finance

'Culture change needed at MoD' to ensure Sottish SMEs get fair share of defence contracts



On the eve of Armed Forces Day, the Scottish Affairs Committee has argued that small and medium-sized enterprises (SMEs) in Scotland are being overlooked by the Ministry of Defence (MoD) and its prime contractors when companies are selected to fulfil defence contracts.

This is despite Scottish industry having the skills and ambition to match any other part of the UK and the nation being pivotal to the UK’s military infrastructure, according to a statement.

While nearly 10% of the MoD’s budget with industry is spent in Scotland, this is heavily skewed towards international prime contractors.

Spending with Scottish SMEs accounted for only 2.5% of the MoD’s total spending with SMEs in 2020/21.

The committee has heard how Scottish SMEs find it “extremely difficult” to access the UK defence sector and that that “culture change is required” to address UK disparities in spending with SMEs.

In its report, Defence in Scotland: Military Landscape , the committee highlighted evidence that Scotland’s diverse military capabilities are vital to the UK, for example RAF Lossiemouth’s role in intercepting foreign aircraft in UK airspace.

Scottish bases – such as HMNB Clyde and RAF Lossiemouth – are already benefiting from increased funding the UK Government has allocated to defence this parliament.

The UK Government has announced its goal to reduce the defence estate by 30% by 2040, creating fewer and larger sites.

The committee collected evidence that the impacts of base closures in Scotland can vary depending on location. In prosperous areas, bases can become much-needed sites for housing or businesses but, in less affluent areas, the consequences can be damaging and long-lasting, with instances where local people need to leave the area to seek new employment opportunities.

To mitigate negative impacts, the committee recommends that the MoD intensifies its collaboration with Scottish local authorities, including engagement at earlier stages, and that impact assessments for proposed base closures and major expansions be compiled and acted on.

Scottish Affairs Committee chair Pete Wishart said: “Scotland’s impressive reputation in defence can be enhanced further if more Scottish SMEs are engaged by the MoD to fulfil UK defence orders.

“The overlooking of Scottish SMEs must change so that different areas of the UK can benefit and contribute to our national security and allow more local economies to thrive.

“The MoD must acknowledge the numerous barriers that Armed Forces personnel and their families face when they move between UK bases,” he continued, adding: “This is an issue likely to be exacerbated with base closures and expansions elsewhere, in Scotland and around the UK, as the MoD looks to reduce its defence estate by 30%.

“Guidance on differing healthcare and education services, tax and even transferring professional qualifications needs to be reassessed to make sure moves are as smooth as possible.”

In its report, the committee also requests clarity on the UK Government’s policy on military shipbuilding procurement: an issue that will likely be revisited in its inquiryDefence in Scotland: Military Shipbuilding.

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