Source · Select Committees · Public Accounts Committee
Recommendation 24
24
Acknowledged
HM Treasury has provided the Department with £560 million to restart production lines in UK...
Conclusion
HM Treasury has provided the Department with £560 million to restart production lines in UK companies.62 The Department told us that it is working closely with key suppliers in the UK, including BAE Systems, MBDA and Thales, to invest in long-term strategic capabilities. The Department subsequently wrote to us outlining its acquisition reform initiatives and explaining that DE&S is implementing a refresh of its strategy under its new Chief Executive.63 Improving the supply chain will also require working with allies. The Department has also placed requests for supply with US companies and has engaged with fellow NATO countries to discuss how they can collectively stimulate the industrial supply chain to meet the alliance’s long-term needs.64 We note that attempts to increase supply will be challenging given the current inflationary economic environment, particularly given that inflation tends to be higher in the defence industry than the general economy.65 57 Q 22; Letter from Permanent Secretary to the Chair, 23 January 2023, p.1 58 Q 25; Letter from Permanent Secretary to the Chair, 23 January 2023, p.1 59 Q 21 60 Q 17; Royal United Services Institute, Preliminary Lessons in Conventional Warfighting from Russia’s Invasion of Ukraine: February-July 2022, P55 61 Q 20 62 Q 22 63 Letter from Permanent Secretary to the Chair, 23 January 2023, p.4 64 Q 20 65 Q 88 MoD Equipment Plan 2022–2032 15
Government Response Summary
The government agrees with the committee's recommendation and outlines actions being taken in relation to defence supply chain strategy, including the creation of a MOD Supply Chain Development Programme, a Supply Chain Contingency Fund, and implementation of a tool to proactively manage supply chain issues.
Government Response
Acknowledged
HM Government
Acknowledged
6.1 The government agrees with the Committee’s recommendation. Target implementation date: December 2023 6.2 The Covid-19 pandemic and Ukraine crisis has brought into sharp focus the increased demands upon the Defence supply chain and its ability to deliver capabilities to our Armed Forces. 6.3 Working with our industry partners, the department has adapted its supply chains and how they are managed on many critical programmes. 6.4 In tandem with programme level action, the Defence Supply Chain Strategy was published last year which focuses on reviewing and improving aspects of Defence support and logistics. The department is now implementing a range of initiatives in support of this Strategy and the and wider supply chain commitments MOD has made. These including the creation of a MOD Supply Chain Development Programme to support Mid Tiers and SMEs, a Supply Chain Contingency Fund, and beginning the implementation of a tool that enables MOD to proactively manage supply chain issues at lower tiers. 6.5 The department recognises that collaboration with the defence industry is vital for the delivery of these initiatives. The Defence Suppliers Forum, the principal mechanism for MOD- Industry engagement, continues to be fully utilised and is being refocused with support from industry to ensure that we are addressing the most important issues facing UK defence. 6.6 Although these efforts and initiatives are substantial, the scale of the supply chain challenge means that MOD is looking at where it should invest more broadly into our supply chain design and management. MOD understands the need to consider supply chain aspects right from the very early stage of capability planning and aims to improve our ability to create supply chain for future capabilities that better support resilience and other defence priorities.