Recommendations & Conclusions
14 items
2
Conclusion
Foreign Involvement in the Defence Supp…
Acknowledged
As a result of the Ministry of Defence’s approach of encouraging inward investment, foreign involvement in the UK defence supply chain is widespread, with the UK hosting a broad range of UK-based and international suppliers. This approach has brought many benefits to the UK defence industry and wider economy.
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As a result of the Ministry of Defence’s approach of encouraging inward investment, foreign involvement in the UK defence supply chain is widespread, with the UK hosting a broad range of UK-based and international suppliers. This approach has brought many benefits to the UK defence industry and wider economy.
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Government response AI summary
The government agrees that its open approach to inward investment has brought significant benefits to the UK economy and defence industry, citing substantial FDI, job creation, and strengthened industrial base through multinational firms and international partnerships.
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Ministry of Defence
3
Conclusion
Foreign Involvement in the Defence Supp…
Accepted
If the Ministry of Defence has the level of oversight of the defence supply chain that it claims, then it is clear that it was aware of purchases by Chinese companies into the UK defence supply chain and decided that such involvement was an acceptable risk. We do not agree.
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If the Ministry of Defence has the level of oversight of the defence supply chain that it claims, then it is clear that it was aware of purchases by Chinese companies into the UK defence supply chain and decided that such involvement was an acceptable risk. We do not agree.
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Government response AI summary
The government notes the committee's concern but maintains its extant risk-based approach to foreign investment in the defence supply chain is appropriate, citing detailed monitoring, scrutiny, and planned enhanced powers under the NSI Bill to protect national security.
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Ministry of Defence
4
Recommendation
Foreign Involvement in the Defence Supp…
Accepted
The Ministry of Defence should assess the implications of Chinese ownership of the companies listed within this report.
Government response AI summary
The government notes the recommendation and reassures the Committee that the MOD has already assessed and will continue to assess the implications of Chinese ownership, actively managing the defence supply chain and monitoring mergers and acquisitions for national security risks.
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Ministry of Defence
5
Recommendation
Foreign Involvement in the Defence Supp…
Rejected
The Ministry of Defence’s open and country-agnostic approach to foreign involvement means that the defence supply chain has been open to potentially hostile foreign involvement, with reports of companies being owned and influenced by foreign Governments whose values and behaviours are at odds with our own and who are known …
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The Ministry of Defence’s open and country-agnostic approach to foreign involvement means that the defence supply chain has been open to potentially hostile foreign involvement, with reports of companies being owned and influenced by foreign Governments whose values and behaviours are at odds with our own and who are known to engage in intellectual property theft. The Ministry of Defence should publish a list of countries it Foreign Involvement in the Defence Supply Chain 31 considers friendly and from whom investment should be encouraged. All those countries falling outside of this list should be barred from investing in the UK’s defence supply chain, including China and Russia.
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Government response AI summary
The government rejected the recommendation to publish a friendly list of countries for investment, stating it prefers a country-agnostic, risk-based approach, strengthened by the NSI Bill, to scrutinize all foreign acquisitions on a case-by-case basis due to potential circumvention.
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Ministry of Defence
6
Recommendation
Foreign Involvement in the Defence Supp…
Rejected
Recent reports have highlighted the purchase of second-hand Chinese equipment by the Ministry of Defence. This is deeply concerning. The purchase of equipment from China for use by the Armed Forces should not be considered a viable option by the Ministry of Defence.
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Recent reports have highlighted the purchase of second-hand Chinese equipment by the Ministry of Defence. This is deeply concerning. The purchase of equipment from China for use by the Armed Forces should not be considered a viable option by the Ministry of Defence.
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Government response AI summary
The government refutes the claim of purchasing second-hand Chinese equipment, clarifying that the E-7 Wedgetail airframes were US-manufactured Boeing aircraft sourced through Canada and will undergo comprehensive overhaul and stringent security checks.
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Ministry of Defence
7
Recommendation
Foreign Involvement in the Defence Supp…
Deferred
The relative indifference of the Ministry of Defence to the possible relocation of General Electric’s Rugby facility was concerning. We are pleased that this important industrial capacity ultimately remained in the UK. The Ministry of Defence should prioritise the maintenance of sovereign capability within the UK defence industry.
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The relative indifference of the Ministry of Defence to the possible relocation of General Electric’s Rugby facility was concerning. We are pleased that this important industrial capacity ultimately remained in the UK. The Ministry of Defence should prioritise the maintenance of sovereign capability within the UK defence industry.
