptionally well presented, and it stopped a lot of questions in the House, I am sure, of, “What are you doing for the SMEs?”, because you have a stock answer. I am not fully tied into the solution. I know there are working groups going on, but I fear it is going to be another talking shop. Dr McGibbon: One good thing recently for UK capability, from a semiconductor standpoint, is that there has been a focus on Octric in the north‑east. There is now Government involvement directly into the supply chain for semiconductors, particularly non-silicon semiconductors, in the UK, and that is good. During covid, it was quicker to be able to move, certainly from a semiconductor standpoint. People realised it took a year to get a car because it was the chip, and suddenly things started to move. I fear that that is being forgotten, and we still need that sense of urgency to develop UK capability in the critical materials that are required for those supply chains. Earlier this morning, we heard about the importance of chemicals. Semiconductors is effectively a chemicals industry.

Does that not require just one very strong-minded human being with enough energy and authority to make the thing happen? I say this as the husband of the person who ran the vaccine taskforce.

Yes, absolutely.

It could be as simple as that.

Most of these problems can be resolved by an entrepreneurial business approach to making decisions, and there is a distinct lack of it.

How do we compare to other European countries or other structures such as the EU or NATO? Do they also have these problems?

Yes, they all have the problems. I think they are all moving at a considerably faster pace than the UK. If you look at where people are not investing, it is the UK and Australia, because nobody is getting off the pot and buying anything. If you look at Germany, Holland and France in particular, and more so Germany recently, their actual defence spending on equipment for the frontline and the defence of their countries has significantly increased. They are buying electronic warfare equipment and anti-missile equipment while we are talking about buying it.

Have they changed their structures, processes and personnel to facilitate that speeding-up?

It is a good question, but they have been, and continue to be, more nationalistic in their approach. They have one or two prime contractors. You will not see many contracts in Germany that do not have Rheinmetall attached to them, for example.

How are they bringing in SMEs?

Again, if people are buying equipment, the SME naturally has to fulfil the supply chain. The primes do not typically build and invent stuff. They are fed by SMEs.

In that sense, it is primes with SMEs docking into them, a bit like we have now, but you are saying it is working better there than it is here. Why is that?

They are spending more money.

So it is literally just more juice.

Yes. When we talk about 2.5%, 3%, 3.2%, as was mentioned earlier, “on what” is the key question that I am not seeing in the public domain. Dr McGibbon: This goes back to the point I made earlier. From our initial engagement with some European countries, it certainly seems easier for them to tailor what they do so that we, as an SME, can access national infrastructure and national capability assistance and funding. At a European level, I do not necessarily think mechanisms such as Horizon have changed that much. That is still a slow, long-term way of getting involved. Access to bilateral funding with other European countries is useful. There is a scheme called Eureka that has been going for years, which has been very good for SMEs because it is close to market and relatively fast-moving. More mechanisms like that between the UK and Europe would certainly help engagement.

The House of Commons Defence Committee recently had the pleasure of going to the International Space Show in Farnborough, where we looked at semiconductor production, for example, in space. There were lots of fascinating, cutting-edge technologies. We have had some very informative evidence sessions as well. Thank you also for your written evidence, which went into a lot of issues. We have covered a considerable amount of ground during this session, but are there any other significant challenges facing our SMEs that you feel have not been covered? You mentioned the security problem earlier, Mr Turley, and perhaps you want to elaborate on that. Just for the record, are there any other significant challenges facing our SMEs before we conclude today’s evidence session?

I will come on to security, but one other thing I would like to mention is banking. It was mentioned that cash is king. I run many businesses and, in the defence world, I had to apply to 19 banks to get an account set up for RUK three years ago. RUK is owned by Rafael in Israel, so you would think that may be a factor. We did not actually tell them at the point we were told they did not want to do business with us. More recently, RUK looks like it is about to be debanked, as a high street bank has been acquired and I am now getting regulatory forms to fill out, the likes of which I have never seen in 20 years of having business bank accounts. That is one I would just like to put out there.

That is an issue that some of us have taken up. The Defence Committee has heard about this particular issue and we have raised it directly with the MoD. What about the length, time and cost to bid a contract? Is that something else that needs to be looked at?

Of course, and, again, it comes down to commercial regulations. If you look at a recent programme for the ACTS—the Army Collective Training Service—it is a large programme with hundreds of millions and is still ongoing, now in its third year of trying to get somewhere. It has run out of competitors. There were 12 main people. Large companies have pulled out because it is too long and too complicated, and the return on investment does not make financial sense. Dr McGibbon: We have touched on it, but to be able to scale is to be able to win contracts and have access to contracts relatively quickly with the proper amount of due diligence, but not overbearing. The ability to procure solutions that may have risk with them because they are highly innovative is potentially something to look at.

Just for the record, what are your views around security clearances and checks? That is an issue that has come up to the likes of me before.

Security clearance comes in two aspects. There are personal security clearances and then there are building facility clearances. Then how does that affect your commercial proposals? The rule currently is that, if you do not have an FSC—full security clearance—of your building, you cannot receive classified documentation. If it is a classified project, of which we were doing several, you cannot receive the documentation and therefore you cannot bid for the work. That is a bit of a problem. You also cannot deliver work if you cannot win it because you cannot bid it.

Precisely, so it is a huge issue for SMEs.

It is a massive issue for SMEs. I have been around this for many years. I hold a high security clearance myself. It took me 15 months to achieve a full security clearance for our building, and another six months on top of that to receive the IPSA, which is the personnel security clearance, so that we can actually hold clearances. It is very difficult for SMEs to hold clearances, but you are also unable to bid for work because you are unable to receive the classified documentation. When I complained, I was told how wonderful they were—“And please don’t write back to me”—but the two answers I got were, first, “Can you borrow somebody else’s facility? Do you have a prime in your area?” and secondly, “We will give you a temporary clearance to allow you to receive the documentation”. We tried that three times; on all three occasions, we ran out of competition time before we were given the clearance to receive the documentation. It is a massive problem. The security authority in the UK is overstretched, underfunded, and failing to deliver.

Thank you very much for putting that on the record. I was particularly trying to tease that out. Dr McGibbon, do you have any final words on what you feel has not been covered in terms of a significant challenge? Dr McGibbon: No, I think that covers it. We have not got that far yet with the security, but there are potential schemes with organisations such as HMGCC, where they are looking to at least do challenge-led competitions for companies to engage in. That is potentially a good way of initial engagement with the sorts of organisations for non-security-cleared SMEs.

Thank you very much. It has been a pleasure to have you here to give evidence, and I think it underlines the importance of SMEs to the defence industry. That is particularly why the Defence Committee wanted to have this panel and why we have been focusing in on SMEs, because, as was very eloquently highlighted to us previously by Make UK Defence, the MoD at the moment seems to be very prime-focused. If we carry on in that same endeavour, what that normally leads to is having one source, one supplier, and then, if there is a surge required because of a conflict, that means you only have one factory and one source. That will represent a huge challenge for us as a nation. Thank you very much for your time today.