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2016 preview: Defence

Following the shock and awe of the 2010 Strategic Defence and Security Review, the prime minister’s announcement in November outlining the government’s defence strategy for the next five years was, by comparison, relatively benign.

There was no further reduction in the size of the armed forces; a commitment to maintain the Nato expenditure target of 2 per cent of GDP on defence; and a modest 1 per cent increase on defence equipment expenditure.

There are, however, some reasonably significant announcements for the UK construction industry, even if the overall framework is not substantially different.

Defence needs

The planned Joint Force 2025 builds on Future Force 2020 and is unlikely to result in any major change of direction for the £1.6bn Army Basing Programme. The increased priority for cyber and intelligence integration may, however, require additional built infrastructure to support these activities.

A further squadron of F35 Lightning aircraft and two additional Typhoon squadrons is likely to require further basing works to be undertaken, and the purchase of nine maritime patrol aircraft will also come with specific basing requirements.

The purchase of eight Type 26 frigates appears to be a reduction on previous announcements of 13 ships, although this may simply be a first phase of procurement.

“With most of the critical construction frameworks in place, and some continuity around the programme, we can expect to see some momentum building around delivery”

Confirmation of these plus a further two offshore patrol vessels is likely to crystallise the shipbuilder’s infrastructure requirements for delivery of these orders.

Reiteration of the Successor programme for replacement of the UK’s current nuclear-armed submarines came as no surprise. Construction and procurement of future work in connection with this programme is already under way, providing considerable construction sector opportunity over the next few years.

Private sector involvement

Probably the biggest loser is the civil service, which will be reduced in size by “almost 30 per cent … by the end of this parliament”.

This may present a challenge for procurement and delivery of planned construction works, with fewer experienced staff to process projects in the pipeline. It certainly suggests that there will be scope for further private sector support to build on that already invested since SDSR 2010.

One potentially significant announcement is that the Ministry of Defence will be allowed to “invest efficiency savings into the armed forces”. As the statement also advises that the defence estate will be reduced by 30 per cent, “releasing public sector land for 55,000 new homes”, this could become a welcome additional source of income for the MoD.

On the whole, this largely confirms the direction of travel. With most of the critical construction frameworks in place, and some continuity around the programme, we can expect to see some momentum building around delivery. Here’s hoping!

Ken Munro is a director and head of defence at Gleeds

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