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Government response AI summary
The government refutes the perception of indifference regarding the GE Rugby facility, stating the MOD worked hard to retain it. It addresses the recommendation to prioritise sovereign capability by confirming that the ongoing Defence and Security Industrial Strategy (DSIS) review is considering a strategic approach …
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Ministry of Defence
8
Conclusion
Foreign Involvement in the Defence Supp…
Acknowledged
The UK previously lacked foreign direct investment screening legislation which left the defence supply chain, alongside other sectors of the UK’s economy, vulnerable to influence from hostile foreign investors. The National Security and Investment Bill, once law, will change this situation and offer greater protection to the UK’s economy. Alongside …
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The UK previously lacked foreign direct investment screening legislation which left the defence supply chain, alongside other sectors of the UK’s economy, vulnerable to influence from hostile foreign investors. The National Security and Investment Bill, once law, will change this situation and offer greater protection to the UK’s economy. Alongside industry and many expert commentators, we support the introduction of this Bill and the planned regime.
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Government response AI summary
The government welcomes the committee's support for the National Security and Investment (NSI) Bill, affirming that it will introduce new powers to modernise the investment screening regime, ensure national security, and enable scrutiny of deals of any type or size.
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Ministry of Defence
9
Recommendation
Foreign Involvement in the Defence Supp…
Accepted
Some commentators have questioned the placement of the ‘Investment Security Unit’ within the Department for Business, Energy and Industrial Strategy, suggesting that it does not have the necessary expertise and knowledge. We are content, however, that the unit will be able to draw on experience across Whitehall. The Ministry of …
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Some commentators have questioned the placement of the ‘Investment Security Unit’ within the Department for Business, Energy and Industrial Strategy, suggesting that it does not have the necessary expertise and knowledge. We are content, however, that the unit will be able to draw on experience across Whitehall. The Ministry of Defence, alongside other departments and agencies, should proactively feed into all relevant assessment processes.
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Government response AI summary
The government confirms that the Investment Security Unit (ISU) was designed with active engagement from the MOD and other departments, and the MOD will continue to play a pivotal role in its establishment and future assessments, drawing on expertise across Whitehall.
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Ministry of Defence
10
Conclusion
Foreign Involvement in the Defence Supp…
Accepted
Venture capitalism helps to drive innovation in defence and associated industries. However, we heard concerns that venture capitalist funding could represent an avenue for hostile foreign investors to gain entry into the UK defence supply chain. The Minister for Business and Industry told us that the National Security and Investment …
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Venture capitalism helps to drive innovation in defence and associated industries. However, we heard concerns that venture capitalist funding could represent an avenue for hostile foreign investors to gain entry into the UK defence supply chain. The Minister for Business and Industry told us that the National Security and Investment Bill legislates in this area to protect national security-sensitive entities.
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Government response AI summary
The government agrees with the committee's concern regarding hostile foreign investment via venture capitalism and explains how the new National Security and Investment regime will address this by requiring ownership declarations, introducing sanctions for false information, and covering risks for small, start-up companies.
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Ministry of Defence
11
Conclusion
Foreign Involvement in the Defence Supp…
Accepted
The new regime’s impact on foreign direct investment is, as yet, uncertain. If implemented efficiently the new regime should have little to no harmful impact on foreign direct investment to the UK defence supply chain, only preventing investment that is undesirable.
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The new regime’s impact on foreign direct investment is, as yet, uncertain. If implemented efficiently the new regime should have little to no harmful impact on foreign direct investment to the UK defence supply chain, only preventing investment that is undesirable.
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Government response AI summary
The government agrees with the committee's assessment that the NSI Bill's regime will not negatively impact FDI and is creating an Investment Security Unit, a digital platform, and a dedicated team to ensure efficient and timely processing of notifications.
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Ministry of Defence
12
Conclusion
Foreign Involvement in the Defence Supp…
Accepted
The defence industry in the UK has remained broadly resilient in the face of financial pressures resulting from the COVID-19 pandemic. Unfortunately, the same cannot be said for all businesses within the defence supply chain, particularly those that also operate in commercial aerospace and are small 32 Foreign Involvement in …
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The defence industry in the UK has remained broadly resilient in the face of financial pressures resulting from the COVID-19 pandemic. Unfortunately, the same cannot be said for all businesses within the defence supply chain, particularly those that also operate in commercial aerospace and are small 32 Foreign Involvement in the Defence Supply Chain and medium sized enterprises. The financial vulnerability of such businesses could increase the risk of hostile foreign involvement in the defence supply chain.
