British manufacturers have urged the government to ensure that small and medium-sized businesses are major beneficiaries of the UK’s rising defence spending by embedding legally binding offset agreements in future military procurement contracts.
Ahead of the release of the government’s revised Defence Industrial Strategy, MakeUK Defence — the trade body representing more than 600 UK defence manufacturers — is calling for foreign contractors to be required to reinvest the vast majority of their contract value back into the British economy.
Offset agreements, which are already commonplace in over 50 developed countries, compel foreign companies that secure military contracts to invest a portion of the contract value locally — either directly in defence-related production, or indirectly in the wider economy. Advocates say such agreements can create thousands of high-skilled jobs and help to secure a sustainable domestic industrial base.
“Securing inward investment in defence deals should be a pillar of the government’s growth agenda,” said Andrew Kinniburgh, director-general of MakeUK Defence. “British SMEs have huge capabilities and the MoD must harness that so they too benefit from defence contracts with overseas companies.”
The UK’s current approach to offset is largely informal, with no formal obligation or enforcement mechanism in place. MakeUK Defence is calling for this to change, arguing that Britain is falling behind international rivals in securing industrial benefits from defence procurement.
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