Soldati del Regno Unito

Brexit and the risks for the “European” defence industry

It is well known that the new European Commission led by Ursula von der Leyen has the objective of strengthening industrial integration in the military field, continuing the policy begun during the last legislature.

This also appears in the creation of the Directorate-General for Defence and Space, entrusted to the Internal Market Commissioner Sylvie Goulard, a former French Defence Minister. The recent publication by the European Court of Auditors of a detailed report on “European Defence” further confirms the desire to increase integration in this extremely delicate area. But this path is being made complicated and intricate by some almost insurmountable obstacles of a political, strategic and economic nature. If the political-strategic issues can be resolved through negotiations to work out a compromise on the priorities in the military sphere, in the case of the economic issues the difficulties seem much greater and will increase when (and if) the United Kingdom completes its exit from the European Union.

A shrinking budget

One of the main effects of Brexit could be to slow down EU policies, principally because the British government is the one that invests most resources in Defence, amounting to about £45 billion (about €50.77 billion). Figures that make the United Kingdom the country that spends most on defence in Europe. In 2017 its budget accounted for a quarter of total defence spending by EU members. And there’s worse to come, because the leading “European” defence company in terms of revenue is the British BAE Systems. In 2018, according to data published by Defense News, it had almost double the turnover of the Airbus sector. And when it comes to engines, in Europe Rolls-Royce dominates the scene.

So Brexit, as pointed out in the report by the European Court of Auditors, will bring with it a series of potential imbalances to the defence industries, but above all it will create an economic void that cannot easily be filled by the EU countries. This means that while for the period 2021-2027 the Commission has proposed to increase the budget of the European Defence Fund (EDF) from €590 million to 13 billion, without the United Kingdom the remaining 27 EU countries will have to stump up more money to make good the shortfall. The real risk is that the project for a common defence industry will start with a lack of investment in research and development, which is essential to keep pace with the technological innovations in the future.

Opposition between two axes

The problems are not confined to investments, because the UK market should not to be underrated, being one of the biggest globally, especially for the Italian company Leonardo, which has about 7000 employees and a number of manufacturing and maintenance plants in Britain. This shows the industrial-political proximity between Italy and the United Kingdom, confirmed by Italian participation in the program for thesixth-generation Tempest fighter aircraft, in competition with the Franco-German FCAS.

The impact of Brexit could increase the fragmentation and divisions between the two main axes of the European defence industry, provoking a Franco-German hegemony over funds allocated by the EDF. The most heavily hit would be Italy, which would find itself at a crossroads. Should it continue relations with a non-EU country or act as a sparring partner to Paris and Berlin? There is more than just the political balance on the plate, because industries in the United Kingdom cooperate with European ones in many defence sectors, including electronics, helicopters and missiles. Losing the chance to cooperate with British industry could be a double-edged sword for Europe because the net decrease in investments in research and development, combined with the polarisation of all the initiatives around the Franco-Germany alignment, risks making the European Union lose its credibility in the military sphere.

The future

For Europe, but above for all the main EU countries, Brexit will be a veryimportant crossroads for the future and will compel them to increase the funds allocated to defence, above all the research and development needed to remain competitive. But the United Kingdom’s exit from the European Union is unlikely to lead to greater integration of the defence industry among the 27 remaining countries. To prove it, there is the division between the Tempest program and the FCAS. And the first difficulties caused by a shortage of funding and the misgivings of many German parliamentarians are already emerging. A far from exciting “beginning” to this “European” industry’s principal project.