Recommendation 15

HM Government Acknowledged

The Government thanks the Committee for its observations. We recognise the impact of the pandemic and agree that global supply chains can involve a degree of vulnerability. Our DSIS review included an assessment of the key capability areas and industry sub- Fifth Special Report of Session 2019–21 11 sectors that we rely upon for our national security - and set out that the MOD would continue to prioritise the mapping of its critical supply chains. This included looking at what we need to have directly available in this country. Through the DSIS review, we have also explored how we can grow opportunities for UK supply chain companies on both our own programmes and those of our key allies and partners. We actively support those interested in supplying the MOD to find new UK-based suppliers, including, for example, the Boeing Prosperity Partnership. For new contracts, we will be piloting a new industrial participation policy, encouraging bidders to consider what can be supplied from within the UK, to set voluntary targets. The new ‘social value in procurement model’–which will ensure that tender evaluations across government fully consider UK social value in a consistent and systematic way–allows us to compare options in individual procurements, including an assessment of which might increase supply chain resilience or boost innovation. The Government recognises the potential benefits of shorter domestic supply chains, especially where they can enhance supply chain resilience. The recent announcement of the potential for Cornish-sourced lithium, a critical mineral for batteries for electric cars, provides one such example. But there are limits to such an approach since the UK on grounds of geology will remain dependent on external sources for certain strategic raw materials. the continued flow of critical goods and to keep global trade moving. The Government has assessed several critical supply chains, based on our judgement of the severity and likelihood of their disruption against a range of stress scenarios. We have also developed a cross-government strategic framework for addressing potential resilience issues, from a ‘market-first’ position in line with our commitment to free trade as part of a rules- based system. We have identified mitigations that could strengthen supply chains and are developing a risk and assurance tool for collating intelligence from across government and our overseas network. This will provide central oversight across the most critical supply chains, allowing the UK to respond quickly when risks emerge. The UK has a diverse range of global trading partners involved in our critical supply chains. As we are committed to championing free trade, our approach to developing supply chain resilience is designed to balance the need to develop domestic resilience in some critical supply chains, with the need for a diverse set of international supply chains and trading partners. Our focus is on ensuring that we have resilient and diverse supply chains in place to allow for the continued flow of essential items and avoid shortages in the future. ensure access for UK companies in overseas supply chains. Our objectives are to establish greater international cooperation, better understand supply chain vulnerabilities, share diagnoses and inform a coordinated response to our shared challenges. The MOD has been engaged from the start in this endeavour. A primary example is the work being done within the National Technology Industrial Base (NTIB) initiative, which seeks to foster increased cooperation and collaboration between the US, Canada, Australia and the UK. NTIB partners are working together to strengthen and build resilience in respective 12 Fifth Special Report of Session 2019–21 industrial bases in areas such as: enhancing innovation to facilitate greater integration, eliminating barriers to the sharing of knowledge, cooperation to resolve specific supply chain issues and for protection against hostile foreign investment.