Foreign Involvement in the Defence Supply Chain

Defence Committee Closed Inquiry
Opened: 30 Jul 2020 Closed: 9 Jul 2021 Parliament page
Following the COVID-19 pandemic, this inquiry and planned Sub-Committee will scrutinise the vulnerabilities of the UK’s defence supply chain. Focusing on the impact on SMEs and mid-sized companies, it will: assess the current level of foreign ownership, particularly by companies with links to states which could have “ulterior motives” explore … Read more
2 Recommendations
12 Conclusions
1 Report
Activity timeline 2 events
27 Apr
2021
Report published
14 Feb
2021
Report published
Title HC No. Published Items Response
Foreign Involvement in the Defence Supply Chain HC 699 14 Feb 2021 14 Responded
Recommendations & Conclusions
14 results
2 Conclusion
Foreign Involvement in the Defence…
As a result of the Ministry of Defence’s approach of encouraging inward investment, foreign involvement...
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 … Read more
Government Response
As the Committee notes, the Government’s open approach to inward investment has resulted in significant benefits to the UK economy. It provides a substantial contribution to business turnover and job … Read more
Ministry of Defence
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3 Conclusion
Foreign Involvement in the Defence…
If the Ministry of Defence has the level of oversight of the defence supply chain...
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 … Read more
Government Response
As the Committee is aware, the MOD wants to source the best solutions for our requirements. This naturally means that there is significant foreign involvement in the defence supply chain. … Read more
Ministry of Defence
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4 Conclusion
Foreign Involvement in the Defence…
The Ministry of Defence should assess the implications of Chinese ownership of the companies listed...
The Ministry of Defence should assess the implications of Chinese ownership of the companies listed within this report.
Government Response
The Government notes the Committee’s recommendation and would like to reassure its members that the MOD (and the wider UK investment security community) has assessed - and will continue to … Read more
Ministry of Defence
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5 Recommendation
Foreign Involvement in the Defence…
The Ministry of Defence’s open and country-agnostic approach to foreign involvement means that the defence...
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 … Read more
Ministry of Defence
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6 Conclusion
Foreign Involvement in the Defence…
Recent reports have highlighted the purchase of second-hand Chinese equipment by the Ministry of Defence.
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 … Read more
Government Response
The Government recognises the Committee’s concerns regarding the importance of our acquisition strategies and supply chains for defence equipment, including associated security considerations. However, it is not correct to state … Read more
Ministry of Defence
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7 Conclusion
Foreign Involvement in the Defence…
The relative indifference of the Ministry of Defence to the possible relocation of General Electric’s...
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 … Read more
Government Response
The Government is very clear that the MOD did not view the possible relocation of General Electric’s Rugby facility with indifference. As the then-Minister for Defence Procurement said in the … Read more
Ministry of Defence
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8 Conclusion
Foreign Involvement in the Defence…
The UK previously lacked foreign direct investment screening legislation which left the defence supply chain,...
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 … Read more
Government Response
The Government’s current powers to protect against hostile foreign investment come from the Enterprise Act (2002). Although this Act has been amended, it is no longer sufficiently flexible to address … Read more
Ministry of Defence
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9 Conclusion
Foreign Involvement in the Defence…
Some commentators have questioned the placement of the ‘Investment Security Unit’ within the Department for...
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 … Read more
Government Response
The Investment Security Unit (ISU) has been designed following wide consultation across Government, with the active engagement of Government departments including the MOD and the Agencies. The Committee is quite … Read more
Ministry of Defence
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10 Conclusion
Foreign Involvement in the Defence…
Venture capitalism helps to drive innovation in defence and associated industries.
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 … Read more
Government Response
The Government agrees with the Committee that venture capitalism can have a positive impact on UK industry. The UK remains by far the leading destination in Europe for venture capital … Read more
Ministry of Defence
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11 Conclusion
Foreign Involvement in the Defence…
The new regime’s impact on foreign direct investment is, as yet, uncertain.
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 … Read more
Government Response
The Government agrees with the Committee’s assessment that an efficiently operated regime introduced by the NSI Bill will not have a negative impact on foreign direct investment to the UK … Read more
Ministry of Defence
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12 Conclusion
Foreign Involvement in the Defence…
The defence industry in the UK has remained broadly resilient in the face of financial...
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 … Read more
Government Response
The Government shares the Committee’s assessment that UK defence industry has remained broadly resilient despite the enormous challenges posed by the pandemic. But the Committee is quite right to highlight … Read more
Ministry of Defence
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13 Conclusion
Foreign Involvement in the Defence…
The Ministry of Defence and wider Government have provided substantial support to businesses in the...
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 … Read more
Government Response
The Government is grateful to the Committee for the insights it offers. As the Committee notes, we have provided substantial support to those within the defence supply chain and have … Read more
Ministry of Defence
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14 Conclusion
Foreign Involvement in the Defence…
The commercial aerospace industry remains financially fragile.
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 … Read more
Government Response
Like the Committee, the Government is acutely aware of the current fragility of the commercial aerospace sector as a result of the Covid pandemic and agrees that a strong aerospace … Read more
Ministry of Defence
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15 Recommendation
Foreign Involvement in the Defence…
The COVID-19 pandemic impacted the supply chains of defence businesses as well as their finances.
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 … Read more
Ministry of Defence
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