Looking beyond BREXIT: what future for the European defence sector?

Peter Watkins thinks about the way Britain’s European defence partners will react to Brexit. He states that ‘European security against growing threats in a world of renewed great power competition – what one might call real European security – will be heavily influenced by the UK’s choices’. And he defines three possibilities for Britain; ‘resting on our laurels’; ‘cleave to the United States’, or ‘play a new intermediate role in Euro-Atlantic security’. 

— Unedited text —

Peter Watkins

As a senior official in the Ministry of Defence (MOD), I was involved in aspects of European defence equipment cooperation for over two decades – dealing with both the practicalities of international acquisition programmes (as the MOD’s head of finance for, and then the director of, the Typhoon programme) and the policy dimensions (not least as “Policy Director” from 2014-2018). 

This long exposure gives a sense of perspective. But it can have its downside. Attending a Munich Security Conference-sponsored symposium on European defence cooperation in Berlin in late 2017, much of the continental discourse felt to me like déjà vu all over again – little different from when I served with the British Embassy in Bonn twenty years earlier: Schmidt-Debré, the same old statistics about the number of European tank manufacturers, etc. Other things hadn’t changed much either: the big institutional and industrial moves – the establishment of the Organisme Conjoint de Coopération en matière d’Armament (OCCAr), the Letter of Intent, the initial formation of MBDA and EADS, now Airbus – took place in the latter years of the 1990s.

But the permafrost is now melting. For various reasons: Russian aggression, German activism, US ambivalence and British absenteeism (aka Brexit). My contention is that change in the sector is going to accelerate and we had better get ready for it, deal or no deal.

Two other general points. First, a key difference between then and now, although one that some people overlook. Then, the debate was mainly about market effectiveness, reducing duplication, institutional ambition – there was no threat to speak of. That’s not true now – strategic coherence and operational effectiveness must not only figure in but shape the debate.

Secondly, I’ve always believed that a strong defence and a strong indigenous defence industrial sector go together. This hasn’t always been the view within HMG.  It has been argued that procurement decisions should be taken on the basis of pure “value for money” – even if that meant buying “off-the-shelf” from overseas and sending the UK sector into terminal decline.  In shorthand, I think that this fails to recognise the key contributions to deterrence and resilience of our defence industrial capability. Sadly, as Philip Dunne noted in his excellent report in July 2018, there is not enough authoritative data and research in this sector – although there are moves afoot to address this.  But, in the meantime, the health of the sector and how it configures itself in response to political signals should be of intense interest to defence policy staffs – which is why the MOD established a new Directorate for Economic Security & Prosperity.

So, on the European scene, I see five key factors that will shape the landscape:

• The new European Commission’s agenda
• NATO/EU cooperation
• Growing continental defence budgets
• Growing “minilateralism”
• US engagement in Europe, not least by US industry.

For the UK, the question is whether it tries to shape events or largely observe them.

European Commission agenda

The Commission have wanted to play in the defence market for years – I recall some excitement about this in the late 1990s. An unholy alliance of French Gaullism and British Euroscepticism kept them largely at bay. But that’s now changing. Given her previous defence portfolio and enthusiasm for Permanent Structured Cooperation (PESCO), it was inevitable that Ursula von der Leyen would want to force the pace – as she put it, “we need bold steps towards a European defence union”. Her creation of a new Director General post responsible for the defence industry and space – reporting to the Commissioner for the Internal Market – sends a clear signal.  The new (French) Commissioner will no doubt be mindful of traditional French reticence about Commission competence in defence, so we may see effort deflected into other avenues – isn’t it now almost inevitable that the Military Planning & Conduct Cell (MPCC) will become an Operational Headquarters (OHQ) in the next couple of years? And, given France’s stance on Galileo, I can’t imagine that the new Commission leadership will look that kindly on bids from UK-based companies into the European Defence Fund (EDF) whatever the UK’s future relationship with the EU.  As an aside, it’s intriguing to think what a British Commissioner or DG would have done with this portfolio – some genuine, and long overdue, defence market reform?

So a Rubicon has been crossed.  A “European defence union” is not a “European Army” (there is no constituency for the latter on the continent) and, no doubt, the whole will be less than the sum of the parts. But we in the UK would be wise not to repeat the error we made over the Euro and prematurely write it off.

NATO/EU cooperation

This has come a long way since the Warsaw Summit declaration in 2016. It will go further. The NATO Secretary General is committed to it – and it is hard to imagine that the new EU High Representative will not continue the path set by Frederica Mogherini. Tellingly, one of the specific responsibilities of the new DG in the Commission is to implement the Action Plan on Military Mobility – a NATO priority. As NATO/EU cooperation grows, the old British trope that European Defence could undermine NATO risks looking increasingly threadbare.

Growing continental defence budgets

British Prime Ministers have liked to boast in their forewords to successive strategic defence reviews and similar documents that the UK has the largest defence budget in Europe. On the trajectories in mid-2018, it appeared that the German defence budget would overtake the UK’s by about 2024. The recent – and welcome – further increase in the UK Defence Budget may delay this crossover a few years. But other countries, particularly Germany, will have lots more money to spend on defence and will not be burdened by a nuclear mortgage – that will influence collective investment priorities, NATO and EU, and seize industry’s attention.

