"..The MoD, with an annual budget of about ?30 billion, is going through a financial crisis, and is already exhausting ?3.5 billion of extra funds granted by the Treasury. The war in Iraq is costing the MoD about ?150 million a month..."

Defence Secretary Geoff Hoon will be issuing a statement later this week. The content is already anticipated to involve sharp cuts in future orders for large equipment items, and also in manpower levels (these will no doubt be disguised as changes in recruitment patterns rather than job cuts, but will still involve redundancies).

Presumably the stocks to benefit are those well placed to handle the higher tech stuff, and those to lose will be reliant on manpower-related orders, and on vehicle/platform production.



December 08, 2003

Arms firms told to expect cuts in orders
By Russell Hotten


BRITAIN'S arms contractors will be warned this week to prepare for big cuts in budgets for ships, aircraft and tanks as the Ministry of Defence switches spending to electronic warfare.
Multi-billion-pound contracts involving BAE Systems, VT Group and several foreign-owned companies will be affected when this week?s Government White Paper on defence spending signals the change in emphasis.

Although Geoff Hoon, the Defence Secretary, is not expected to say which contracts will be hit - that will come next year - programmes including the Type 45 destroyer and the Eurofighter jet are almost certain to be cut back.

On Thursday, when he delivers the White Paper, Mr Hoon will say that the era when Britain could rely on a large army and heavy armour to fight wars is over. Instead, satellite intelligence, ?smart? bombs and pilotless drones are the way forward.

"Rapid deployment and weapons capable of pin-point accuracy will be essential for our forces in the future,"a Whitehall source said.

This is because most future conflicts are expected to be smaller, but spread throughout the world.

Although the MoD says manpower levels will stay the same, armed forces chiefs fear that the budget cuts will inevitably mean a reduction in personnel. The Conservative Party has already indicated that it will fight any drop in staffing.

Last month Mr Hoon hinted at what will be in the White Paper. Military effectiveness was no longer measured by the size of an army or the number of tanks, he said, adding: "Technology will be a key driver for changes and will present us with new opportunities."

In October, Lord Bach, the Defence Procurement Minister, said: "Numbers of platforms is a fairly blunt planning tool for acquisition decisions."

Analysts believe that ?1-2 billion will be cut from the budget for heavy weapons. They believe that the cutbacks will involve buying fewer Eurofighter jets and reducing the number of Type 45 destroyers from twelve to about eight.

Eurofighter is developed with Finmeccania of Italy, and EADS, the Franco-German defence group.

The Government had planned to buy six Astute class submarines, but this could be cut to five. Two new aircraft carriers may be shortened, meaning that the ships would require fewer Joint Strike Fighters. A large number of Challenger 2 tanks may also be mothballed.


The MoD, with an annual budget of about ?30 billion, is going through a financial crisis, and is already exhausting ?3.5 billion of extra funds granted by the Treasury. The war in Iraq is costing the MoD about ?150 million a month.


Edit: Apologies for punctuation oddities. Have tried correcting them but MoneyAM system keeps reverting to errors.