New Naval Support Agreement: Opportunities and Challenges for UK SMEs

The Ministry of Defence's recent announcement of a new warship and submarine support agreement marks a significant shift in how the UK's naval fleet will be maintained. While this move promises to boost both military readiness and economic growth, it's important to examine the practical implications for small and medium-sized enterprises (SMEs) across the country.

At the heart of this initiative is the Marine Systems Transformation (MaST) programme, a seven-year framework worth up to £850 million. This programme is designed to deliver support and spares for non-combat equipment aboard UK warships and submarines, covering an impressive 180,000 different items ranging from propulsion systems to galley equipment.

The most notable aspect of this agreement is its focus on increasing SME participation in the defence supply chain. Defence Minister Maria Eagle emphasized that this change will allow more British small businesses - "from Southampton to Aberdeen" - to be directly involved in supporting the Royal Navy. This marks a departure from previous models that often favoured larger, established contractors.

Under the new framework, 39 companies will be able to bid for work through Defence Equipment & Support (DE&S), the MOD's procurement arm. This increased competition is expected to drive innovation and potentially reduce costs, though it remains to be seen how this will balance with the complexities of defence procurement.

The geographical distribution of suppliers under this framework is particularly interesting. Between a third and half of the suppliers are based outside the south of England, with the majority located in the Midlands or North of England, and additional suppliers based in Scotland and Wales. This spread could contribute to the government's "levelling up" agenda, potentially creating jobs and stimulating economic growth in regions that have traditionally seen less benefit from defence spending.

However, the transition to this new model is not without challenges. SMEs entering the defence market for the first time may face a steep learning curve in terms of meeting the stringent quality and security requirements associated with military contracts. There's also the question of whether smaller companies will have the capacity to handle the scale and complexity of some of the required work.

Samson Folkes, Managing Director of Somers Forge, a Midlands-based manufacturer of bespoke naval parts, highlighted both the opportunities and the responsibilities that come with this new framework. "Being selected for the MAST framework represents a huge opportunity for our business," Folkes said. He noted that winning contracts through MAST could help sustain vital jobs and apprenticeships in the Midlands, as well as underpin growth ambitions.

This point about apprenticeships and skills development is crucial. The defence industry often requires specialized skills, and this new agreement could potentially create a demand for training programs and apprenticeships in regions that have historically struggled with skills shortages.

From a naval perspective, the MaST programme aims to improve fleet readiness through better access to spare parts for both planned and unplanned maintenance, access to specialist equipment-related technical advice and expertise globally, and reductions in cost without compromising safety or availability. These improvements could have knock-on effects for the SMEs involved, potentially leading to more consistent work and opportunities for growth.

However, it's important to note that entering the defence supply chain is not without risks. Defence budgets can be subject to political changes, and SMEs may need to be prepared for potential fluctuations in demand. There's also the challenge of balancing specialisation in defence work with the need to maintain a diverse customer base to ensure long-term sustainability.

The success of this initiative will likely depend on how well the MOD and DE&S can manage the transition to this new model. Clear communication of requirements, streamlined procurement processes, and support for SMEs in navigating the complexities of defence contracts will be crucial.

Moreover, while the focus on SMEs is commendable, it's worth considering how this might affect the larger, established defence contractors. Will they adapt by subcontracting more work to SMEs, or will this lead to a more fundamental restructuring of the defence industrial base?

In conclusion, the new warship and submarine agreement represents a significant opportunity for UK SMEs to enter or expand their presence in the defence market. It has the potential to drive innovation, create jobs, and contribute to regional economic growth. However, it also presents challenges in terms of capacity building, skills development, and managing the risks associated with defence contracts.

As this programme unfolds over the next seven years, it will be crucial to monitor its impact not just on naval readiness, but on the broader industrial landscape of the UK. The success of this initiative could provide valuable lessons for future efforts to diversify and strengthen the UK's industrial base, both within and beyond the defence sector.