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Government response AI summary
The government shares the committee's assessment regarding the vulnerability of some defence supply chain businesses and notes actions taken, including strengthening the Enterprise Act, bringing forward the NSI Bill, and continuing economic support to industry. Furthermore, the MOD aims for at least 25% of procurement …
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Ministry of Defence
13
Recommendation
Foreign Involvement in the Defence Supp…
Accepted
The Ministry of Defence and wider Government have provided substantial support to businesses in the defence supply chain. Unfortunately, we heard that this support has not always reached its intended beneficiaries or had the intended consequences. The Ministry of Defence should improve its communication strategy with small and medium sized …
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The Ministry of Defence and wider Government have provided substantial support to businesses in the defence supply chain. Unfortunately, we heard that this support has not always reached its intended beneficiaries or had the intended consequences. The Ministry of Defence should improve its communication strategy with small and medium sized enterprises to ensure that they are aware of the support that they are eligible for at this difficult time.
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Government response AI summary
The government accepts the recommendation, committing to enhance communications to SMEs, which is featured in the MOD's SME Action Plan, and has established a new SME Working Group with a refreshed SME Action Plan due for publication later this year.
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Ministry of Defence
14
Recommendation
Foreign Involvement in the Defence Supp…
Accepted
The commercial aerospace industry remains financially fragile. The Ministry of Defence should already be aware of the close links between this industry and the defence supply chain and should consider what more it can do to support businesses which operate here, particularly small and medium sized enterprises.
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The commercial aerospace industry remains financially fragile. The Ministry of Defence should already be aware of the close links between this industry and the defence supply chain and should consider what more it can do to support businesses which operate here, particularly small and medium sized enterprises.
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Government response AI summary
The government is acutely aware of the aerospace industry's fragility and its links to the defence supply chain, stating it has already provided significant support through schemes like Furlough and interim payments, and will make a strategic investment of over £2 billion in the Future …
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Ministry of Defence
15
Recommendation
Foreign Involvement in the Defence Supp…
Accepted
The COVID-19 pandemic impacted the supply chains of defence businesses as well as their finances. Global supply chains for defence represent a vulnerability, especially when these supply chains include materials from countries not closely aligned with the UK. The Ministry of Defence should set out how it is proactively supporting …
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The COVID-19 pandemic impacted the supply chains of defence businesses as well as their finances. Global supply chains for defence represent a vulnerability, especially when these supply chains include materials from countries not closely aligned with the UK. The Ministry of Defence should set out how it is proactively supporting efforts from defence businesses to seek domestic alternatives for supply and to shorten supply chains. (Paragraph 72) Foreign Involvement in the Defence Supply Chain 33 Sub-Committee Formal minutes Tuesday 9 February 2021 Members present: Richard Drax, in the Chair Stuart Anderson Sarah Atherton Martin Docherty-Hughes Rt Hon Tobias Ellwood Rt Hon Mr Mark Francois Gavin Robinson Rt Hon John Spellar Derek Twigg Minutes Foreign Involvement in the Defence Supply Chain Draft Report (Foreign Involvement in the Defence Supply Chain), proposed by the Chairman, brought up and read. Ordered, That the draft Report be read a second time, paragraph by paragraph. Paragraphs 1 to 72 read and agreed to. Summary agreed to. Resolved, That the Report be the Second Report of the Sub-Committee to the Committee in this session. Ordered, That the Chair make the Report to the Committee. Next meeting [Sub-Committee Adjourned 34 Foreign Involvement in the Defence Supply Chain Committee Formal Minutes Tuesday 9 February 2021 Members present: Rt Hon Tobias Ellwood, in the Chair Stuart Anderson Sarah Atherton Martin Docherty-Hughes Richard Drax Rt Hon Mr Mark Francois Gavin Robinson Rt Hon John Spellar Derek Twigg Minutes Foreign Involvement in the Defence Supply Chain Draft Report from the Sub-Committee (Foreign Involvement in the Defence Supply Chain), proposed by the Chairman, brought up and read. Ordered, That the draft Report be read a second time, paragraph by paragraph. Paragraphs 1 to 72 read and agreed to. Summary agreed to. Resolved, That the Report be the Fourth Report of the Committee to the House. Ordered, That the Chair make the Report to the House. Order
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Government response AI summary
The government acknowledges supply chain vulnerabilities and is proactively supporting domestic alternatives by mapping critical supply chains, exploring opportunities for UK companies, supporting new UK-based suppliers, piloting a new industrial participation policy, and engaging in international cooperation initiatives like NTIB.
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Ministry of Defence