Growing “minilateralism”

This inelegant term is widely used to cover the various bilateral and small group cooperative activities – on an institutionally agnostic basis – that have burgeoned over recent years.  HMG’s view has been that they enhance collective cohesion, rather than undermine it – and the UK has been a leading protagonist through its sponsorship of the Joint Expeditionary Force. Others have also been active, particularly Germany. Many people on the British side of the Channel may be surprised at the growth of integrated capabilities and joint units on the continent, notably between Germany and the Netherlands – for example, Project Apollo: the integration of their ground-based air defence.

Given its rule-set, the EDF will deepen this trend – and the UK will not be seen as an especially attractive partner. Some people counter that “Europe” will need UK capabilities and know-how – there were some telling numbers in the German Council on Foreign Relations (DGAP)/International Institute for Strategic Studies (IISS) research papers published last year. But UK capabilities are rated less highly by our continental partners than we might wish – and the institutional reflex will be to get on without us, even if that means replicating capabilities already extant here. And, in certain areas, we are arguably more dependent on them than vice versa – for example, in the land systems domain, which suffered from two decades of flip-flop decision-making by the British Army.

So where will the next generation of big projects fit into this?  A few years ago everyone agreed that we couldn’t have a repeat of the Typhoon/Rafale/Gripen split which emerged in the 1980s. But today we have two incipient European combat air programmes – the Franco-German led New Generation Fighter and the UK-led “Tempest”.  It’s hard to see them coming together anytime soon, if at all.  Absent some bold thinking, we could be heading for another sub-optimal outcome from a broader European perspective. Which may create an opportunity for… the US.    

US engagement, not least by US industry

There is a tendency in Brussels and London to think that this debate is all about us – whether the EU’s future role or the UK’s relationship to it.  But there’s another player with a big interest and whose intentions seem somewhat opaque – the US. At the governmental level, the US is about to lose its default interlocutor on European defence issues – US officials are uncomfortable with the alphabet soup of initiatives coming from Brussels and Paris, but I doubt whether they will invest much effort into blocking them: their focus is increasingly elsewhere.  But US industry are increasingly active in the continental European market. And openly so – twenty years ago, they operated behind front companies. It is said that one or two companies see Germany and Poland as being potentially more important long-term markets than even the UK.  I think that this will lead to some interesting tensions on the continent.  Ursula von der Leyen’s dictum – “stay transatlantic and become more European” – will be tested.

What does all this mean for European defence and security? There will be more “European Defence”.  France and Germany will basically set this agenda, directly or via the EU, with others – mainly the Eastern European states – pursuing their own sub-agendas.  And the EDF’s sponsorship of “minilateral” propositions could drive some industrial restructuring at the second tier level.

But European security against growing threats in a world of renewed great power competition – what one might call real European security – will be heavily influenced by the UK’s choices.  Essentially, I think there are three options:

• “Resting on our laurels”.  Remain active in NATO – indeed, become more so – but generally stand aside from EU-badged activities and “do minimum” on others, such as the French-led European Intervention Initiative (E2I). For the reasons I’ve outlined, I think that this would gradually push us to the margins – with the risk to wider European security that Russia or some other trouble-maker miscalculates the UK’s commitment.

• “Cleave to the US”.  This would be popular with some politicians and senior military folk. I’m sure that we can continue to attract significant US industrial investment, particularly in areas of increasing salience such as cyber, space, Artificial Intelligence, etc. But there would be a price – we wouldn’t have European alternatives, as in the past, to leverage better deals, and there would be an expectation of loyal UK support for US policy positions and activities which we dislike.  Again, the ensuing tensions could pose a risk to wider European security.

• “Play a new intermediate role in Euro-Atlantic security”.  We should be realistic about what we can do with the EU given their reflexes as I’ve previously described – but open to case-by-case engagement.  We should play our capability cards – we may not always have the largest defence budget in Europe in future, but we have some prize assets. We should proactively work to become the F-35 “hub” for Europe. We should become Europe’s framework nation for carriers. We should exploit our geography – as ballistic missile defence becomes more salient, so do our ranges off the West coast of Scotland.   We should continue to build our bilateral partnership with Germany – which could be the “swing vote” in terms of how protectionist or not the EU defence market becomes.  And we should remember that European security isn’t solely about Europe – the challenges to the rules-based order are global and we face them together with other liberal democracies like Japan, Australia, etc. The UK has been investing in its defence links with those countries for several years and they have a depth and breadth unmatched by those with other European states.

I favour the last of these strategies.  For the UK, it would help us retain our sense of being an independent, sovereign actor with choices – which is clearly psychologically important to us.  More widely, it would reinforce deterrence and resilience in the Euro-Atlantic area.  Of course, it will have costs.  We’ll need to make big commitments and investments in key technologies like Artificial Intelligence and quantum computing – we can’t keep sitting on the fence, keeping our options open, which has been another reflex. Such an approach would be good for Britain and good for European security.

Peter Watkins

The author was Director General Security Policy and then Director General Strategy & International in the UK Ministry of Defence (MOD) from April 2014 to November 2018. The views expressed here are personal and not necessarily representative of those of the MOD or other organisations to which the author is now affiliated.  They are based on a talk given in London in October 2019.